On July 13th, the Division of Clearing and Intermediary Oversight (the "Division") of the CFTC issued a no-action letter to several investment management industry trade associations – the ICI, MFA, IAA and AIML (collectively, the "Associations"). The effect of the letter is to permit mutual funds and qualifying hedge funds launched after July 13, 2012 ("New Funds") and their advisors to claim relief from CPO and CTA registration requirements until December 31, 2012. In order to claim this relief, an electronic notice must be filed with the Division, as more fully described below.


The Division issued its July 13th letter in response to comment letters filed by the Associations in the second quarter of 2012 requesting delayed implementation of the amendments to CFTC Rules 4.5 and 4.13(a)(4) that were effective April 24, 2012. In support of their request, the Associations cited undue operational burdens resulting from compliance with CPO regulatory compliance and ambiguity with respect to margin levels on uncleared swaps as a result of the fact that the applicable margin rules have not yet been finalized by the CFTC. Accordingly, the Associations asked the CFTC to delay the requirement for funds and their advisors to be in compliance with these rules for a period of ten months after the effective date of final CFTC rules defining the term "swap" and setting margin requirements on uncleared swaps.

The Division denied the request of the Associations, explaining that, in the Division’s view, granting such relief would not be consistent with Congressional intent in adopting the Dodd-Frank Act’s definition of swap, which was the subject of final definitional rulemaking on July 10, 2012. Further, according to the Division, there was no need to wait for final rules in respect of margin requirements on uncleared swaps, since uncleared swaps would be grandfathered for purposes of the applicable compliance tests under Rule 4.5 and 4.13.

However, the Division did grant relief from CPO/CTA registration requirements until December 31, 2012 for New Funds (i.e., launched after July 13th), if the funds and the advisers would have been exempt from CPO registration requirements under the version of CFTC Rules 4.5 and 4.13(a)(3) that were in effect prior to the April 2012 rule amendments. In order to qualify for the relief, a New Fund must be registered as an investment company under the Investment Company Act of 1940 or, if a private fund, the fund’s CPO must reasonably believe that the fund’s participants are "qualified eligible persons" under applicable provisions of CFTC Rule 4.7 or "accredited investors" under specified provisions of SEC Rule 501. The Division provided parallel relief from CTA registration requirements for advisers to New Funds or pools operated by a CPO exempt from registration under CFTC Rule 4.5 or CFTC Rule 4.13(a)(1)-(4).


In order to claim the relief provided by the July 13th No-Action Letter, a notice must be filed with the Division and meet the following requirements:

1) The notice must state the name, business address and phone number of the CPO or CTA;

2) The notice must state the capacity – CPO, CTA, or both – in which claimant is acting and the name(s) of the New Fund(s) with respect to which relief is being claimed;

3) The notice must be electronically signed by the claimant; and

4) The notice must be filed with the Division at dsionoaction@cftc.gov prior to commencing activities that would require CPO or CTA registration.

The Division’s No-Action Letter is available here.

Good day. Good news…but only if you are an adviser to a New Fund. TSR