CFTC Proposes Exemptions from CPO/CTA Registration for Certain Investment Advisers

The Commodity Futures Trading Commission (the "CFTC") is proposing various amendments to Part 4 of the CFTC's regulations, which govern the activities and operations of commodity pool operators ("CPOs") and commodity trading advisors ("CTAs"). Pursuant to a Notice of Proposed Rulemaking (the "NOPR"), the CFTC is proposing to add (i) an exemption from CPO registration in a new Rule 4.13(a)(4) for Securities and Exchange Commission ("SEC")-registered investment advisers ("RIAs") with respect to pools whose participants are limited to certain categories of sophisticated investors; and (ii) a corresponding exemption from CTA registration in existing Rule 4.14(a)(8).[1] The CPO exemption in proposed Rule 4.13(a)(4) would essentially reinstate the CPO exemption in former Rule 4.13(a)(4), as it existed prior to its rescission in 2012, subject to a few adjustments which reflect subsequent developments and also codify CFTC Letter 25-50 (Dec. 19, 2025), subject to certain modifications. The proposed amendment to Rule 4.14(a)(8) would restore the CTA exemption which was available prior to the 2012 rescission of the former Rule 4.13(a)(4) exemption. These amendments are designed to reduce duplicative and overlapping regulation with the SEC's regulatory framework while still preserve investor protection and market integrity.

Comments on the NOPR are due by October 5, 2026.

Background

In CFTC Letter 25-50, the Staff granted no-action relief from CPO and CTA registration to private fund managers who (i) are RIAs; (ii) offer pool interests in private offerings under the Securities Act of 1933 (the "1933 Act"), with an exception permitting SEC Rule 506(c) offerings; and (iii) offer pool interests solely to qualified eligible persons ("QEPs"), as defined in Rule 4.7, which include "Qualified Purchasers" as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940 and "Non-United States persons" as defined in Rule 4.7. The relief is available on a pool-by-pool basis and is subject to certain conditions which include (i) filing Form PF with the SEC for the subject pool(s); (ii) having a reasonable belief that all investors in the subject pool(s) are QEPs at the time of investment or at the time of relying on the no-action position; and (iii) filing a notice claiming the relief with the CFTC.[2] The no-action relief permits a CPO to transition qualifying pools from regulated status to exempt status, without having to provide a right of redemption to investors under Rule 4.13(e)(2) with respect to pools for which the CPO is relying on the no-action position.

The no-action relief was intended as an interim measure pending rulemaking by the CFTC to reinstate the exemption from CPO registration under former Rule 4.13(a)(4). In this regard, CFTC Letter 25-50 states that the no-action relief remains in effect "until such time as the [CFTC] promulgates rules, or publicly determines not to promulgate rules, addressing the reinstatement of the [CPO exemption in former Rule 4.13(a)(4)]…."

To date, some RIAs have claimed relief under CFTC Letter 25-50 to withdraw from CPO registration and to operate qualifying pools as "25-50 QEP No-Action pools." Some other RIAs have claimed relief under CFTC Letter 25-50 to transition certain pools they operate to "25-50 QEP No-Action" pools, but have remained registered CPOs and members of the National Futures Association ("NFA"), the industry self-regulatory organization for registered CPOs and CTAs. Other RIAs have taken a more cautious approach with regard to relying on CFTC Letter 25-50, pending rulemaking by the CFTC to codify the relief.[3]

Discussion

Criteria for the CPO Registration Exemption

By incorporating an additional exemption from CPO registration in proposed Rule 4.13(a)(4), sometimes referred to herein as the "Proposed RIA-QEP Exemption," the CFTC would make the no-action relief in CFTC Letter 25-50 more durable and transparent. The criteria for the proposed exemption are modeled after the criteria in former Rule 4.13(a)(4), as well as under CFTC Letter 25-50. For example, as with the no-action position in CFTC Letter 25-50, the Proposed RIA-QEP Exemption is limited to RIAs so that investment advisers exempt from registration with the SEC such as exempt reporting advisers and other fund managers who are not RIAs would not be eligible. In summary, the proposed exemption would be available to a CPO who (i) is an RIA; (ii) offers pool interests in offerings exempt from registration under the 1933 Act and sold without marketing to the public in the United States (with an exception for SEC Rule 506(c) offerings); (iii) offers pool interests solely to sophisticated investors in the same manner as in the original Rule 4.13(a)(4) exemption, with differing "sophistication" requirements for natural person and non-natural person participants;[4] (iv) files Form PF for the pool, if required by the SEC; and (v) complies with the notice, disclosure, recordkeeping, and annual affirmation requirements set forth in the provisions of existing Rule 4.13(b), (c), (d), and (e).

While the CFTC's stated intent is to recreate the exemption in former Rule 4.13(a)(4) and integrate it into the existing framework of Rule 4.13, as well as to codify the no-action relief in CFTC Letter 25-50, the Proposed RIA-QEP Exemption conflicts with CFTC Letter 25-50 in two principal respects. The CFTC is proposing to exclude natural person QEPs who qualify as QEPs through satisfying the portfolio requirement in Rule 4.7(a)(5) from participating in an otherwise qualifying pool and, most importantly, to require a CPO seeking to claim relief under the proposed exemption for pools transitioning to exempt status to provide each investor with a right to redeem their interest(s) in the pool(s). The apparent rationale for both the proposed natural person participant limitation and the proposed right of redemption is to advance the CFTC's investor protection objectives. The CFTC also notes that both these elements derive from the original Rule 4.13(a)(4) exemption.[5]

The NOPR states further that the CFTC does not intend to place additional, conflicting requirements on CPOs who are currently relying on CFTC Letter 25-50 for qualifying pools, some of whom have deregistered as CPOs. Thus, such CPOs generally would not be subject to Rule 4.13(e)(2) for such pools, consistent with their claims under CFTC Letter 25-50, but would be subject to Rule 4.13(e)(2) for any pools for which they have not relied on CFTC Letter 25-50. In this regard, the CFTC is considering whether to designate a later effective date with respect to the conforming amendment to
Rule 4.13(e)(2).[6]

Criteria for the CTA Registration Exemption

Rule 4.14(a)(8) provides an exemption from CTA registration for an investment adviser, including an RIA, whose commodity interest trading advice is directed solely to, and the sole use of, certain permitted categories of clients, which include the CPO of a Rule 4.13(a)(3) exempt pool, with respect to its advisory activities for pools meeting the criteria of that exemption. Prior to the 2012 rescission of the original Rule 4.13(a)(4) exemption, CPOs of Rule 4.13(a)(4) exempt pools were also included as permitted clients.

The CFTC is proposing to reinstate the reference to CPOs of Rule 4.13(a)(4) exempt pools in Rule 4.14(a)(8)(i)(D) so that this exemption would be available to investment advisers, including RIAs, providing commodity interest trading advice to a CPO who has claimed an exemption under Rule 4.13(a)(4) as proposed with respect to pools meeting the criteria thereunder. This amendment would restore the pre-2012 functioning of Rules 4.13 and 4.14 and would implement and build upon the CTA registration no-action relief provided in CFTC Letter 25-50.

Request for Comment

The CFTC is requesting comments on all aspects of the NOPR, including the conditions of proposed Rule 4.13(a)(4) and whether there should be any adjustments to the proposed conditions, or any different, additional, or alternative conditions. For example, the CFTC is requesting comment on whether the proposed Form PF reporting condition is sufficient to provide the information necessary to monitor for market or systemic risk and whether what, if any, regulatory risk is presented by certain RIAs potentially no longer being required to file Form PF and also being exempt from reporting on Form CPO-PQR. In this regard, comment is being requested on whether the CFTC should consider additional or alternative reporting conditions. [7]

The CFTC is also requesting comment whether the Proposed RIA-CPO Exemption, if adopted as a final rule, should supersede CFTC Letter 25-50 in whole or only in part and whether it should take any action similar to that in CFTC Letter 26-06 to address the treatment of CPO delegation arrangements under CFTC Letter 14-126. Also, as noted, the CFTC is requesting comment on whether to consider designating a later effective date with respect to the proposed conforming amendment to Rule 4.13(e)(2), especially with respect to CPOs who have claimed relief under CFTC Letter 25-50 for qualifying pools. [8]

Analysis

The managed funds industry will largely welcome the CFTC's NOPR which is designed to restore the original CPO exemption in former Rule 4.13(a)(4) and to codify the no-action relief provided under CFTC Letter 25-50, subject to certain modifications. The NOPR also implements the CFTC's objective of enhancing U.S. market competitiveness by seeking to reduce duplicative and overlapping regulation and is consistent with CFTC/SEC harmonization efforts and other recent deregulatory initiatives.

It makes sense to integrate the Proposed RIA-QEP Exemption into the existing framework of Rule 4.13, so that CPOs claiming the relief can submit notice filings electronically on NFA's Exemptions System, without having to submit a claim for relief to the CFTC in the first instance. However, it is expected that RIAs will have concerns primarily relating to the inclusion of a redemption right as a condition of relying on the proposed exemption, which conflicts with the no-action relief granted under CFTC Letter 25-50. The proposed distinction in QEP eligibility between natural persons and non-natural persons may also present issues in certain cases. Lastly, it should be noted that the CFTC's NOPR does not address any of the collateral issues which have arisen in relation to CFTC Letter 25-50 such as under the "eligible contract participant" definition in the CFTC's rules.

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We will continue to monitor and report on developments in this area.

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