On September 12, 2024, the U.S. Commodity Futures Trading Commission (CFTC) adopted amendments to CFTC Rule 4.7,1 which provides an exemption from certain disclosure, reporting and recordkeeping obligations for registered commodity pool operators (CPOs) and commodity trading advisors (CTAs) whose pool participants and clients, respectively, are limited to “qualified eligible persons” (QEPs), as such term is defined in the rule.
Summary of Updates to Rule 4.7
The final amendments to Rule 4.7 are a subset of those originally proposed in October 2023 (the Proposal).2 As adopted, the amendments:
- double the financial thresholds of the “Portfolio Requirement” in Rule 4.7’s definition of a QEP (effective six months after the final rule is published in the Federal Register);
- codify previously issued exemptive letters that permit the distribution of monthly, rather than quarterly, account statements for 4.7 pools that operate as funds-of-funds (effective 60 days after the final rule is published in the Federal Register); and
- make certain technical changes to the organization of the rule and various cross-references in other CFTC rules.
Notably, the CFTC deferred taking action on the more controversial aspect of the Proposal, which would have required specific disclosures for pools and trading programs operated and offered by registered CPOs and CTAs relying on Rule 4.7. On this point, the CFTC stated that it plans to “take additional time to consider the concerns articulated as well as the alternatives to the proposed QEP disclosure amendments put forward by commenters.”3
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1 Commodity Pool Operators, Commodity Trading Advisors, and Commodity Pools Operated under Regulation 4.7: Updating the ‘Qualified Eligible Person’ Definition; Adding Minimum Disclosure Requirements for Pools and Trading Programs; Permitting Monthly Account Statements for Funds of Funds; Technical Amendments, CFTC Rel. No. 8965-24 (September 12, 2024) (Adopting Release).
2 Commodity Pool Operators, Commodity Trading Advisors, and Commodity Pools: Updating the ‘Qualified Eligible Person’ Definition; Adding Minimum Disclosure Requirements for Pools and Trading Programs; Permitting Monthly Account Statements for Funds of Funds; Technical Amendments, CFTC Rel. No. 70853, 88 Fed. Reg. 70852 (October 12, 2023) (Proposing Release).
3 Adopting Release at 20.
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