On September 9th, the staff of the CFTC issued an interpretive letter to the American Council of Life Insurers (“ACLI”) that allows commonly-owned, state-regulated life insurance companies to contribute general account assets to a single vehicle, a General Account Entity, which may invest directly or indirectly in commodity interests, without that vehicle being deemed a commodity pool.  Accordingly, the parent company or other affiliate that is responsible for operating the General Account Entity does not need to register as a commodity pool operator (“CPO”).  The following is a summary of the letter’s main points:

• Only affiliated life insurance companies under common control by the same parent can contribute their general account assets to a given General Account Entity;
• The General Account Entity may not accept investments from an investor that is not an insurance company controlled by the same parent company;
• Assets held in an insurance company’s separate account can not be used to fund or invest in the General Account Entity; and
• The General Account Entity may invest directly in commodity interests (i.e., CFTC regulated futures, swaps and other derivatives) or may invest in pooled investment vehicles that, in turn, invest in the commodity interests. For example, the General Account may obtain indirect exposure to commodity interests by virtue of its investment in a private fund.

In closing, for those interested, pages 4 and 5 of CFTC Staff Letter 14-113 provide an excellent overview of the administrative history relating to the CFTC’s 1985 conclusion that an insurance company can invest its general account assets in commodity interests without becoming a commodity pool.

CFTC Staff Letter 14-113 is available here.

Good day.  Good “not a pool” letter – who doesn’t love those!  DR2