The Commodity Futures Trading Commission (CFTC) has unveiled a proposed rule aimed at refurbishing CFTC Regulation 4.7. It offers exemptions from specific compliance requirements for commodity pool operators (CPOs) in relation to commodity pool offerings to qualified eligible persons (QEPs), and for commodity trading advisors (CTAs) regarding trading programs advising QEPs.

The proposed rule will introduce significant changes to this regulation, if implemented. It addresses various aspects that have remained untouched since its inception in 1992.

Addressing Long-Standing Issues: Proposed Regulation Amendments

The proposed amendments to CFTC Regulation 4.7 encompass several key aspects:

(1) Portfolio Requirement Threshold Adjustments: One of the primary changes involves adjustments to the monetary thresholds specified in CFTC Regulation 4.7(a)(1)(v) to account for the impact of inflation over the past three decades. These updates are intended to align the regulation with current economic realities and ensure that it continues to serve its intended purpose effectively.

(2) Minimum Disclosure Requirements: The proposed rule introduces new minimum disclosure requirements for CPOs and CTAs operating pools and trading programs under CFTC Regulation 4.7. This measure seeks to enhance transparency and provide investors with a more comprehensive understanding of the risks and potential returns associated with their investments.

(3) Exemptive Letters Codification: The amendments also aim to codify the practice of issuing exemptive letters to CPOs of Funds of Funds operating under CFTC Regulation 4.7. This codification would grant these CPOs the option to distribute monthly account statements within 45 days of the end of each month, providing them with greater flexibility in their operations.

(4) Technical Improvements: The proposed rule includes technical changes designed to improve the overall efficiency and utility of CFTC Regulation 4.7. These enhancements are intended to benefit intermediaries, as well as prospective and current QEP pool participants and advisory clients, along with the general public.

Statement of @CFTCjohnson: Proposed Amendments to CFTC Regulation 4.7: https://t.co/frRYfAJgyK

— CFTC (@CFTC) October 2, 2023

Engaging Stakeholders: Providing Input on Proposed Changes

The comment period for this proposed rule will remain open for 60 days from its publication in the Federal Register. It will allow stakeholders and interested parties the opportunity to provide input and feedback on the proposed changes. Comments must be submitted in writing and received within the specified timeframe. The electronic submission is facilitated through the CFTC Comments online process.

All comments received during this period will be made publicly accessible on the CFTC's official website, CFTC.gov. It will promote transparency and accountability in the regulatory process.

The proposed rule reflects the CFTC's commitment to adapting and modernizing regulatory frameworks. It is to keep pace with evolving financial markets and to better safeguard the interests of investors and market participants. Stakeholders are encouraged to actively participate in the comment process. It is to ensure that the final regulations align with their needs and expectations.