mutual fund cpo compliance

As we explained in an earlier post, the CFTC has recently amended its Regulation 4.5 to clarify that the commodity pool operator (“CPO”) of a registered investment company is the entity that serves as the registered investment adviser (“RIA”) to that company.

In this post, we will explore practical implications of this recent rule amendment.


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Mutual fund complexes relying on the exemption under Commodity Futures Trading Commission (“CFTC”) Regulation 4.5 from commodity pool operator (CPO) registration have to file:

(1) An initial notice of eligibility to claim that exemption; and

(2) An annual affirmation of continued reliance on the exemption within 60 days of each calendar year end.

In our experience, many mutual fund complexes “update” their Regulation 4.5 eligibility notices during the last two weeks of February.

This blog post is a reminder to clients and friends that the CFTC has recently amended its Regulation 4.5 to clarify that the registered investment adviser (the “RIA”) to a registered investment company is that company’s CPO.  This clarification will be of interest to any mutual fund complex that may have had an entity other than the RIA claim the CPO exemption with respect to the operation of a registered investment company.   


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The Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”) announced parallel enforcement orders against an investment adviser (the “Adviser”) and its Chief Executive Officer for derivatives-related oversight failures.  The alleged failures related to the Adviser’s management of a registered investment company that invested primarily in options on stock-index futures contracts.  The Adviser was regulated by the SEC and the CFTC as a registered investment adviser and registered commodity pool operator (“CPO”), respectively.

This blog post will summarize these enforcement orders, since we believe that they are relevant to investment advisers subject to joint oversight by the SEC and the CFTC.  As a general matter, we also believe that this matter highlights the importance of disclosure and consistent risk management practices in connection with any advisory client’s derivatives-based investment strategy.


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On January 15th, the National Futures Association (“NFA”) issued its Notice to Members I-15-02 (the “NTM”).

The NTM will be of interest to NFA Members, such as futures commission merchants (“FCMs”) and introducing brokers (“IBs”), and any entity in a mutual or hedge fund complex that has not yet affirmed its status for calendar year 2015 as:

  • an exempt commodity pool operator (“CPO”) under Commodity Futures Trading Commission (“CFTC”) Regulation 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), or 4.13(a)(5);
  • an excluded CPO under CFTC Regulation 4.5; or
  • an exempt commodity trading advisor (“CTA”) under CFTC Regulation 4.14(a)(8).

These annual affirmations are due by March 2, 2015.

The remainder of this posting is an overview of the NTM, which is available here.


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