On February 9, 2012, the CFTC adopted final rules rescinding the Rule 4.13(a)(4) exemption from registration as a commodity pool operator ("CPO") (otherwise known as the 'sophisticated investor' exemption) previously relied upon by many hedge fund and private equity fund managers. Fund managers currently utilizing this exemption face registration and potentially far-reaching disclosure, reporting and compliance requirements. Consequently, fund managers who seek to launch a new fund may need to register with the National Futures Association, unless another exemption is available. Non-exempt fund managers and certain employees will also be subject to regulation, including, among other things, registering as associated persons and being required to pass the Series 3 proficiency examination.
This article, written by Peter Bilfield and published in the Marcum LLP Private Investment Forum, seeks to provide a brief introduction on CPOs and commodity pools, and the jurisdictional reach of the CTFC with respect to CPOs. It also addresses the rules that are critical to a fund manager's understanding of the current CPO regulatory regime. To download a pdf of the article, click here.