Re: RIN 3038—AF78: Notice of Proposed Rulemaking: Commodity Pool Operators and Commodity Trading Advisors: Reduction of Duplicative Regulation Through Intermediary Registration[...]

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October 5, 2026

Re: RIN 3038-AF78: Notice of Proposed Rulemaking: Commodity Pool Operators and Commodity Trading Advisors: Reduction of Duplicative Regulation Through Intermediary Registration Exemptions; Expansion of the Exemption for Small Commodity Pools

Mr. Christopher Kirkpatrick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, D.C. 20581

Re: 3038-AF78: Notice of Proposed Rulemaking: Commodity Pool Operators and Commodity Trading Advisors: Reduction of Duplicative Regulation Through Intermediary Registration Exemptions; Expansion of the Exemption for Small Commodity Pools

Dear Mr. Kirkpatrick:

National Futures Association (NFA) appreciates the opportunity to comment on the Commodity Futures Trading Commission's (CFTC or Commission) Notice of Proposed Rulemaking (NPR or Proposal) regarding amendments to various Part 4 exemptions from registration for commodity pool operators (CPOs) and commodity trading advisers (CTAs). In particular, the Commission proposes to amend Regulation 4.13 to permit a Securities and Exchange Commission (SEC) registered investment adviser (SEC RIA) to claim an exemption from registration as a CPO with respect to each pool it operates, subject to certain conditions, including that the pool is offered only to participants who meet the definition of a "qualified eligible participant" (QEP), as set forth in CFTC Regulation 4.7(a)(6).

This Proposal would generally codify CFTC No Action Letters 25-50 and 26-06 (NALs 25-50 and 26-06) with certain modifications intended to largely reinstate former Regulation 4.13(a)(4) (referred to in the Proposal as the Original QEP Exemption), which was in effect for nine years (2003-2012). The NPR also increases the total gross capital contributions threshold set forth in CFTC Regulation 4.13(a)(2), which exempts CPOs from registration (colloquially known as the Small Pool Exemption) to account for inflation.

NFA is a registered futures association (RFA) pursuant to Section 17 of the Commodity Exchange Act (CEA). As an RFA, NFA provides front-line oversight of CFTC-registered market participants, including registered CPOs and CTAs that are NFA Member firms.

The Commission indicates its proposed amendments are intended to reduce regulatory burdens and compliance obligations for certain CPOs and CTAs, while also harmonizing existing CFTC and SEC regulatory regimes. The Commission further notes its Proposal would provide long-term certainty for market participants currently relying on NALs 25-50 and 26-06. While NFA favors reducing duplicative or burdensome regulation as long as it does not diminish customer protections, we also believe it is important to respect the regulatory framework Congress established when it allocated responsibilities for the derivatives and securities markets to the CFTC and SEC, respectively.

As provided by the CEA, the CFTC and NFA have the legal authority as well as the expertise and resources necessary to oversee derivatives market participants. Since the Commission's Market Participants Division issued NAL 25-50 on December 19, 2025 (under CFTC Acting Chairman Pham), approximately 120 CPOs have availed themselves of the registration exemption and other relief provided in NAL 25-50 for over 980 commodity pools. These commodity pools have significant assets under management (AUM) invested in derivatives, which is not surprising since the proposed Regulation 4.13(a)(4) exemption-unlike the Regulation 4.13(a)(3) de minimis exemption-does not limit the amount of derivatives activity in which a commodity pool may engage and avail itself of the exemption. To illustrate, about half of the pools that have availed themselves of NAL 25-50 are operated by CPOs that invest more than a de minimis amount (i.e., greater than 5%) of their assets in derivatives, with total derivatives exposure of over $482 billion in AUM. Moreover, at least 200 of these pools were operated by CPOs that invested more than half of their assets in derivatives, totaling over $18 billion in AUM.¹

As this data illustrates, there are a material number of commodity pools that primarily trade derivatives which could avail themselves of the Regulation 4.13(a)(4) exemption. These pools will no longer be operated by CFTC registered CPOs and NFA Members and, therefore, no longer subject to the CFTC's and NFA's regulatory oversight, which-as explained below-benefits pool participants. Indeed, for CPOs and commodity pools availing themselves of the relief provided in NAL 25-50, the CFTC, under acting Chairman Pham, appears to have made the determination that the SEC is the appropriate federal regulator responsible for periodically examining these pools' derivatives activities and that it has the resources, expertise, and jurisdiction to obtain derivatives-related records.

As the Commission is aware, NFA conducts routine examinations of NFA Member CPOs to, among other things, confirm the accuracy and existence of a pool's AUM as reported by CPOs and the periodic account statements CPOs must provide to pool participants.² Additionally, NFA analyzes a commodity pool's transactions to ensure that the pool's CPO prominently discloses material information, including potential conflicts of interest, and does not engage in self-dealing transactions that benefit the CPO, its principals, or affiliates at the expense of pool participants. Further, NFA routinely reviews CPO marketing materials to ensure they are not materially misleading.³ NFA currently conducts approximately 175 examinations of CPOs each year using a risk-based approach, and for those examinations that result in more egregious findings, NFA not only confirms that a CPO has appropriately remediated the findings but also re-examines the CPO typically no later than two years later to confirm the CPO continues to implement appropriate remedial actions.

Given today's coordination and harmonization efforts between the SEC and CFTC, NFA recommends that the agencies develop and execute a plan as to how the SEC will periodically review the significant derivatives activities of these exempt pools to include, if necessary, a process for obtaining relevant records from CFTC registrants. NFA offers its assistance to the CFTC and/or the SEC with respect to its prior oversight of these exempt pools to the extent it would be beneficial.

NFA's comments on specific issues and questions raised in the NPR are set forth below.

Limiting Eligible Pool Participation Is Consistent with Original QEP Exemption

The NPR would limit Regulation 4.13(a)(4) to those pools with eligible participants under the Original QEP Exemption, which distinguished between natural and non-natural persons. As the Commission has recognized, the QEP definition encompasses a broad spectrum of market participants from institutional investors to individuals, each of which have varying backgrounds, experience, and resources. The Proposal acknowledges that differentiating between natural and non-natural persons, consistent with the Original QEP Exemption, preserves an appropriate balance between customer protection and flexibility for investors, and the industry.⁴ The Proposal therefore requires that for each pool, each natural person participant is a QEP listed in Regulation 4.7(a)(6)(i) and each non-natural person participant is a QEP or an ''accredited investor,'' as that term is defined in SEC Regulations 230.501(a)(1)-(3), (7), or (8).

Given that the proposed Regulation 4.13(a)(4) exemption provides a complete exemption from registration rather than relief from certain regulatory requirements (e.g., the 4.7 exemption), NFA agrees with the Commission that the exemption must be appropriately tailored and limited to only highly sophisticated investors, who understand the nature of the investment, including that the pool is exempt from registration, and have the commensurate level of resources to perform adequate due diligence and protect themselves in the event of unethical or fraudulent practices. Therefore, if the Commission determines to reinstate the Regulation 4.13(a)(4) exemption, NFA strongly agrees that the standard for natural person investors must be higher than what is required for a 4.7 exemption⁵, which already affords these pools meaningful regulatory relief from important CFTC requirements.⁶ Accordingly, distinguishing between natural and non-natural QEPs strikes the correct balance between harmonizing regulatory requirements while ensuring that customer protection remains paramount.

Disclosure and Rights Afforded to Pool Participants under Regulation 4.13(e)(2)

CFTC Regulation 4.13(e)(2) currently provides essential protections-a person operating one or more exempt pools described in paragraph (a)(3) must provide specified disclosures and rights to participants-one of the most important of which is an investor's right to redeem their interests in the pool once the CPO notifies the investor that the CPO intends to operate on an exempt basis. While NAL 25-50 omitted this critical protection, the Commission's Proposal correctly recognizes the important customer protection rights that Regulation 4.13(e)(2) affords investors in pools that intend to operate on an exempt basis, and NFA strongly supports the Commission's decision to require a CPO to comply with Regulation 4.13(e)(2).

In NFA's view, it is critical that investors in these pools not only receive notice of the CPO's intent to operate an exempt pool but, importantly, investors also have the opportunity to evaluate whether the investment remains appropriate in light of the pool's exempt status. This is especially true for investors who may be less sophisticated or lack the resources to perform adequate due diligence and protect themselves from unethical practices. Therefore, it is critical that all investors in these pools, which may avail themselves of the proposed Regulation 4.13(a)(4) exemption, receive disclosure and have an opportunity to consider whether they should remain invested in the pool. Further, this proposed amendment is also consistent with the Original QEP Exemption, which provided investors with these critical disclosure and redemption rights.

Given the utmost importance of Regulation 4.13(e)(2) as it relates to customer protection, NFA strongly encourages the Commission to retroactively afford Regulation 4.13(e)(2)'s full notification and redemption protections to NAL 25-50 pool participants. Without requiring a person who operated a pool exempt under NAL 25-50 to comply with Regulation 4.13(e)(2), the Commission risks some investors receiving disparate treatment solely due to the arbitrary timing of a pool's exemption filing.⁷ For the same reason, NFA recommends that if the Commission reinstates Regulation 4.13(a)(4) with Regulation 4.13(e)(2)'s notification and redemption rights, then it make Regulation 4.13(e)(2)'s pool participant protections effective upon the final rule's publication in the Federal Register, rather than at a later effective date. This would help mitigate the unintended consequence of treating pool participants disparately due to timing (presumably NAL 25-50 will remain in effect until Regulation 4.13(a)(4) is effective).

Adjustments for Inflation

The NPR also proposes to increase the total gross capital contributions threshold in the Small Pool Exemption to $800,000 to account for inflation. As the Commission notes, the current $400,000 threshold has not been adjusted for inflation since 2003. NFA believes that it is appropriate to update these financial thresholds from time to time to ensure that exemptions continue to align with the Commission's original regulatory intent-in this case, to relieve operators of pools with a relatively small number of participants and AUM from the costs and burdens of full CPO registration, while still subjecting them to the anti-fraud and other provisions of the CEA. This inflation adjustment also compliments the Commission's 2024 inflation-based adjustments that doubled the financial thresholds within the Portfolio Requirement of the QEP definition in Regulation 4.7 referenced above.

Request for Implementation Guidance

The Proposal indicates that the Commission preliminarily intends that the NPR's proposed amendments will supersede the no-action positions set forth under NAL 25-50.⁸ NFA requests that when the Commission publishes its final rule, the rule provides a date at which NAL 25-50's relief will expire. Further, NFA also requests that the Commission provide guidance, under two potential scenarios, as to how NFA should treat a pool that previously availed itself of the relief under NAL 25-50 but does not claim an exemption for a pool under Regulation 4.13(a)(4), if adopted. The first scenario occurs when a pool that previously claimed relief under NAL 25-50 does not claim a 4.13(a)(4) exemption because the pool does not qualify for that exemption. The second scenario involves a pool that claimed relief under NAL 25-50 and would qualify for the 4.13(a)(4) relief but still fails to claim the exemption. In addition, while the NPR indicates that a pool must affirm the 4.13(a)(4) exemption on an annual basis, NFA requests that the Commission clarify that a pool will be required to do so through NFA's electronic exemption system, rather than the manual process a pool undertook to claim relief under NAL 25-50.

In conclusion, NFA appreciates your consideration of our comments and stands ready to work with the CFTC to implement the Commission's final rule. If we can provide any further information or other assistance, please do not hesitate to contact Katie Clapper, Vice President, Member Compliance and Regulatory Operations ([email protected].) or me ([email protected]).

Respectfully submitted,
Michael J. Otten
Senior Vice President
Head of Member Oversight

¹Currently, there are over 150 registered CPOs that operate over 1,200 commodity pools that remain eligible for the relief provided under NAL 25-50 and could withdraw from CFTC registration. Many CPOs operate fund-of-fund commodity pools, which makes it difficult to extrapolate the exact amount of AUM that any individual commodity pool invests in derivatives. However, at the CPO level, this group of registered CPOs manage pools with reported derivatives exposure that exceeds $255 billion in AUM. Moreover, over 30 CPOs that would be eligible for relief and could withdraw from registration have more than half of their pool's reported assets invested in derivatives across over 150 pools, totaling over $50 billion in reported AUM. .

²To confirm the accuracy of a CPO's reported AUM, NFA confirms balances held at third parties, including futures commission merchants (FCMs), which maintain and segregate pool participant funds used as collateral to margin a pool's derivatives positions. FCMs, as NFA Members, are obligated to cooperate with NFA to confirm a pool's reported funds on deposit. Similarly, the CFTC can use its authority under Section 4g of the CEA to obtain the same information. However, it is not apparent that the SEC has similar legal authority to require a CFTC registrant (e.g., an FCM) to provide it with this information absent a subpoena or requesting this information from the CFTC and/or NFA.

³Similar to what NFA noted in its July 7, 2003, comments submitted for the SEC Roundtable on Hedge Funds (available at: NFA News Center | NFA), NFA has several programs in place to monitor CPOs for compliance with the various rules and regulations. NFA conducts risk-based examinations and, as part of that process, reviews pool(s) operated by the CPO to determine the scope of its testing. NFA generally concentrates its detail testing on pools with larger exposures to derivatives and U.S. domiciled persons. Testing may also include reviewing each pool's participant list (and, if applicable, confirming that participants invested in Regulation 4.7 exempt pools qualify as QEPs), the pool's marketing materials, additions and withdrawals, any transactions between the CPO and any of its pools, transfers between the CPO's pools, and the CPO's banking relationships. NFA also conducts detailed testing of financial records, in which NFA reviews the assets and liabilities of the pool and determines whether each appears to be reasonably valued.

⁴Pursuant to the Commission's Proposal, the only natural persons that would qualify as QEPs are those that meet the definition of a QEP as set forth under CFTC Regulation 4.7(a)(6)(i). With respect to 4.7(a)(6)(i), and excluding certain "knowledgeable employees," their related family members and pool interests acquired by gifts or other similar means, the only natural persons who therefore would qualify as QEPs are those who are "qualified purchasers" (i.e., Regulation 4.7(a)(6)(i)(H)) as defined in Section 2(a)(51)(A) of the Investment Company Act and "non-United States persons" (i.e., Regulation 4.7(a)(6)(i)(N)). The current qualified purchaser threshold is $5 million for individuals and has not been adjusted since it was adopted in 1996. As the Commission is aware, it previously determined to double the Portfolio Requirement threshold set forth within the definition of a QEP in 2024 to adjust for inflation and, similarly, in this NPR, the Commission proposes to increase the total gross capital contributions threshold in the Small Pool Exemption to $800,000 to account for inflation. To ensure that the relevant monetary thresholds set forth within the QEP definition accurately reflect the appropriate level of investor sophistication necessary for a pool to claim the Regulation 4.13(a)(4) exemption, NFA respectfully recommends the Commission also consider inflation adjusting the "qualified purchaser" threshold by either amending Regulation 4.7(a)(6)(i)(H) to double the current Qualified Purchaser threshold of $5 million or work directly with the SEC to inflation adjust those standards.

⁵Many 4.7 exempt pools may be able to claim the 4.13(a)(4) exemption, and NFA has taken a number of enforcement actions against 4.7 exempt pools since the Commission's 2012 recission of Regulation 4.13(a)(4). Some of these actions alleged violations of NFA Compliance Rules that caused customer harm, including the use of misleading promotional material (i.e., omitting material losses in performance calculations, calculating performance not net of fees, overstating AUM); receiving pool participant funds in the name of the CPO, rather than the commodity pool and/or commingling pool participant funds with the CPO's; and improper advances or loans of pool assets to the CPO and/or its principals. Further, other enforcement actions not only caused customer harm but also alleged violations of NFA's most serious Compliance Rules, including the failure to uphold just and equitable principles of trade, fraud and misappropriation of pool assets, and failure to cooperate promptly and fully with NFA during an examination. Additionally, certain of NFA's disciplinary actions have involved claims against a CPO that operated a 4.7 exempt pool, and the CPO was unable to demonstrate that the pool participants qualified as QEPs. Finally, a substantial number of these enforcement actions involved CPOs that also were SEC RIAs.

⁶The Regulation 4.7 exemption provides relief from the CFTC's specific disclosure and recordkeeping requirements and from itemizing certain items on a pool's periodic and annual report.

⁷At a minimum, NFA believes that the Commission should require a person who filed a claim for relief under NAL 25-50 to notify pool participants that the pool has claimed relief and, if applicable, the CPO has withdrawn from CFTC registration and NFA membership so investors-at the very least-understand the pool is no longer subject to CFTC and NFA regulatory oversight.

⁸NAL 25-50 provides, in part, that MPD will not recommend that the Commission commence an enforcement action against any person that complies with NAL 25-50's conditions and: (A) fails to register with the Commission as a CPO, or (B) withdraws from registration with the Commission as a CPO, until such time as the Commission promulgates rules addressing the reinstatement of former Regulation 4.13(a)(4).