Proposed Rule2026-17079
Commodity Pool Operators and Commodity Trading Advisors: Reduction of Duplicative Regulation Through Intermediary Registration Exemptions; Expansion of the Exemption for Small Commodity Pools
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 21, 2026
Issuing agencies
Commodity Futures Trading Commission
Abstract
The Commodity Futures Trading Commission ("Commission" or "CFTC") is proposing several amendments to its registration requirements for certain commodity pool operators ("CPOs") and commodity trading advisors ("CTAs") to reduce duplicative and overlapping regulation and reflect inflation ("Proposal"). The Proposal would add an exemption from CPO registration for certain investment advisers registered with the Securities and Exchange Commission ("Registered Investment Advisers" or "RIAs") in relation to commodity pools for which the participants are limited to certain sophisticated investors and which meet other conditions; add a related registration exemption for CTAs; and increase the total gross capital contributions threshold in the CPO registration exemption for small commodity pools (commonly referred to as the "Small Pool Exemption") to account for inflation. The Commission preliminarily intends for the Proposal, if adopted, to supersede certain no-action positions issued by the Commission's Market Participants Division ("MPD").
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 161 (Friday, August 21, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 161 (Friday, August 21, 2026)]
[Proposed Rules]
[Pages 54264-54280]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-17079]
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 4
RIN 3038-AF78
Commodity Pool Operators and Commodity Trading Advisors:
Reduction of Duplicative Regulation Through Intermediary Registration
Exemptions; Expansion of the Exemption for Small Commodity Pools
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing several amendments to its registration
requirements for certain commodity pool operators (``CPOs'') and
commodity trading advisors (``CTAs'') to reduce duplicative and
overlapping regulation and reflect inflation (``Proposal''). The
Proposal would add an exemption from CPO registration for certain
investment advisers registered with the Securities and Exchange
Commission (``Registered Investment Advisers'' or ``RIAs'') in relation
to commodity pools for which the participants are limited to certain
sophisticated investors and which meet other conditions; add a related
registration exemption for CTAs; and increase the total gross capital
contributions threshold in the CPO registration exemption for small
commodity pools (commonly referred to as the ``Small Pool Exemption'')
to account for inflation. The Commission preliminarily intends for the
Proposal, if adopted, to supersede certain no-action positions issued
by the Commission's Market Participants Division (``MPD'').
DATES: Comments must be in writing and received by October 5, 2026.
ADDRESSES: You may submit comments, specifically referencing
``Commodity Pool Operators and Commodity Trading Advisors: Reduction of
Duplicative Regulation Through Intermediary Registration Exemptions;
Expansion of the Exemption for Small Commodity Pools'' and RIN 3038-
AF78, by any of the following methods:
<bullet> <a href="http://Regulations.gov">Regulations.gov</a>: Go to <a href="https://www.regulations.gov">https://www.regulations.gov</a> and
press the ``Search'' button, then proceed as follows:
1. Under Refine Documents Results--check the box to ``Only show
documents open for comment'';
2. Under Agency--select ``See More'' and check the box for
``Commodity Futures Trading Commission,'' then press the Apply button;
3. Identify this Proposal in the list of CFTC documents open for
comment, press the ``Comment'' button to open the submission form, and
follow the instructions on the form.
Alternatively, if you are viewing this Proposal on
<a href="http://www.federalregister.gov">www.federalregister.gov</a>, click the ``Submit A Public Comment'' button
at the top of the page to open the comment form. Follow the
instructions on the form to submit your comment to <a href="http://Regulations.gov">Regulations.gov</a>.
<bullet> Mail: Send to--Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
<bullet> Hand Delivery/Courier: Address to--CFTC Comment
Submission, Attn: Christopher Kirkpatrick, Secretary of the
[[Page 54265]]
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
Please submit your comments using only one of these methods. To
avoid possible delays with mail or in-person deliveries, submissions
through <a href="http://Regulations.gov">Regulations.gov</a> are encouraged.
All comments must be submitted in English or, if not, accompanied
by an English translation. Do not include in your comment text or
attachments any personal identifying information or business
information that you do not want published online. Comments (regardless
of submission method) will be published without review for, and without
removal of, any personal identifying information or information your
business may consider confidential.
If you wish to submit confidential information for the Commission's
consideration, please contact the CFTC personnel listed in this Notice
under FOR FURTHER INFORMATION CONTACT before making any submission.
Please also carefully review the Commission's procedures in 17 CFR
145.9 for requesting confidential treatment under the Freedom of
Information Act (``FOIA'') of information submitted to the Commission.
The CFTC reserves the right, but shall have no obligation, to
review, pre-screen, filter, or redact all or any part of your comment
submission. The CFTC also reserves the right, without further
notification, to refuse to publish or to remove from public view all or
any part of your submission to the extent it contains content
inappropriate for publication in a comment file, such as--without
limitation--obscene language, threats of violence, solicitations for
commercial sales or illegal activity, or obvious spam. If a submission
that is refused for or withdrawn from publication because of
inappropriate content also contains comments on the merits of this
Proposal, such submission will be retained in the record for the matter
and will be considered as required under the Administrative Procedure
Act (``APA'') and other applicable laws and may be accessible under the
FOIA.
Pursuant to the Administrative Procedure Act at 5 U.S.C. 553(b)(4),
a plain language summary of the proposed rule is available at
regulations.gov.
FOR FURTHER INFORMATION CONTACT: DJ Hennes, Director, <a href="/cdn-cgi/l/email-protection#27434f4249494254674441534409404851"><span class="__cf_email__" data-cfemail="b6d2ded3d8d8d3c5f6d5d0c2d598d1d9c0">[email protected]</span></a>;
Frank Fisanich, Deputy Director, <a href="/cdn-cgi/l/email-protection#ddbbbbb4aebcb3b4beb59dbebba9bef3bab2ab"><span class="__cf_email__" data-cfemail="a8cecec1dbc9c6c1cbc0e8cbcedccb86cfc7de">[email protected]</span></a>; Jacob Chachkin,
Associate Director, <a href="/cdn-cgi/l/email-protection#b8d2dbd0d9dbd0d3d1d6f8dbdeccdb96dfd7ce"><span class="__cf_email__" data-cfemail="7218111a13111a191b1c32111406115c151d04">[email protected]</span></a>; Michael Ehrstein, Special
Counsel, <a href="/cdn-cgi/l/email-protection#3d5058554f4e495854537d5e5b495e135a524b"><span class="__cf_email__" data-cfemail="1479717c666760717d7a54777260773a737b62">[email protected]</span></a>; Elizabeth Groover, Special Counsel,
<a href="/cdn-cgi/l/email-protection#355052475a5a43504775565341561b525a43"><span class="__cf_email__" data-cfemail="2f4a485d4040594a5d6f4c495b4c01484059">[email protected]</span></a>; or Catherine Brescia, Attorney-Advisor,
<a href="/cdn-cgi/l/email-protection#375455455244545e56775451435419505841"><span class="__cf_email__" data-cfemail="a0c3c2d2c5d3c3c9c1e0c3c6d4c38ec7cfd6">[email protected]</span></a>, each in the Market Participants Division at the
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW, Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Statutory and Regulatory Framework and Existing CPO/CTA
Registration Architecture
B. Former Regulation 4.13(a)(4)
C. The Trump Administration's Prosperity Agenda and the
``Minimum Effective Dose'' Regulatory Approach
D. CFTC Staff Letter 25-50
E. CFTC Staff Letter 26-06
F. Need for Rulemaking
II. The Proposal
A. Proposed Regulation 4.13(a)(4)
B. Conforming Amendments to Regulation 4.13
C. Proposed Regulation 4.14(a)(8): CTA Exemption for Advisers to
Certain Exempt Pools
D. Proposed Regulation 4.13(a)(2): Inflation-Based Adjustment to
the Small Pool Exemption Threshold
III. Request for Comment
IV. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost-Benefit Considerations
D. Antitrust Considerations
E. Executive Orders 12866, 13563, and 14192
I. Background
The Commission is proposing to amend certain part 4 regulations,\1\
such that RIAs regulated and overseen by the Securities and Exchange
Commission (``SEC'') would qualify for an exemption from CPO
registration with respect to their pools that are offered only to
certain sophisticated investors (``Proposed Regulation 4.13(a)(4)'' or
``Proposed RIA-QEP Exemption''), subject to certain conditions, and to
make related changes to 17 CFR part 4. The Proposed RIA-QEP Exemption
would generally codify the no-action positions issued by MPD in CFTC
Letter 25-50 (``Letter 25-50'') \2\ with certain modifications, as
discussed below.
---------------------------------------------------------------------------
\1\ 17 CFR pt. 4. The Commission's regulations referred to in
this release are found at 17 CFR ch. I (2025) and are accessible on
the Commission's website at <a href="https://www.cftc.gov/LawRegulation/CommodityExchangeAct/index.htm">https://www.cftc.gov/LawRegulation/CommodityExchangeAct/index.htm</a>.
\2\ CFTC Staff Letter 25-50 (Dec. 19, 2025), available at
<a href="https://www.cftc.gov/csl/25-50/download">https://www.cftc.gov/csl/25-50/download</a> (``Letter 25-50'').
---------------------------------------------------------------------------
In addition, the Commission is proposing an inflation-based
adjustment for the Small Pool Exemption to continue its efforts at
maintaining and modernizing long-standing regulations with financial
thresholds, similar to recently adopted increases to certain financial
thresholds of the ``qualified eligible person'' (``QEP'') definition
found in 17 CFR 4.7.\3\
---------------------------------------------------------------------------
\3\ See Commodity Pool Operators, Commodity Trading Advisors,
and Commodity Pools Operated: 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, 89 FR 78793 (Sep. 26, 2024)
(``2024 CPO/CTA Final Rule'').
---------------------------------------------------------------------------
A. Statutory and Regulatory Framework and Existing CPO/CTA Registration
Architecture
Section 1a(11) of the Commodity Exchange Act (``CEA'' or ``Act'')
defines the term ``commodity pool operator'' as any person engaged in a
business that is of the nature of a commodity pool, investment trust,
syndicate, or similar form of enterprise, and who, with respect to that
commodity pool, solicits, accepts, or receives from others, funds,
securities, or property, either directly or through capital
contributions, the sale of stock or other forms of securities, or
otherwise, for the purpose of trading in commodity interests.\4\ CEA
section 1a(10) defines a ``commodity pool'' as any investment trust,
syndicate, or similar form of enterprise operated for the purpose of
trading in commodity interests.\5\ CEA section 1a(12) defines the term
``commodity trading advisor'' as any person who, for compensation or
profit, engages in the business of advising others, either directly or
through publications, writing, or electronic media, as to the value of
or the advisability of trading in commodity interests.\6\ CEA section
4m(1) makes it unlawful for any person whose intermediary activities
satisfy either the CPO or CTA definitions to make use of themails or
any means or instrumentality of interstate commerce in connection with
its business as a CPO or CTA, unless so registered with the
Commission.\7\
---------------------------------------------------------------------------
\4\ 7 U.S.C. 1a(11).
\5\ 7 U.S.C. 1a(10).
\6\ 7 U.S.C. 1a(12).
\7\ 7 U.S.C. 6m(1).
---------------------------------------------------------------------------
With respect to both CPOs and CTAs, the CEA authorizes the
Commission to include persons within, or exclude them from, those
definitions, by rule, regulation, or order, if the Commission
determines that such action will effectuate the purposes of the CEA.\8\
The CEA also gives the Commission authority to make and promulgate such
rules and regulations, as in the judgment of the Commission, are
reasonably necessary to effectuate the
[[Page 54266]]
provisions or to accomplish any purposes of the CEA.\9\
---------------------------------------------------------------------------
\8\ 7 U.S.C. 1a(11)(B); 7 U.S.C. 1a(12)(B)-(C).
\9\ 7 U.S.C. 12a(5).
---------------------------------------------------------------------------
17 CFR part 4 specifically governs the operations and activities of
CPOs and CTAs. These regulations implement the statutory authority
provided to the Commission by the CEA and also establish registration
exemptions and definitional exclusions for CPOs and CTAs.\10\ Part 4
also contains detailed regulations that establish additional ongoing
compliance requirements applicable to CPOs and CTAs registered with the
Commission as such. These compliance requirements pertain to the
commodity pools and separate accounts that CPOs and CTAs operate and
advise, and provide customer protection through, among other things,
requiring disclosures and regular reporting to a registrant's pool
participants or advisory clients.
---------------------------------------------------------------------------
\10\ See 7 U.S.C. 6n; see, e.g., 17 CFR 4.5, 4.6, 4.13, and
4.14.
---------------------------------------------------------------------------
Several regulations in part 4 also reduce regulatory burdens and
compliance obligations for certain persons engaged in CPO and CTA
activities, where the Commission has determined as a matter of policy
that it is appropriate and serves the interests of the public or the
purposes of the CEA to do so.\11\ For instance, Regulation 4.7 provides
exemptions from certain part 4 compliance requirements regarding
disclosure, periodic reporting, and recordkeeping for registered CPOs
and CTAs, whose prospective and actual pool participations and/or
advisory clients are restricted to individuals and entities determined
to be QEPs and who claim the desired exemptions pursuant to paragraph
(d) of that section.\12\
---------------------------------------------------------------------------
\11\ See H.R. Rep. No. 93-975, 93d Cong., 2d Sess. (1974), p.
23, available at <a href="https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/hr93975.pdf">https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/hr93975.pdf</a> (last retrieved May
14, 2026) (explaining that the U.S. House Committee on Agriculture
intended the ``discretionary power'' to exclude CPOs and CTAs from
the statutory definitions in the CEA ``be exercised to exempt from
registration those persons who would otherwise meet the criteria for
registration . . . if, in the opinion of the Commission, there is no
substantial public interest served by such registration'').
\12\ 17 CFR 4.7.
---------------------------------------------------------------------------
While 17 CFR 4.7 does not provide exemptions from CPO registration
and instead provides exemptions from certain part 4 compliance
obligations of CPOs applicable to qualifying commodity pools,
Regulation 4.13 provides exemptions from CPO registration and related
registrant compliance obligations for each qualifying pool.\13\ These
registration exemptions are intended to calibrate regulatory
requirements to the nature and scale of the pools and their
participants.\14\ Similarly, 17 CFR 4.14 provides CTA registration
exemptions in situations where registration and compliance provides
limited benefit, e.g., where the CTA is registered in another capacity
with the Commission, its advisory activities are limited in scope, it
is substantially otherwise regulated, or it does not offer tailored
trading advice or direct client accounts.
---------------------------------------------------------------------------
\13\ 17 CFR 4.13. For example, under 17 CFR 4.13(a)(2), the
Small Pool Exemption currently exempts a person from CPO
registration with respect to pools with no more than 15 participants
and total gross capital contributions not exceeding $400,000.
\14\ See, e.g., Commodity Pool Operators and Commodity Trading
Advisors; Final Rules, 44 FR 1918, 1919 (Jan. 8, 1979) (``1979 CPO/
CTA Final Rule'') (explaining that exemptions found in today's
Regulations 4.13(a)(1)-(a)(2) ``are being granted because the costs
of compliance with the Part 4 rules outweigh the benefits to be
gained from regulating family, club and small pools'').
---------------------------------------------------------------------------
B. Former Regulation 4.13(a)(4)
Former Regulation 4.13(a)(4) (the ``Original QEP Exemption''),\15\
which was adopted in 2003, provided an exemption from CPO registration
for the operators of privately offered commodity pools whose
participants were limited to certain financially sophisticated persons
(including QEPs), subject to additional conditions regarding the nature
of participants and marketing, as described below.\16\ It was adopted
to facilitate participation in the commodity interest markets by
collective investment vehicles and their operators and advisers, with
the intended added benefit of increasing liquidity for all market
participants,\17\ and, in part, to reduce duplicative, overlapping, and
conflicting regulatory requirements applicable to CPOs, including CPOs
routinely regulated by the SEC as RIAs.\18\ The Commission recognized
that QEPs--such as institutional investors, family offices, and high-
net-worth individuals--possess the resources and expertise to evaluate
investment risks without the need for prescriptive regulatory
protections.\19\
---------------------------------------------------------------------------
\15\ Though, as discussed below, this exemption allowed for
certain pool participants that are accredited investors and not
QEPs, it is commonly referred to by market participants as the ``QEP
Exemption,'' and this release refers to it as the ``Original QEP
Exemption'' for consistency and to avoid confusion.
\16\ 17 CFR 4.13(a)(4) (2010), available at <a href="https://www.govinfo.gov/content/pkg/CFR-2010-title17-vol1/pdf/CFR-2010-title17-vol1-part4.pdf">https://www.govinfo.gov/content/pkg/CFR-2010-title17-vol1/pdf/CFR-2010-title17-vol1-part4.pdf</a>; see Additional Registration and Other
Regulatory Relief for Commodity Pool Operators and Commodity Trading
Advisors; Past Performance Issues, 68 FR 47221 (Aug. 8, 2003)
(``2003 CPO/CTA Final Rule''); see also Commodity Pool Operators and
Commodity Trading Advisors: Compliance Obligations, 77 FR 11252
(Feb. 24, 2012) (``2012 CPO/CTA Final Rule'').
\17\ 2003 CPO/CTA Final Rule, 68 FR at 47223 (citing the related
proposed rulemaking, Additional Registration and Other Regulatory
Relief for Commodity Pool Operator and Commodity Trading Advisors;
Past Performance Issues, 68 FR 12622, 12625 (Mar. 17, 2003) (``2003
CPO/CTA NPRM'')). The Commission has also previously used its
authority to reduce regulatory burden for entities otherwise subject
to extensive federal or state regulation. See, e.g., 17 CFR 4.5.
\18\ See 2003 CPO/CTA Final Rule.
\19\ Id. at 47222.
---------------------------------------------------------------------------
The Original QEP Exemption had the following conditions with
respect to the related commodity pool: (i) interests in the pool were
exempt from registration under the Securities Act of 1933 (``Securities
Act''),\20\ and such interests were offered and sold without marketing
to the public in the United States (``U.S.''); and (ii) the CPO
reasonably believed, at the time of investment, that each natural
person participant is a QEP of the type listed in 17 CFR 4.7(a)(6)(i)
\21\ (i.e., those not required to satisfy the Portfolio Requirement (as
defined in 17 CFR 4.7(a)(5)) \22\ to be a QEP), and each non-
[[Page 54267]]
natural person participant is a QEP or an accredited investor (as
defined in 17 CFR 230.501(a)(1)-(3), (7), or (8)) (each such
participant, an ``Eligible Participant'').\23\ Finally, the Original
QEP Exemption provision permitted persons relying on it with respect to
qualifying pools to do so without affecting their ability to claim
exemption for additional pools investing a de minimis amount of pool
assets in commodity interests, clearly establishing the pool-by-pool
basis on which a pool operator could rely with respect to both of those
CPO registration exemptions.\24\
---------------------------------------------------------------------------
\20\ 15 U.S.C. 77a, et seq.
\21\ These QEPs are considered to have a higher level of
sophistication, resilience, and experience in trading or managing
commodity interest portfolios, within the QEP definition, and to not
need the level of protection afforded by the Commission's regulatory
regime applicable to registered CPOs (including in the QEP
definition (1) registered futures commission merchants (``FCMs''),
registered retail foreign exchange dealers, registered swap dealers,
and principals thereof; (2) a registered broker or dealer, or a
principal thereof; (3) certain registered CPOs and principals
thereof; (4) certain registered CTAs and principals thereof; (5)
certain RIAs and the principals thereof; (6) ``qualified
purchasers'' as defined in section 2(a)(51)(A) of the Investment
Company Act of 1940 (``ICA''), 15 U.S.C. 80a-2(a)(51)(A); (7)
``knowledgeable employees'' as defined in 17 CFR 270.3c-5 pursuant
to the ICA; (8) certain persons associated with an exempt pool or
account, outlined in Regulations 4.7(a)(6)(i)(J) and (K),
respectively; (9) certain trusts; (10) organizations described in
section 501(c)(3) of the Internal Revenue Code (``IRC''), 26 U.S.C.
501(c)(3), subject to certain conditions; (11) non-U.S. persons;
(12) entities in which all unit owners or participants are QEPs;
(13) exempt pools; and (14) entities for which an exclusion under
Regulation 4.5 has been claimed, if all unit owners or participants
are also QEPs).
\22\ The Portfolio Requirement requires a person ``own
securities (including pool participations) of issuers not affiliated
with such person and other investments with an aggregate market
value of at least $4,000,000;'' ``has had on deposit with an [FCM],
for its own account at any time during the six-month period
preceding either the date of sale to that person of a pool
participation in the exempt pool or the date that the person opens
an exempt account with the [CTA], at least $400,000 in exchange-
specified initial margin and option premiums, together with any
required minimum security deposits for retail foreign exchange
transactions, . . . for commodity interest transactions;'' or some
combination of the two tests that, when combined, amount to 100%,
e.g., $2,000,000 in assets (50% of the asset test), and $200,000 in
margin, premiums, and security deposits (50% of the margin test). 17
CFR 4.7(a)(5)(i)-(iii). The Commission has previously stated that
the Portfolio Requirement, ``provides a reasonable proxy for the
experience, acumen, and resources necessary for certain persons,
including natural persons, to be considered QEPs eligible to invest
in complex commodity interest products without receiving the full
panoply of information [and protection] otherwise required under
part 4.'' Commodity Pool Operators, Commodity Trading Advisors, and
Commodity Pools Operated: 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, 88 FR 70852, 70854 (Oct. 12, 2023)
(``2024 CPO/CTA NPRM'').
\23\ Non-natural persons, therefore, could be considered QEPs
under either 17 CFR 4.6(a)(i) or (a)(ii), or meet the specified
accredited investor definitions. For the types of entities and
persons who must meet the Portfolio Requirement to be a QEP, see 17
CFR 4.7(a)(6)(ii) (including in the QEP definition the following
entities who must meet the Portfolio Requirement in order to be a
QEP: (1) an investment company registered under the ICA, or a
business development company as defined in section 2(a)(48) of the
ICA, 15 U.S.C. 2(a)(48), not formed for the specific purpose of
either investing in the exempt pool or opening an exempt account;
(2) a bank as defined in section 3(a)(2) of the Securities Act, 15
U.S.C. 77c(a)(2), or any savings and loan association or other
institution as defined in section 3(a)(5)(A) of the Securities Act,
15 U.S.C. 77c(a)(5)(A), acting for its own account or for the
account of a QEP; (3) an insurance company as defined in section
2(13) of the Securities Act, 15 U.S.C. 77b(a)(13), acting for its
own account or for the account of a QEP; (4) a plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of
$5,000,000; (5) an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, 29 U.S.C. ch. 18,
provided that the investment decision is made by a plan fiduciary,
as defined in section 3(21) of such Act, 29 U.S.C. 1002(21), which
is a bank, savings and loan association, insurance company, or RIA,
or that the employee benefit plan has total assets in excess of
$5,000,000, or if the plan is self-directed, that investment
decisions are made solely by persons that are QEPs; (6) a private
business development company as defined in section 202(a)(22) of the
Investment Advisers Act of 1940 (``Advisers Act''), 15 U.S.C. 80b-
2(a)(22); (7) an organization described in section 501(c)(3) of the
IRC, with total assets in excess of $5,000,000; (8) a corporation,
Massachusetts or similar business trust, or partnership, limited
liability company, or similar business venture, other than a pool,
which has total assets in excess of $5,000,000, and is not formed
for the specific purpose of either participating in the exempt pool
or opening an exempt account; (9) a natural person whose individual
net worth, or joint net worth with that person's spouse, at the time
of either his purchase in the exempt pool or his opening of an
exempt account would qualify him as an accredited investor as
defined in 17 CFR 230.501(a)(5); (10) a natural person who would
qualify as an accredited investor as defined in 17 CFR
230.501(a)(6); (11) a pool, trust, insurance company separate
account or bank collective trust, with total assets in excess of
$5,000,000, not formed for the purpose of either participating in
the exempt pool or opening an exempt account, and whose
participation in the exempt pool or investment in the exempt account
is directed by a QEP; and (12) except as provided or the
governmental entities referenced above, if otherwise authorized by
law to engage in such transactions, a governmental entity (including
the U.S., a state, or a foreign government) or political subdivision
thereof, or a multinational or supranational entity or an
instrumentality, agency, or department of any of the foregoing). See
also 17 CFR 230.501(a)(1)-(3), (7)-(8).
\24\ See 17 CFR 4.13(a)(4)(ii)(B) (2010).
---------------------------------------------------------------------------
The Commission rescinded the Original QEP Exemption in 2012.\25\ At
that time, the Commission determined it was appropriate to require the
registration of certain previously exempt CPOs and to require the
reporting with respect to commodity pools of information similar to
Form PF, which the Commission had previously adopted jointly with the
SEC.\26\ When the Commission rescinded the Original QEP Exemption by
removing and reserving paragraph (a)(4) in Regulation 4.13, the
Commission also removed cross-references to former Regulation
4.13(a)(4) found elsewhere in Regulations 4.13 and 4.14, which included
provisions governing the electronic filing of exemption notices and the
availability of the related CTA registration exemption.\27\
---------------------------------------------------------------------------
\25\ 2012 CPO/CTA Final Rule.
\26\ Id. Following the joint adoption with the SEC of Form PF,
the Commission subsequently adopted a new reporting requirement for
CPOs through Regulation 4.27, which, among other things, requires
certain CPOs to report periodically on Form CPO-PQR regarding their
pool assets and activities. See 17 CFR pt. 4, app. A; and 17 CFR
4.27. See also Compliance Requirements for Commodity Pool Operators
on Form CPO-PQR, 85 FR 71772 (Nov. 10, 2020) (adopting changes in
the reporting required by Form CPO-PQR).
\27\ See 2012 CPO/CTA Final Rule.
---------------------------------------------------------------------------
C. The Trump Administration's Prosperity Agenda and the ``Minimum
Effective Dose'' Regulatory Approach
In 2025, the Trump Administration articulated an agenda that
emphasizes removing unnecessary and duplicative regulations,
streamlining oversight where other federal regulators already provide
robust coverage, and enhancing the efficiency and competitiveness of
U.S. financial markets.\28\ Consistent with that agenda, the Chairman
of the CFTC (``Chairman Selig'') has publicly advocated for a
regulatory approach that focuses on delivering the ``minimum effective
dose'' of regulation--no more and no less--to maintain the protection
of market participants, to foster sound, liquid, and competitive
markets, and to support innovation.\29\ In public statements explaining
the Commission's regulatory priorities and approach, Chairman Selig
expressed concern that the costs and complexity of accessing commodity
interest markets have become too burdensome for smaller and mid-sized
participants, and he committed the Commission to developing clear, ex
ante ``rules of the road.'' \30\
---------------------------------------------------------------------------
\28\ See Executive Order 14192, Unleashing Prosperity Through
Deregulation, 90 FR 9065 (Feb. 6, 2025) (``Prosperity Through
Deregulation'').
\29\ See Michael S. Selig, Chairman, CFTC, Remarks at FIA Global
Cleared Markets Conference (Mar. 9, 2026), available at <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/opaselig2">https://www.cftc.gov/PressRoom/SpeechesTestimony/opaselig2</a> (``FIA
Remarks''); Michael S. Selig, Chairman, CFTC, Testimony of Chairman
Michael S. Selig Before the U.S. House Committee on Agriculture
(Apr. 16, 2026) (``My staff have been working diligently to right-
size cumbersome rules so that even our smallest producers can
properly manage risk.''), available at <a href="https://www.cftc.gov/PressRoom/SpeechesTestimony/opaselig4">https://www.cftc.gov/PressRoom/SpeechesTestimony/opaselig4</a>.
\30\ See supra FIA Remarks.
---------------------------------------------------------------------------
D. CFTC Staff Letter 25-50
Consistent with the regulatory agenda articulated above, on
December 19, 2025, MPD issued Letter 25-50, which responded to a
request from the Managed Funds Association (``MFA''). MFA argued that
providing a registration no-action position to an RIA that is required
to be registered as a CPO with the Commission (``RIA-CPO'') ``would
mitigate the burdens of duplicative, overlapping regulation and is
wholly aligned with the Trump Administration's efforts to identify
regulations that eliminate jobs, or inhibit job creation; are outdated,
unnecessary, or ineffective; impose costs that exceed benefits; or
implement more stringent standards than required by law'' and would
further ``policy goals [of the CFTC that] . . . recognize the
sophistication of QEP investors and better harmonize CFTC regulation
with the SEC, thereby reducing unnecessary expenses and burdens.'' \31\
Letter 25-50 was intended by MPD to bridge the period between its
issuance and when the Commission formally promulgated rules to
reinstate the Original QEP Exemption (or determined otherwise).\32\
---------------------------------------------------------------------------
\31\ Letter 25-50, at 5.
\32\ Id. at 7 (providing that the no-action position is
effective ``until such time as the Commission promulgates rules, or
publicly determines not to promulgate rules, addressing the
reinstatement'' of the Original QEP Exemption).
---------------------------------------------------------------------------
Letter 25-50 provides no-action positions on CPO and CTA
registration similar to the Original QEP Exemption in former
Regulations 4.13(a)(4) and 4.14(a)(8), conditioned, among other things,
on: (1) the CPO being an RIA regulated by the SEC; (2) the relevant
[[Page 54268]]
pool interests being privately offered in the U.S. and exempt under the
Securities Act, with general solicitation permitted for pools offered
under Regulation 230.506(c); \33\ (3) at the time of investment or
reliance on Letter 25-50, the participants of the pool qualifying as
QEPs pursuant to the definition found in 17 CFR 4.7(a)(6); and (4) the
RIA filing a Form PF \34\ with respect to such pool (CPOs qualifying
under the conditions therein, ``QEP No-Action CPOs'').\35\ It provides
additional clarity that QEP No-Action CPOs are not required to offer
pool participants an opportunity to redeem their participations in such
pools pursuant to 17 CFR 4.13(e)(2) in order to qualify for the no-
action position.\36\ Notwithstanding the more streamlined and
harmonized regulatory posture provided by Letter 25-50, the Commission
understands that its practical implementation, in coordination with the
National Futures Association (``NFA''), to which many of the
Commission's registration and exemption functions have been
delegated,\37\ has proven to be complex, time-consuming, and difficult
for MPD, NFA, and market participants seeking to rely on it due to,
among other things, the need for NFA to mechanically enter each
entity's reliance on the no-action position in its systems.
---------------------------------------------------------------------------
\33\ 17 CFR 230.506(c).
\34\ Form PF is a reporting form for certain investment advisers
to private funds and certain CPOs and CTAs, which is intended to
collect information for the protection of investors, and for the
assessment of systemic risk. The CFTC and SEC have signed a
Memorandum of Understanding (``MOU'') that creates the framework for
sharing Form PF data between the agencies. See Memorandum of
Understanding Between the U.S. Securities and Exchange Commission
and the U.S. Commodity Futures Trading Commission Regarding the Use
of Form PF Data (Feb. 8, 2024), available at <a href="https://www.cftc.gov/media/10216/mou_sec_cftc_form_pf/download">https://www.cftc.gov/media/10216/mou_sec_cftc_form_pf/download</a>.
\35\ Letter 25-50, at 7-8.
\36\ Under Regulation 4.13(e)(2)(iii), persons withdrawing from
CPO registration to claim an exemption under Regulation 4.13(a)(3)
must offer all participants an opportunity to redeem their interests
when the pool's status changes, and prior to 2012, it required the
same of pools exempt under the Original QEP Exemption. 17 CFR
4.13(e)(2)(iii) (2010). In response to MFA's request, in Letter 25-
50, ``MPD confirm[ed] that a QEP No-Action CPO who is relying on
this no-action position, would not be required to comply with the
requirements of Commission regulation 4.13(e)(2) solely with respect
to pools for which the QEP No-Action CPO is relying on this no-
action position.'' Letter 25-50, at 8.
\37\ See, e.g., Performance of Registration Functions by
National Futures Association, 49 FR 39593 (Oct. 9, 1984).
---------------------------------------------------------------------------
E. CFTC Staff Letter 26-06
On February 26, 2026, MPD issued CFTC Staff Letter 26-06 (``Letter
26-06''), which provided an additional no-action position with respect
to certain delegation arrangements between CPOs entered into in
reliance on the no-action position established by CFTC Staff Letter 14-
126 (``Letter 14-126''), issued by MPD's predecessor, the Division of
Swap Dealer and Intermediary Oversight.\38\ Letter 14-126 provides a
no-action position on CPO registration to CPOs who delegate their CPO
responsibilities and functions (``Delegating CPOs'') to ``Designated
CPOs,'' provided certain conditions (defined as ``Criteria'' in Letter
14-126) are met, including that the Designated CPO is registered with
the Commission as a CPO.\39\ Subsequent to the issuance of Letter 25-
50, MFA informed MPD staff that Designated CPOs wished to avail
themselves of the no-action positions provided by Letter 25-50, but
were concerned that deregistering as a CPO in reliance on Letter 25-50
would make the Delegating CPO ineligible for the no-action position in
Letter 14-126. As a result, MPD believed that an additional no-action
position addressing this issue was warranted, and therefore, reissued
the content of Letter 25-50 with an additional no-action position in
relation to Letter 14-126 by publishing Letter 26-06, stating ``MPD
will not recommend that the Commission commence an enforcement action
against a Delegating CPO for failure to register as a CPO where all of
[the Criteria in Letter 14-126] are satisfied except that the
Designated CPO is a QEP No-Action CPO instead of being a registered CPO
(as otherwise required by Criterion 2).'' \40\
---------------------------------------------------------------------------
\38\ CFTC Staff Letter 26-06 (Feb. 26, 2026), available at
<a href="https://www.cftc.gov/csl/26-06/download">https://www.cftc.gov/csl/26-06/download</a> (``Letter 26-06''); CFTC
Staff Letter 14-126 (Oct. 15, 2024), available at <a href="https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/14-126.pdf">https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/14-126.pdf</a> (``Letter 14-126'').
\39\ Letter 26-06, at 1; Letter 14-126, at 4-6.
\40\ Letter 26-06, at 2, 9.
---------------------------------------------------------------------------
F. Need for Rulemaking
The Commission believes that formal rulemaking in this context of
CPO exemptions is necessary to provide durable, transparent, and
uniformly applicable regulatory standards, while reducing the
duplicative regulation of RIA-CPOs and the commodity pools they
operate, and to provide consistency with past efforts to codify in its
regulations staff letters that become routinely or widely utilized by
market participants. The Commission believes it serves the public
interest, and particularly the interests of market participants, to
engage in notice-and-comment rulemaking and to seek and consider the
public's views in amending its regulations, consistent with the
requirements of the APA. Moreover, the Commission believes that long-
term reliance on no-action positions, like those in Letter 25-50, which
do not represent the views of the Commission itself, and which could
easily be withdrawn or modified by MPD, provides less long-term
certainty for market participants and limits the opportunity for public
input on Commission policy-making decisions.
The Commission further believes it is appropriate to undertake this
rulemaking effort because it is consistent with the Commission's
current regulatory approach of harmonizing CFTC and SEC regulatory
regimes by reducing overlapping registration and compliance
requirements, and because the Commission wishes to provide clarity in
the context of CPO exemptions, while ensuring the statutory mandates
and oversight goals contemplated by the CEA and the Commission's part 4
regulations are met. The Commission's experience administering
Regulation 4.13 supports the premise that registration exemptions play
a critical role in tailoring regulatory obligations to the nature of
pools and their participants. Further, through this rulemaking process,
the Commission intends to address many of the practical complexities of
complying with the no-action positions in Letter 25-50.
II. The Proposal
A. Proposed Regulation 4.13(a)(4)
1. Overview and Policy Rationale
Proposed Regulation 4.13(a)(4) would provide an exemption from CPO
registration for RIAs in relation to commodity pools that meet certain
proposed conditions discussed in more detail below (each commodity pool
satisfying all of the conditions in Proposed Regulation 4.13(a)(4), an
``Eligible Pool'').\41\ Proposed Regulation 4.13(a)(4) is modeled on
the Original QEP Exemption and the no-action position for QEP No-Action
CPOs in Letter 25-50, but incorporates refinements, discussed below, to
reflect the Commission's experience with implementing Letter 25-50 and
past CPO exemptions.
---------------------------------------------------------------------------
\41\ The new text would replace the currently reserved paragraph
(a)(4) of Regulation 4.13. 17 CFR 4.13(a)(4).
---------------------------------------------------------------------------
As discussed above, the Commission has previously determined that
providing an exemption from CPO registration is appropriate, where
appropriately calibrated, when CPO registration with the Commission and
[[Page 54269]]
full compliance with its requirements would provide limited benefit to
the public.\42\ Consistent with the Commission's historical
justifications for proposing and adopting CPO exemptions in other
contexts, the Commission preliminarily believes that a CPO registration
exemption is appropriate with respect to RIAs and their Eligible Pools
that are already subject to robust SEC oversight and regulation,
through the Investment Advisers Act of 1940 (the ``Advisers Act'') and
Form PF, and that this exemption would effectively reduce overlapping
regulatory requirements consistent with the Trump Administration's
efforts to streamline federal regulatory oversight.\43\
---------------------------------------------------------------------------
\42\ See 1979 CPO/CTA Final Rule.
\43\ See Prosperity Through Deregulation.
---------------------------------------------------------------------------
2. SEC Investment Adviser Registration
The Commission is proposing to limit the exemption in Proposed
Regulation 4.13(a)(4) to RIAs. Doing so is consistent with the
conditions of Letter 25-50 and ensures that CPOs relying on the
Proposed RIA-QEP Exemption are subject to a robust federal regulatory
regime. RIAs are already subject to oversight and regulation under the
Advisers Act and the SEC's regulations issued thereunder, including
conduct standards, examinations under the federal securities laws,
disclosure to RIA clients and reporting to the SEC, and for certain
RIAs, reporting on Form PF.\44\ The Commission recognizes that this
oversight by the SEC is significant and appropriately tailored for the
conduct of RIAs in the financial markets.
---------------------------------------------------------------------------
\44\ See 17 CFR pt. 275.
---------------------------------------------------------------------------
This condition of the Proposed RIA-QEP Exemption is also consistent
with the Commission's approach of ensuring that the ``minimum effective
dose'' of regulation is applied to Commission registrants and entities
participating in markets subject to Commission jurisdiction. Moreover,
exempting RIAs from CPO registration would effectively and
significantly reduce duplicative regulatory burdens, as requested by
industry groups like MFA, and encouraged by the Trump Administration's
executive orders, without undermining the purposes and goals of the
Commission's mandates established by the CEA. Under these
circumstances, the Commission preliminarily believes that it is
appropriate to rely upon the existing SEC regulatory system applied to
RIAs, and that the CFTC can safely reduce duplicative federal
regulation of RIAs whose conduct also meets the CPO definition through
the Proposed RIA-QEP Exemption, rather than requiring compliance with
its part 4 regulatory regime applicable to CFTC-registered CPOs.
3. Private U.S. Offerings and Limited Solicitation
The Commission is proposing to require that interests in Eligible
Pools be exempt from registration under the Securities Act and only
marketed to the public in the U.S. under certain limited circumstances.
Pursuant to the Original QEP Exemption, and consistent with Letter 25-
50, interests in a pool exempt thereunder were required to be exempt
from registration under the Securities Act,\45\ and offered and sold
without marketing to the public in the U.S. Since the Original QEP
Exemption was rescinded by the Commission in 2012, Congress passed,
also in 2012, the Jumpstart Our Business Startups Act (``JOBS
Act''),\46\ described as ``an act to increase American job creation and
economic growth by improving access to the public capital markets for
emerging growth companies.'' \47\ The SEC implemented the JOBS Act in a
variety of ways, including by amending provisions of Regulation D,\48\
to permit issuers (including private funds \49\) to engage in general
solicitation or general advertising in offering and selling securities,
provided that all purchasers of the securities are accredited investors
and the issuer takes reasonable steps to verify that such purchasers
meet the SEC's definition of ``accredited investor.'' \50\ In 2019, the
Commission adopted amendments to the exemptions in 17 CFR 4.7(b) and
4.13(a)(3) that effectively codified Commission staff letters \51\ and
sought to harmonize those CFTC regulations with those of the SEC, as
amended, to comply with and facilitate the stated goals of the JOBS
Act.\52\ The Commission preliminarily believes that it is appropriate
to continue its harmonization of CPO exemptions with the goals of the
JOBS Act and related subsequent amendments to applicable securities
regulations. Therefore, to provide greater flexibility for solicitation
in limited circumstances that have been encouraged and facilitated by
the JOBS Act, and consistent with the marketing condition in Letter 25-
50, the Commission is proposing that Eligible Pools be prohibited from
marketing to the public in the U.S., except with respect to Eligible
Pools offered pursuant to 17 CFR 230.506(c).
---------------------------------------------------------------------------
\45\ 15 U.S.C. 77a, et seq.
\46\ Public Law 112-106, 126 Stat. 306 (2012).
\47\ Id.
\48\ Eliminating the Prohibition Against General Solicitation
and General Advertising in Rule 506 and Rule 144A Offerings, 77 FR
54464 (Sep. 5, 2012), and 78 FR 44771 (Jul. 24, 2013).
\49\ For additional discussion on private funds, see ``Private
Funds,'' U.S. Securities and Exchange Commission (last reviewed Aug.
18, 2026), available at <a href="https://www.sec.gov/resources-small-businesses/capital-raising-building-blocks/private-funds">https://www.sec.gov/resources-small-businesses/capital-raising-building-blocks/private-funds</a>.
\50\ 17 CFR 230.506(c).
\51\ See, e.g., CFTC Staff Letter 14-116 (Sep. 9, 2014)
available at <a href="https://www.cftc.gov/csl/14-116/download">https://www.cftc.gov/csl/14-116/download</a>, superseded by
Registration and Compliance Requirements for Commodity Pool
Operators (CPOs) and Commodity Trading Advisors: Family Offices and
Exempt CPOs, 84 FR 67355 (Dec. 10, 2019) (``Family Offices and
Exempt CPOs Final Rule''). This final rule additionally adopted CPO
and CTA exemptions with respect to ``family offices,'' thereby
codifying CFTC Staff Letters 12-37 and 14-143, and further
harmonizing CFTC and SEC regulatory regimes. Family Offices and
Exempt CPOs Final Rule, 84 FR at 67357-60, 67368-69.
\52\ Family Offices and Exempt CPOs Final Rule, 84 FR at 67361
(stating that ``harmonizing the impact of the JOBS Act on dually-
regulated entities eliminates incompatibilities between comparable
SEC and CFTC regulatory regimes, and generally provides legal
certainty regarding these transactions in a manner that allows these
entities to benefit from the new offering process under the JOBS
Act'').
---------------------------------------------------------------------------
4. Limiting Eligible Pool Participation Consistent With the Original
QEP Exemption
The Commission proposes to require in Proposed Regulation
4.13(a)(4) that pool participants be limited in the same manner as in
the Original QEP Exemption, with different requirements for non-natural
and natural person participants. Accordingly, participants would be
limited to Eligible Participants, as defined above, i.e., natural
person participants limited to those QEPs listed in 17 CFR 4.7(a)(6)(i)
(those that do not have to meet the Portfolio Requirement), and non-
natural person participants limited to all QEPs and accredited
investors listed under 17 CFR 230.501(a)(1)-(3), (a)(7), or (a)(8).
The Commission recognizes that this is a recalibration of the
participant condition MPD included in Letter 25-50, which did not
differentiate between natural and non-natural persons; however, given
its experience in administering the Original QEP Exemption from its
2003 adoption to its 2012 rescission, the Commission preliminarily
believes that it is appropriate to include the participation
limitations from the Original QEP Exemption in Proposed Regulation
4.13(a)(4). As the Commission has previously recognized, the QEP
definition ``encompasses a broad spectrum of market participants from
large fund complexes and other institutional investors with significant
assets under management to individuals
[[Page 54270]]
with varying backgrounds and experience, each of which has vastly
different resources available to [them].'' \53\ Moreover, the
Commission has previously recognized that there is a fundamental
difference between large institutional investors, financial entities,
and fund complexes, when compared with individual natural persons, and
that such differences sometimes warrant different treatment of entities
and natural persons, even those that are sophisticated, in the
application of Commission regulations. Tailoring participation to
maintain consistency with prior Commission opinions and statements
regarding the wide variety and spectrum of investors encompassed by the
QEP definition preserves an appropriate balance between customer
protection and providing much-needed flexibility and innovative
opportunities for investors and intermediaries in the commodity
interest markets. Further, this approach recognizes that non-natural
person QEPs typically possess greater financial resources and
resilience, sophisticated compliance and risk management regimes with
which to evaluate potential investment opportunities, and greater
overall experience trading in financial markets, and thus, require less
customer protection or intervention from CFTC regulations. Finally,
given that the proposed requirement is sourced directly from the
Original QEP Exemption, the Commission preliminarily expects that RIAs
seeking to rely on the Proposed RIA-QEP Exemption will already be
familiar with these participant limitations and readily able to comply
with them.
---------------------------------------------------------------------------
\53\ 2024 CPO/CTA Final Rule, 89 FR at 78796 (citing the 2024
CPO/CTA NPRM, 88 FR at 70856).
---------------------------------------------------------------------------
5. Form PF Reporting
The Commission is proposing that for an RIA-CPO to be eligible for
the exemption in Proposed Regulation 4.13(a)(4) with respect to an
Eligible Pool, it must file Form PF for that pool, if required to do
so.\54\ The Commission preliminarily believes that this proposed
condition is appropriate and will allow the CFTC and other Financial
Stability Oversight Council (``FSOC'') regulators to obtain non-
duplicative data needed for effective market oversight and systemic
risk monitoring without imposing separate, and potentially duplicative,
reporting obligations. This condition aligns with the Trump
Administration's emphasis on coordinated regulation among federal
agencies and reducing regulatory overlap, while preserving the CFTC's
ability to monitor whether Eligible Pools pose risks to the commodity
interest markets or to financial stability more broadly.
---------------------------------------------------------------------------
\54\ Currently, the Commission, in a joint proposed rulemaking
with the SEC, has proposed, among other amendments, raising the
filing thresholds for Form PF, which, if adopted, will likely reduce
the number of RIAs required to file Form PF for the private funds
they operate and advise. Form PF; Reporting Requirements for All
Filers, 91 FR 22232 (Apr. 24, 2026) (``Form PF Joint NPRM''). As
such, the Commission proposes to require a Form PF filing to qualify
for the Proposed RIA-QEP Exemption, where the CPO is required by
securities regulations and Form PF, as amended, to do so. This
proposed requirement maintains harmonization efforts going forward
between applicable securities regulations and CFTC regulations
applicable to CPOs.
---------------------------------------------------------------------------
B. Conforming Amendments to Regulation 4.13
Finally, as discussed in further detail below, the Proposal
reinstates prior references to paragraph (a)(4) throughout Regulation
4.13, which would, in effect, require compliance with the existing
provisions of 17 CFR 4.13(b), (c), (d), and (e). The Commission
preliminarily believes that these requirements are an important part of
the ``minimum effective dose'' of regulation for all exempt CPOs and
pools, ensuring basic transparency to participants and the Commission,
and that the conforming amendments outlined below effectively integrate
Proposed Regulation 4.13(a)(4) into the existing framework of
Regulation 4.13.\55\
---------------------------------------------------------------------------
\55\ The Commission notes that certain other cross-references in
Regulation 4.13 and other Commission regulations will be given
effect by the replacement of paragraph (a)(4) and the creation of a
new CPO registration exemption. See, e.g., 17 CFR 4.13(a)(3)(iv) and
(a)(7)(i). These provide, respectively, for pool-by-pool exemptions
as noted above and for the delivery of certain communications to
prospective participants.
---------------------------------------------------------------------------
1. Regulation 4.13(b)(1)(ii): Electronic Notice of Exemption
Under Regulation 4.13(b)(1), persons claiming an exemption from CPO
registration must file a notice of exemption with the NFA, typically
through NFA's ``electronic exemption filing system,'' today known as
NFA's Online Registration System.\56\ The Commission is proposing to
amend Regulation 4.13(b)(1)(ii) \57\ to restore the ability of persons
claiming an exemption under Proposed Regulation 4.13(a)(4) to identify
that exemption in their electronic filings. Specifically, Regulation
4.13(b)(1)(ii) would be amended to add a reference to paragraph (a)(4).
This proposed amendment reinstates the reference to paragraph (a)(4)
that was removed when the Original QEP Exemption was rescinded and
ensures that NFA's electronic exemption filing system can properly
capture and track claims under the restored exemption. The Commission
notes further that RIA-CPOs claiming an exemption under Proposed
Regulation 4.13(a)(4), like all other persons claiming an exemption
under Regulation 4.13, would be subject to the remaining provisions of
paragraph (b) thereunder, including, but not limited to, required
representations regarding statutory disqualifications, required annual
notices of exemption with NFA confirming continued reliance on the RIA-
QEP Exemption, and necessary updates to ensure exemption notices are
accurate and complete, as well as the recordkeeping requirements found
in Regulation 4.13(c).\58\
---------------------------------------------------------------------------
\56\ 17 CFR 4.13(b)(1).
\57\ 17 CFR 4.13(b)(1)(ii).
\58\ See 17 CFR 4.13(b)(1)(iii), (b)(4), and (b)(5); 17 CFR
4.13(c).
---------------------------------------------------------------------------
2. Regulation 4.13(e)(2): Treatment of Certain Pools Operated by
Registered CPOs
Regulation 4.13(e)(2) currently provides that a person, who
operates one or more exempt pools described in paragraph (a)(3), and
one or more pools for which it must be, and is, registered as a CPO, is
exempt from requirements applicable to registered CPOs with respect to
its exempt pools, provided that specified disclosures and rights are
afforded to participants.\59\ The Commission proposes to amend
Regulation 4.13(e)(2) as shown in the proposed rule text to extend this
framework to pools described in revised paragraph (a)(4), which had
been referenced in this regulation prior to the 2012 rescission of the
Original QEP Exemption. This proposed amendment ensures that
participants in pools transitioning from registered to exempt status
under Regulations 4.13(a)(3) or (a)(4) receive notice, an opportunity
to redeem, and ongoing transparency, consistent with the existing
protections in Regulation 4.13.
---------------------------------------------------------------------------
\59\ 17 CFR 4.13(e)(2).
---------------------------------------------------------------------------
3. Integration of No-Action Positions Provided by Letters 25-50 and 26-
06 and the Proposed Amendments in Regulation 4.13
The Commission additionally wishes to provide clarity with respect
to the impact of the Proposal and its potential codification of the no-
action positions provided by Letter 25-50. The Commission preliminarily
intends the proposed amendments herein to ultimately supersede the no-
action positions provided currently by Letter 25-50, if they are
finalized by the
[[Page 54271]]
Commission in a final rule.\60\ As explained further below, the
Commission solicits comment on this and many other aspects of the
Proposal.\61\
---------------------------------------------------------------------------
\60\ In such case, MPD may determine to rescind Letter 25-50.
Letter 25-50, at 8 (stating that ``MPD retains the authority to
condition further, modify, suspend, terminate, or otherwise restrict
the terms of the position taken herein, in its discretion'').
\61\ See infra III. Request for Comment.
---------------------------------------------------------------------------
Nonetheless, the Commission acknowledges that Letter 25-50 provides
a no-action position regarding the requirements of Regulation
4.13(e)(2). In particular, a no-action position on the requirement that
a CPO offer a right of redemption to all pool participants prior to
claiming and relying upon the CPO registration no-action position in
Letter 25-50, potentially conflicts with the proposed conforming
amendments to Regulation 4.13 reinstating cross-references to paragraph
(a)(4) that would require, among other things listed in 17 CFR
4.13(e)(2), that a CPO transitioning a pool operated by a registered
CPO to an exempt status offer such a redemption right as a condition of
claiming the exemption in Proposed Regulation 4.13(a)(4). The
Commission believes it is important to reincorporate references to
proposed paragraph (a)(4) within Regulation 4.13 to restore the
original coordination and efficacy of Regulation 4.13 prior to the 2012
rescission of the Original QEP Exemption. However, the Commission does
not intend to place additional, conflicting requirements upon RIA-CPOs
that are currently relying on Letter 25-50 for qualifying pools, many
of whom may have consequently deregistered as CPOs.\62\ Therefore, the
Commission preliminarily intends that, consistent with their claims
under Letter 25-50, such CPOs would generally not be subject to 17 CFR
4.13(e)(2) for such pools. However, like other CPOs claiming an
exemption under 17 CFR 4.13(a)(3) or (a)(4), they would be subject to
17 CFR 4.13(e)(2) for pools for which they have not relied on Letter
25-50. To carry out its intention to not subject CPOs and pools relying
on Letter 25-50 to 17 CFR 4.13(e)(2), the Commission is considering
whether a separate, later effective date with respect to the
application of 17 CFR 4.13(e)(2) to pools relying on the exemption in
Proposed Regulation 4.13(a)(4) would appropriately address this issue
and requests public comment on this proposed methodology.\63\
---------------------------------------------------------------------------
\62\ The Commission notes that, to the extent QEP No-Action CPOs
have already claimed Letter 25-50 for qualifying pools and have
already deregistered as CPOs, they would not be registered CPOs
operating pools transitioning from registered to exempt status under
Regulation 4.13, which the right of redemption requirement in
Regulation 4.13(e)(2)(iii) is intended to address.
\63\ See infra III.C.3.
---------------------------------------------------------------------------
With respect to the no-action position in Letter 26-06 preserving
the no-action position for Delegating CPOs in Letter 14-126, the
Commission preliminarily believes the proposed amendments to Regulation
4.13 do not create concerns for Delegating and Designated CPOs engaged
in delegation arrangements with respect to Eligible Pools. The
Commission notes that the Proposed QEP Exemption would be broadly
available to both Delegating and Designated CPOs with respect to an
Eligible Pool, and more broadly, that a no-action position on CPO
delegation, like that in Letter 14-126, is not necessary where the pool
for which responsibility is being delegated is an exempt pool,
including an Eligible Pool under the Proposed QEP Exemption, rather
than one requiring CPO registration.\64\ The Commission specifically
requests comment from Delegating and Designated CPOs with respect to
this issue.\65\
---------------------------------------------------------------------------
\64\ Letter 14-126 notes that CPO delegation arrangements in
pools operated by registered CPOs seeking guidance and no-action
positions from MPD's predecessor division(s) likely increased, at
least in part, as a result of the 2012 rescission of the Original
QEP Exemption, which caused an increase in CPO registration
applications. Letter 14-126, at 3, n. 8 (citing CFTC Staff Letter
14-69 (May 12, 2014)).
\65\ See infra III.A.3.
---------------------------------------------------------------------------
C. Proposed Regulation 4.14(a)(8): CTA Exemption for Advisers to
Certain Exempt Pools
Regulation 4.14(a) provides various exemptions from registration as
a CTA.\66\ 17 CFR 4.14(a)(8) currently allows an investment adviser
whose commodity interest trading advice is directed solely to, and for
the sole use of, among other clients listed therein, a CPO that has
claimed an exemption under Regulation 4.13(a)(3), to be exempt from CTA
registration with respect to its advisory activities for pools meeting
that exemption's criteria. Prior to the 2012 rescission of the Original
QEP Exemption, CPOs exempt under Regulation 4.13(a)(4) were also
permitted clients in this CTA exemption.\67\
---------------------------------------------------------------------------
\66\ 7 U.S.C. 6m; 17 CFR 4.14(a).
\67\ 17 CFR 4.14(a)(8) (providing a CTA exemption to qualifying
persons who are, ``an investment adviser registered under the
[Advisers Act] or with the applicable securities regulatory agency
of any State, or . . . exempt from such registration, or . . .
excluded from the [investment adviser] definition . . . of the
[Advisers Act]''). Cf. 17 CFR 4.14(a)(8) (2010).
---------------------------------------------------------------------------
The Commission is proposing to amend 17 CFR 4.14(a)(8)(i)(D) to
restore the cross-reference to Regulation 4.13(a)(4), such that the CTA
exemption would also be available to investment advisers, including
RIAs, whose commodity interest trading advice is directed, among
others, solely to a CPO that has claimed an exemption under Proposed
Regulation 4.13(a)(4) with respect to Eligible Pools. The Commission
preliminary believes that this proposed amendment is necessary to
restore the integrated functioning of Regulations 4.13 and 4.14 as they
operated prior to the 2012 rescission of the Original QEP Exemption and
to avoid requiring separate CTA registration for advisory activities
related solely to CPOs and pools that qualify for the exemption in
Proposed Regulation 4.13(a)(4). This approach is consistent with past
Commission approaches regarding intermediary exemptions, namely that
exempt CPOs should, generally speaking, also be exempt from CTA
registration with respect to qualifying exempt pools,\68\ and with the
Commission's rationale explained in Federal Register releases proposing
and adopting the CPO exemptions in Regulations 4.13(a)(3) and (a)(4) in
2003.\69\ Finally, the Commission notes that this proposed amendment
implements and expands the no-action position provided in Letter 25-50
with respect to CTA activity and services provided by QEP No-Action
CPOs relying on Letter 25-50.\70\
---------------------------------------------------------------------------
\68\ See, e.g., 17 CFR 4.14(a)(5).
\69\ 2003 CPO/CTA Final Rule, 68 FR at 47223; see also 2003 CPO/
CTA NPRM, 68 FR at 12625 (explaining that the amendments therein
were ``intended to allow greater flexibility and innovation, and to
take into account market developments and the current investment
environment'' and ``to facilitate participation in the commodity
interest markets by additional collective investment vehicles and
their advisers, with the added benefit to all market participants of
increased liquidity'').
\70\ Letter 25-50, at 7.
---------------------------------------------------------------------------
D. Proposed Regulation 4.13(a)(2): Inflation-Based Adjustment to the
Small Pool Exemption Threshold
Chairman Selig has publicly noted that current regulatory costs can
be disproportionately burdensome for small- and medium-sized businesses
accessing the commodity interest markets, and thus, has advocated for a
``minimum effective dose'' of regulation.\71\ An inflation-based
adjustment to the Small Pool Exemption is consistent with this
philosophy: a carefully considered increase to the gross capital
contributions threshold preserves the original intent and rationale of
the Small Pool Exemption
[[Page 54272]]
(that the regulatory costs of registration and compliance outweigh the
benefits participants may receive as a result, in the context of small
commodity pools and their CPOs), maintains existing participant limits
and exclusions from the gross capital contributions calculation,
updates the threshold in a manner that reflects current economic
conditions, and effectively lowers the bar to entry in commodity
interest markets for comparatively small commodity pools, their CPOs,
and their pool participants.
---------------------------------------------------------------------------
\71\ See supra FIA Remarks.
---------------------------------------------------------------------------
1. Existing Small Pool Exemption
Under the Small Pool Exemption, 17 CFR 4.13(a)(2) currently
provides an exemption from CPO registration for operators of ``small
pools,'' defined as pools with no more than 15 participants and total
gross capital contributions across all pools the person operates or
intends to operate not exceeding $400,000, subject to certain
exclusions for those contributions.\72\ This threshold was last updated
in 2003, when the Commission doubled the threshold of $200,000 as
adjusted in 1981 to the current $400,000 to account for the effects of
inflation in the intervening 22 years.\73\ The Small Pool Exemption is
intended to relieve operators of pools with a small total financial and
participant footprint from the costs and burdens of full CPO
registration, while still subjecting them to the anti-fraud and other
provisions of the CEA.\74\
---------------------------------------------------------------------------
\72\ 17 CFR 4.13(a)(2)(iii) excludes certain contributions from
counting towards the financial threshold, i.e., those from the
pool's CPO, CTA, or principals thereof; from any child, sibling or
parent of those participants; any spouse of those participants; and
any relative of those participants, its spouse or a relative of its
spouse, who has the same principal address as such participants. 17
CFR 4.13(a)(2)(iii)(A)-(D).
\73\ See supra 2003 CPO/CTA Final Rule. For further discussion,
see 2003 CPO/CTA NPRM, 68 FR at 12626.
\74\ 1979 CPO/CTA Final Rule, 44 FR at 1919 (``because the costs
of compliance with the Part 4 rules outweighs the benefits to be
gained from regulating [ . . . ] small pools.'').
---------------------------------------------------------------------------
2. Proposed Increase of Gross Capital Contributions Limit to $800,000
Given that more than two decades have passed since its last
adjustment, and to again account for the effects of inflation and
maintain the original scope and purpose of the Small Pool Exemption,
the Commission is proposing to amend the threshold in Regulation
4.13(a)(2)(ii) by increasing the total gross capital contributions
threshold from $400,000 to $800,000. This doubling of the threshold
reflects the approximate cumulative inflationary impact since 2003,
consistent with the Commission's methodology in adjusting this
threshold in 2003 based on the Consumer Price Index for All Urban
Consumers (``CPI-U'') and its recent adjustments to QEP Portfolio
Requirement thresholds under Regulation 4.7.\75\
---------------------------------------------------------------------------
\75\ See supra 2024 CPO/CTA Final Rule; 2003 CPO/CTA NPRM, 68 FR
at 12626, finalized by 2003 CPO/CTA Final Rule.
---------------------------------------------------------------------------
The proposed amendment would not alter the 15-participant per pool
limit or the exclusion of certain contributions from the calculation of
gross capital contributions. By updating only the monetary threshold,
the Commission seeks to maintain the exemption's focus on small pools,
while recognizing that the real value of the 2003 threshold has eroded
over time. Utilizing the CPI Inflation Calculator, which uses data from
the CPI-U to determine the current value of financial amounts, the
Commission has determined that $400,000 in January 2003 has the same
buying power as $735,097 as of July 2026.\76\
---------------------------------------------------------------------------
\76\ See U.S. Bureau of Labor Statistics, CPI Inflation
Calculator, available at <a href="https://www.bls.gov/data/inflation_calculator.htm">https://www.bls.gov/data/inflation_calculator.htm</a>.
---------------------------------------------------------------------------
Like its 2024 amendments to the Portfolio Requirement in Regulation
4.7,\77\ the Commission is continuing its efforts to ensure that its
exemptions and regulatory thresholds remain appropriate, especially in
the context of rapidly growing and expanding commodity interest
markets. The Commission preliminarily believes that rounding up to the
nearest hundred thousand, i.e., $800,000, is an appropriate Small Pool
Exemption threshold for financial size that will be simpler for persons
seeking to calculate their gross capital contributions across their
operated pools, and provides a degree of durability, as it will add a
buffer in advance of any near-term inflation.
---------------------------------------------------------------------------
\77\ See 2024 CPO/CTA Final Rule; 17 CFR 4.7(a)(5).
---------------------------------------------------------------------------
III. Request for Comment
The Commission is requesting comment on all aspects of the
Proposal. In responding to each of the following questions, please
provide a detailed response, including the rationale for such response,
cost and benefit considerations, and relevant supporting information,
such as data or studies available. The Commission specifically requests
comment on the following:
A. Proposed Regulation 4.13(a)(4)
1. Is it appropriate for the Commission to endeavor to provide a
CPO registration exemption for RIAs operating and advising commodity
pools that participate in the commodity interest markets on behalf of
sophisticated investors? Why or why not?
2. Are the conditions of Proposed Regulation 4.13(a)(4)--SEC
registration, exempted offering of pool interests, marketing
limitations, participant limits based upon the Original QEP Exemption,
and, where applicable, Form PF reporting--appropriate? Why or why not?
For instance, please consider the following specific issues:
i. Does the exception of Rule 506(c) offerings from the marketing
prohibition in Proposed Regulation 4.13(a)(4)(i) effectively
incorporate developments in securities law and private funds practice
since the JOBS Act was passed and the SEC adopted related regulatory
amendments?
ii. Is the proposed Form PF reporting condition sufficient to
provide the Commission and FSOC with the information needed to monitor
Eligible Pools for market and systemic risk? Given the proposed
increases in Form PF filing thresholds discussed above,\78\ what, if
any, regulatory risk is presented by certain RIAs and private funds
potentially no longer being required to file Form PF, and also being
exempt from reporting on Form CPO-PQR? \79\ Should the Commission
consider additional or alternative reporting conditions for Eligible
Pools? How should the Commission address these concerns, if at all, in
Proposed Regulation 4.13(a)(4)?
---------------------------------------------------------------------------
\78\ Form PF Joint NPRM.
\79\ 17 CFR 4.27, and pt. 4, app. A.
---------------------------------------------------------------------------
iii. Are there other categories of ``accredited investor'' that the
Commission should consider adding to the list of Eligible Participants
in Proposed Regulation 4.13(a)(4)?
iv. Please describe in detail any suggested adjustments to the
conditions of the Proposed RIA-QEP Exemption, or any different or
additional conditions the Commission should consider, as well as the
specific rationale justifying such adjustments or conditions.
3. By its terms, Letter 25-50 is intended to remain in effect until
the Commission completes a rulemaking addressing the reinstatement of
the Original QEP Exemption (or determines not to complete such a
rulemaking). The Commission requests comment on whether the Proposal,
if adopted as a final rule, should supersede Letter 25-50 in its
entirety or only in part. Why or why not? In addition, the Commission
requests comment on whether it should take any action similar to that
in Letter 26-06 with respect to the treatment of CPO delegation
arrangements under Letter
[[Page 54273]]
14-126 if it ultimately adopts the Proposed QEP Exemption. Why or why
not?
B. Inflation-Based Increase of the Small Pool Exemption's Gross Capital
Contributions Threshold
Is the proposed increase of the gross capital contributions
threshold in 17 CFR 4.13(a)(2)(ii) from $400,000 to $800,000 an
appropriate adjustment that effectively considers inflation since its
last adjustment in 2003? Should the Commission consider a different
amount? Why or why not? Please provide appropriate or relevant data on
commodity pool size justifying alternative thresholds, whether higher
or lower than that currently proposed.
C. Proposed Amendments Reinstating Cross-References to Regulation
4.13(a)(4) and Related CTA Exemption
1. Are the proposed conforming amendments to 17 CFR 4.13(b)(1)(ii),
4.13(e)(2), and 4.14(a)(8)(i)(D) clear and sufficient to reinstate the
full functionality and coordination of the CPO and CTA exemption
framework as it existed prior to the 2012 rescission of the Original
QEP Exemption? Why or why not?
2. Should the Commission not make any particular proposed
conforming amendment? Please identify the particular proposed amendment
and provide a detailed explanation as to why it should or should not be
included in amendments adopting a finalized RIA-QEP Exemption.
3. If the Proposal is ultimately finalized by the Commission
through the publication of a related final rule, the amendments would
generally become effective on the date that such a final rule is
published. Should the Commission consider utilizing a later effective
date solely with respect to the conforming amendment to 17 CFR
4.13(e)(2), especially with respect to qualifying pools and QEP No-
Action CPOs that claimed Letter 25-50? Why or why not?
IV. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') requires Federal agencies
to consider whether the rules they propose will have a significant
economic impact on a substantial number of small entities and, if so,
to provide a regulatory flexibility analysis reflecting the impact.\80\
Whenever an agency publishes a general notice of proposed rulemaking
for any rule, pursuant to the notice-and-comment provisions \81\ of the
APA, a regulatory flexibility analysis or certification is typically
required.\82\
---------------------------------------------------------------------------
\80\ 5 U.S.C. 601, et seq.
\81\ See 5 U.S.C. 553 (for specific notice-and-comment
provisions).
\82\ See 5 U.S.C. 601(2), 603-605.
---------------------------------------------------------------------------
The Commission has previously established certain definitions of
``small entities'' to be used by the Commission in evaluating the
impact of its regulations on small entities in accordance with the
RFA.\83\ The Proposal published by the Commission today would affect
only persons registered or required to be registered as CPOs and CTAs
in relation to commodity pools and trading programs qualifying for a
registration exemption under the proposed amendments to Regulations
4.13 or 4.14, as shown in the attached rule text.
---------------------------------------------------------------------------
\83\ See, e.g., Policy Statement and Establishment of
Definitions of ``Small Entities'' for Purposes of the Regulatory
Flexibility Act, 47 FR 18618, 18618-21 (Apr. 30, 1982).
---------------------------------------------------------------------------
1. CPOs
With respect to CPOs, the Commission has previously determined that
a CPO is a small entity for purposes of the RFA, only if it meets the
criteria for the Small Pool Exemption.\84\ Only one proposed amendment
would directly impact CPOs considered to be small entities, and thus
would require RFA analysis with respect to its potential impact on
CPOs, and that is the proposed amendment to the requirements of the
Small Pool Exemption. The proposed amendment would revise Regulation
4.13(a)(2) to expand the availability of the current Small Pool
Exemption by increasing the gross capital contributions across pools
operated by eligible CPOs from $400,000 to $800,000. The Commission
expects this doubling would result in savings and reducing compliance
costs arising from CPO registration and compliance for those CPOs that
would be newly eligible for the exemption. However, the Commission
preliminarily believes that this proposed increase, which is intended
to update the financial threshold to account for the effects of
inflation since 2003, would not result in a substantial increase in the
number of CPOs claiming the Small Pool Exemption and the Commission
does not expect resulting cost reductions to result in a significant
economic impact. Therefore, the Commission preliminarily believes that
Proposed Regulation 4.13(a)(2) will not have a significant economic
impact on a substantial number of small entities. Accordingly, the
Chairman, on behalf of the Commission, certifies pursuant to 5 U.S.C.
605(b) that this Proposal will not have a significant economic impact
on a substantial number of small entities, with respect to CPOs.
---------------------------------------------------------------------------
\84\ Id. at 18619-20. As stated above, 17 CFR 4.13(a)(2) exempts
a person from registration as a CPO when: (1) none of the pools
operated by that person has more than 15 participants at any time,
and (2) when excluding certain sources of funding, the total gross
capital contributions the person receives for units of participation
in all of the pools it operates or intends to operate do not, in the
aggregate, exceed $400,000. The Commission notes that its proposed
increase to this dollar threshold may also increase the number of
CPOs that are eligible for the Small Pool Exemption and, thus, that
are treated as ``small entities'' for purposes of the Commission's
RFA compliance.
---------------------------------------------------------------------------
2. CTAs
Regarding CTAs, the Commission has previously considered whether
such registrants would be deemed small entities for purposes of the RFA
on a case-by-case basis, in the context of the particular Commission
regulation at issue.\85\ Only one proposed amendment in the Proposal
would directly impact CTAs, and that is the addition of a cross-
reference of Regulation 4.13(a)(4) to Regulation 4.14(a)(8)(i)(D). 17
CFR 4.14(a)(8) provides an exemption from CTA registration for RIAs,
state-registered investment advisers, and exempt investment advisers,
with respect to certain investment vehicles, persons, and entities that
they advise. The effect of Proposed Regulation 4.14(a)(8)(i)(D) is to
slightly expand the availability of this exemption because it would add
to the list of permissible clients, the CPOs of those pools that
qualify for the exemption under Proposed Regulation 4.13(a)(4). The
Commission preliminarily believes that CTAs claiming the exemption in
Regulation 4.14(a)(8) are investment advisers, primarily RIAs, with
large amounts of assets under management and significant trading
experience, who are frequently affiliated with large financial
institutions, and thus, not likely to be persons the Commission would
consider to be ``small entities.'' \86\
---------------------------------------------------------------------------
\85\ Id. at 18620.
\86\ See, e.g., 2024 CPO-CTA Final Rule, 89 FR at 78804
(describing CTAs relying upon Regulation 4.7 ``for the purposes of
soliciting and serving QEP advisory clients'' as ``large financial
institutions with substantial financial assets and advisory
experience, or affiliates thereof''). The Commission preliminarily
expects that the population of CTAs claiming the exemption in
Regulation 4.14(a)(8) would be very similar to those CTAs that claim
an exemption under Regulation 4.7 and may include a number of CTAs
already claiming the exemption in Regulation 4.14(a)(8) with respect
to other qualifying individuals or entities.
---------------------------------------------------------------------------
Accordingly, the Chairman, on behalf of the Commission, certifies
pursuant to 5 U.S.C. 605(b) that the Proposal will not have a
significant economic impact on a substantial number of small entities,
with respect to CTAs.
[[Page 54274]]
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \87\ imposes certain
requirements on federal agencies, including the Commission, in
connection with their conducting or sponsoring any ``collection of
information,'' as defined by the PRA. Under the PRA, an agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a valid control number
from the Office of Management and Budget (``OMB'').\88\ The PRA is
intended, in part, to minimize the paperwork burden created for
individuals, businesses, and other persons as a result of the
collection of information by federal agencies, and to ensure the
greatest possible benefit and utility of information created,
collected, maintained, used, shared, and disseminated by or for the
Federal Government.\89\ The PRA applies to all information, regardless
of form or format, whenever the Federal Government is obtaining,
causing to be obtained, or soliciting information, and includes
required disclosure to third parties or the public, of facts or
opinions, when the information collection calls for answers to
identical questions posed to, or identical reporting or recordkeeping
requirements imposed on, ten or more persons.\90\ For purposes of the
PRA, the term ``burden'' means the ``time, effort, or financial
resources expended by persons to generate, maintain, or provide
information to or for a Federal Agency.'' \91\
---------------------------------------------------------------------------
\87\ 5 U.S.C. 601, et seq.
\88\ See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3).
\89\ See 44 U.S.C. 3501.
\90\ See 44 U.S.C. 3502(3).
\91\ See 44 U.S.C. 3502(2).
---------------------------------------------------------------------------
This proposed rulemaking would affect regulations that contain
collections of information within the meaning of the PRA.\92\
Specifically, the Proposal would affect two collections of information
for which the Commission has previously received control numbers from
OMB. The first collection of information is OMB Control Number 3038-
0005 (``Collection 3038-0005'') (Rules Relating to the Operations and
Activities of Commodity Pool Operators and Commodity Trading Advisors
and to Monthly Reporting by Futures Commission Merchants), which
primarily accounts for the burden associated with the Commission's part
4 regulations that concern compliance generally applicable to CPOs and
CTAs, as well as certain exemptions from registration as such and
exclusions from those definitions, and available relief from compliance
with certain regulatory requirements.\93\ The second collection is OMB
Control Number 3038-0023 (``Collection 3038-0023'') (Registration under
the Commodity Exchange Act), which pertains to the registration of
intermediaries generally.\94\ The Commission believes that the
information collection burdens of both of these collections would be
reduced if the Proposal were adopted, because of a decrease in the
number of CPOs and CTAs required to register with the Commission and,
thus, required to comply with applicable Commission regulations.
However, in an effort to be conservative, the Commission has
preliminarily determined to leave its estimated burdens for these
collections unchanged at this time, as the potential amount of the
reduction of any such burden is unknown. For example, the Commission
does not know what percentage of CPOs will be eligible to rely on the
Proposed RIA-QEP Exemption or what CPOs may opt to rely on the Proposed
RIA-QEP Exemption but not on Letter 25-50 due to the limitations of no-
action positions as compared to Commission regulations. In addition,
the reduction in burden from relying on the proposed exemption may be
offset to some extent by any burden entailed by compliance with the
exemption requirements.
---------------------------------------------------------------------------
\92\ To the extent that the Commission does not identify a
specific provision, the Commission does not believe that any
associated change substantively or materially modifies an existing
information collection burden or creates a new one.
\93\ For information on the Commission's burden estimates for
this collection, see ICR Ref. No. 202407-3038-001 (concluded on Nov.
19, 2024).
\94\ For information on the Commission's burden estimates for
this collection, see ICR Ref. No. 202512-3038-002 (concluded on Apr.
16, 2026).
---------------------------------------------------------------------------
If the Proposal is adopted, responses to the collections of
information referenced below related to the Proposal would be optional
for those wishing to claim the exemptions. The Commission will protect
proprietary information it may receive according to FOIA and 17 CFR
part 145, ``Commission Records and Information.'' In addition, section
8(a)(1) of the CEA strictly prohibits the Commission, unless
specifically authorized by the CEA, from making public ``data and
information that would separately disclose the business transactions or
market positions of any person and trade secrets or names of
customers.'' \95\ The Commission also is required to protect certain
information contained in a government system of records according to
the Privacy Act of 1974.\96\
---------------------------------------------------------------------------
\95\ 7 U.S.C. 12(a)(1).
\96\ 5 U.S.C. 552a.
---------------------------------------------------------------------------
The Commission invites the public and other Federal agencies to
comment on any aspect of the proposed information collection
requirements discussed above. The Commission will consider public
comments on the proposed collections of information in: (1) evaluating
whether the proposed collections of information are necessary for the
proper performance of the functions of the Commission, including
whether the information will have a practical use; (2) evaluating the
accuracy of the estimated burdens of the proposed collections of
information, including the degree to which the methodology and the
assumptions that the Commission employed were valid; (3) enhancing the
quality, utility, and clarity of the information proposed to be
collected; and (4) minimizing the burden of the proposed information
collection requirements on those who are to respond, including through
the use of appropriate automated, electronic, mechanical, or other
technological information collection techniques, e.g., permitting
electronic submission of responses.
Copies of the submission from the Commission to OMB are available
from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC
20581, 202-418-5714 or from <a href="http://RegInfo.gov">http://RegInfo.gov</a>. Organizations and
individuals desiring to submit comments on the proposed information
collection requirements should send those comments to:
<bullet> The Office of Information and Regulatory Affairs, Office
of Management and Budget, New Executive Office Building, Washington, DC
20503, Attn: Desk Officer of the Commodity Futures Trading Commission.
Submit comments electronically via <a href="http://www.RegInfo.gov">www.RegInfo.gov</a> by searching for
the relevant OMB control number to locate the information collection
request associated with this rulemaking. Please provide the Commission
with a copy of submitted comments so that all comments can be
summarized and addressed in the final rulemaking. Please refer to the
ADDRESSES section of this notice of proposed rulemaking for comment
submission instructions to the Commission. OMB is required to make a
decision concerning the proposed information collection requirements
between 30 and 60 days after publication of this release in the Federal
Register. Therefore, a comment to OMB is best assured of receiving full
consideration if OMB receives it within 30 calendar days of publication
of this release. Nothing in the foregoing affects the deadline
enumerated above for
[[Page 54275]]
public comment to the Commission on the proposed rules.
C. Cost-Benefit Considerations
1. Statutory and Regulatory Background
As discussed above, CEA sections 4m and 4n generally require the
registration of persons acting as CPOs and CTAs, as well as compliance
with a variety of substantive requirements explained in further detail
in part 4 of the Commission's regulations. The Commission has further
utilized this statutory authority to establish exemptions for persons
from CPO and CTA registration under certain circumstances, when the
purposes of the CEA and the public interest are not negatively
affected.
2. Consideration of the Costs and Benefits of the Proposal
i. Section 15(a) of the CEA
Section 15(a) \97\ of the CEA requires the Commission to consider
the costs and benefits of its actions before promulgating a regulation
under the CEA or issuing certain orders. CEA section 15(a) further
specifies that the costs and benefits shall be evaluated in light of
five broad areas of market and public concern: (1) protection of market
participants and the public; (2) efficiency, competitiveness, and
financial integrity of markets; (3) price discovery; (4) sound risk
management practices; and (5) other public interest considerations
(collectively, the ``Section 15(a) Factors'').\98\ In conducting its
analysis, the Commission may, in its discretion, give greater weight to
any one of the five enumerated areas of concern and may determine that,
notwithstanding its costs, a particular rule is necessary or
appropriate to protect the public interest or to effectuate any of the
provisions or to accomplish any of the purposes of the Act. The
Commission considers the costs and benefits resulting from its
discretionary determinations with respect to the Section 15(a) Factors.
---------------------------------------------------------------------------
\97\ 7 U.S.C. 19(a).
\98\ Id.
---------------------------------------------------------------------------
ii. Costs and Benefits of the Proposal
The baseline for the Commission's consideration of the costs and
benefits of the Proposal is the regulatory status quo, as determined by
the CEA and the Commission's existing regulations in 17 CFR part 4,
including specifically: (1) the existing CPO registration and
compliance framework under the part 4 regulations; and (2) the existing
and currently available exemptions under Regulations 4.13 and 4.14,
with existing qualifications and financial thresholds (e.g., without
the Original QEP Exemption). The Commission recognizes, however, that
to the extent that market participants have relied on Letter 25-50, the
actual costs and benefits of the proposed rulemaking, as realized in
the market, may not be as significant. These circumstances shape the
Commission's evaluation of incremental benefits and costs associated
with proposing an exemption from CPO registration with respect to
Eligible Pools operated by RIAs and the related conforming adjustments
to the other regulatory provisions. In situations where the Commission
is unable to quantify the costs and benefits, the Commission identifies
and considers the costs and benefits of these proposed rules in
qualitative terms.
iii. Benefits
Proposed Regulation 4.13(a)(4) would significantly reduce
duplicative, overlapping registration and compliance obligations for
qualifying RIA-CPOs and Eligible Pools, which are supervised by the SEC
and subject to that agency's investment adviser regulatory regime. For
these market participants, the Commission preliminarily believes that
separate, additional CPO registration and related compliance
requirements in 17 CFR part 4 may provide only a limited incremental
benefit to participants, given the pre-existing application of SEC
regulations to their advisory and fund activities, as well as the
sophistication of participants required to qualify for the exemption in
Proposed Regulation 4.13(a)(4). Reducing duplicative regulations
applicable to RIAs also engaged in CPO activities by providing this
proposed registration exemption would substantially reduce such RIA-
CPOs' legal, operational, and administrative costs, while maintaining
the core regulatory protections provided by the CEA and Commission
regulations for investors most in need of them. In particular, the
exemption in Proposed Regulation 4.13(a)(4) would eliminate the need
for qualifying RIAs to incur costs associated with applying for and
obtaining CPO registration, complying with applicable CFTC reporting
requirements, and arising from other related compliance requirements
typically applicable to commodity pools.
Moreover, the Commission generally endeavors, wherever possible and
when prudent to do so, to codify in its regulations widely relied upon
no-action positions created by its operating divisions.\99\ These
efforts help to level the playing field for market participants by
ensuring that staff letters become more durable and universally
applicable and available when they are specifically added and
memorialized in Commission regulations. Therefore, the Commission
preliminarily believes that adding the RIA-QEP Exemption at Proposed
Regulation 4.13(a)(4) will establish uniform and transparent standards
for RIAs participating in the commodity interest markets and who wish
to claim an exemption from CPO registration. By definition, Commission
staff letters are limited to the authority of the issuing division or
office of the Commission,\100\ whereas Commission regulations, once
proposed and adopted, are more reliable and less subject to change, in
that they are an official Commission action, with the input of public
notice and comment under the APA. As a result, the Commission
preliminarily believes that Proposed Regulation 4.13(a)(4) would
additionally provide a degree of regulatory clarity and certainty to
market participants eligible for the RIA-QEP Exemption that may only be
provided through the proposal and adoption of Commission regulations.
---------------------------------------------------------------------------
\99\ See, e.g., Family Offices and Exempt CPOs Final Rule; 2024
CPO/CTA Final Rule (codifying commonly relied upon quarterly account
statement relief for CPOs and pools utilizing Regulation 4.7
exemptions).
\100\ See 17 CFR 140.99(a)(2). The Commission notes further that
the staff letter particularly relevant here, Letter 25-50, was
specifically issued by MPD, and continues to be available until the
Commission determines to formally adopt regulations superseding it
or specifically declines to do so. Letter 25-50, at 7. See also id.,
at 8 (stating that the no-action positions therein are the decision
of MPD only, and not a position or view by any other office or
division of the Commission or the Commission itself and are not
binding on the Commission).
---------------------------------------------------------------------------
The Commission further preliminarily believes that, in addition to
adding Proposed Regulation 4.13(a)(4), market participants will benefit
from the restoration of appropriate cross-references in Regulations
4.13 and 4.14. These proposed amendments are intended to recreate the
integrated functionality of the CPO and CTA exemption framework, as it
existed prior to the 2012 rescission of the Original QEP Exemption.
Specifically, these proposed amendments would incorporate Proposed
Regulation 4.13(a)(4) into the existing exemption claim and annual
notice system, administered by NFA; clarify the limited compliance
obligations applicable to exempt CPOs and their pools once the proposed
amendments are adopted and effective; and ensure that RIAs operating
Eligible Pools exempt under Proposed Regulation
[[Page 54276]]
4.13(a)(4) may again qualify for the corresponding CTA exemption in
Regulation 4.14(a)(8). The Commission preliminarily believes that these
proposed amendments will enhance predictability for market participants
by providing more complete exemptions from applicable CFTC regulations
and facilitating more efficient administration of the CPO and CTA
exemption regime by both the Commission and NFA. Additionally, the
Commission preliminarily expects that RIA-CPOs who qualify for the CTA
exemption in Regulation 4.14(a)(8) because of the proposed amendment
will experience lower costs, when claiming that exemption, than those
typically associated with CTA registration and compliance for advising
such pools. Further, the Commission preliminarily believes that, by
virtue of claiming Proposed Regulation 4.13(a)(4), eligible RIAs may
also be able to reallocate their internal compliance resources
currently devoted to CFTC obligations toward other aspects of their
operations, like risk management functions and investor-facing
activities.
With respect to the Small Pool Exemption, the Commission
preliminarily believes that the commodity interest markets and market
participants will benefit from the increased gross capital
contributions threshold in Proposed Regulation 4.13(a)(2). As discussed
in more detail above, the Commission has historically endeavored to
ensure that financial thresholds in its regulations maintain their
relevancy and intended scope by periodically adjusting them to account
for time and economic factors like inflation. Therefore, the Commission
preliminarily believes that increasing the gross capital contributions
threshold in Regulation 4.13(a)(2) from $400,000 to $800,000 would
account for inflation occurring since 2003, effectively aligning the
exemption with current economic conditions. By modernizing this
threshold in one of the CPO exemptions originally adopted in 1979, the
Commission also preliminarily believes that the proposed increase
preserves the original purpose and scope of the Small Pool Exemption:
to avoid disproportionate regulatory burdens for operators of small
pools with a limited financial footprint, which do not substantially
benefit the public interest. Persons qualifying for the exemption in
Proposed Regulation 4.13(a)(2) would be able to offer commodity pool
investment opportunities and experience a lower bar to entry in the
commodity interest markets, with little customer protection or
regulatory risk, due to other aspects of the Small Pool Exemption
remaining unchanged. As with CPOs qualifying for Proposed Regulation
4.13(a)(4), the Commission preliminarily believes that registered CPOs
who may instead qualify for and claim the exemption in Proposed
Regulation 4.13(a)(2) would benefit from a significant reduction in
legal, operational, and administrative costs, by virtue of their being
able to deregister with the Commission as CPOs.
iv. Costs
Notwithstanding the expected benefits of being able to deregister
as CPOs and CTAs, the Commission recognizes that some costs will arise
specifically from the Proposed RIA-QEP Exemption. For instance, the
Commission expects that RIAs seeking to claim Proposed Regulation
4.13(a)(4) with respect to Eligible Pools would incur costs associated
with: (1) verifying pool participants' sophistication; (2) filing the
initial claim of exemption and annually renewing it for each pool and
RIA-CPO; and (3) meeting the other requirements in Regulation 4.13,
including providing required disclosures and maintaining books and
records of the exempt RIA-CPO and exempt pool activities.
The Commission preliminarily expects that RIA-CPOs may experience
costs in their efforts to ensure that their pool participants meet the
proposed eligibility criteria in Proposed Regulation 4.13(a)(4)(iii).
However, it is the Commission's understanding that many RIA-CPOs
wishing to claim the exemption in Proposed Regulation 4.13(a)(4) may
likely be transitioning from other regulatory statuses that currently
already involve some degree of eligibility assessment for their pool
participants. For example, RIA-CPOs currently exempt under Regulation
4.13(a)(3) are already experienced in evaluating and limiting their
pool participants to qualify for that exemption, and RIA-CPOs who are
registered, but offer pools pursuant to Regulation 4.7, also routinely
evaluate their participants to determine their status as QEPs. The
Commission notes further that the proposed participant eligibility
criteria are derived from the Original QEP Exemption, with which many
RIA-CPOs have had prior experience and familiarity, until its
rescission in 2012. Therefore, with the exception of newly formed RIA-
CPOs who have not previously operated commodity pools subject to CFTC
jurisdiction, the Commission preliminarily expects that the costs of
the proposed participant eligibility requirements in the RIA-QEP
Exemption would be mitigated by the substantial likelihood that
potential claimants already have experience and existing processes in
place to meet that qualification of the proposed exemption. Moreover,
the Commission preliminarily believes that the proposed participant
requirements in the RIA-QEP Exemption are necessary to ensure the
proposed exemption is appropriately tailored and narrowed in scope to
financially sophisticated and experienced investors who would receive
far fewer benefits from the complete application of the CPO
registration and compliance regulations, than other investors more in
need of those protections, i.e., persons participating in pools offered
to the general or retail public.
The Commission further recognizes that RIA-CPOs would incur costs
from complying with the requirement to electronically file a claim for
Proposed Regulation 4.13(a)(4), and further, to annually verify that
the RIA-CPO and Eligible Pool continue to qualify for the RIA-QEP
Exemption. Again, however, given that RIA-CPOs seeking to rely upon
Proposed Regulation 4.13(a)(4) may be transitioning from another
exemption provided by Regulation 4.13(a)(3), or from registered CPO
status operating a Regulation 4.7 pool, the Commission preliminarily
expects that such entities would already be experienced and familiar
with the online system administered by NFA on the Commission's behalf
to receive and maintain exemption claims under Regulation 4.13 and
other part 4 regulations, and familiar with what such notices must
contain to be effective. Consequently, the Commission preliminarily
believes that any costs incurred from the initial and annual notice
filings experienced by persons claiming Proposed Regulation 4.13(a)(4)
would likely be lessened because of that experience and any existing
processes and procedures they may already have in place, and
ultimately, would be small. Furthermore, the Commission preliminarily
finds that such costs are necessary to integrate Proposed Regulation
4.13(a)(4) into its existing CPO exemption framework and to facilitate
the Commission's monitoring of how frequently and by whom the RIA-QEP
Exemption is used.
The Proposal would also result in some compliance costs arising
from other provisions of Regulation 4.13, including, e.g., paragraphs
(a)(7), (c)(1), and (e)(2), though the Commission notes that such costs
would be substantially smaller than the costs arising from similar
requirements applicable to
[[Page 54277]]
registered CPOs and their pools. With respect to recordkeeping, the
proposed amendments to Regulation 4.13 would require persons claiming
the RIA-QEP Exemption, like all other exemptions available in
Regulation 4.13, to make and keep books and records with respect to the
exempt CPO and its pool activities, to make them available to the
Commission (among other agencies), and to submit to special calls by
the Commission to demonstrate eligibility for the claimed
exemption.\101\ Persons seeking to claim the RIA-QEP Exemption would be
further required to notify prospective participants of the pool's
exempt status and operational features, and in some instances, provide
existing participants with a right of redemption at the time the pool
converts to exempt status under Regulation 4.13.
---------------------------------------------------------------------------
\101\ 17 CFR 4.13(c)(1).
---------------------------------------------------------------------------
The Commission preliminarily expects that, as a result of the
requirements outlined above, RIA-CPOs claiming Proposed Regulation
4.13(a)(4) would experience some operational and administrative costs.
The Commission preliminarily believes, however, that such costs are
necessary to ensure that pools exempt under Proposed Regulation
4.13(a)(4) are treated and overseen in a manner equal to other pools
operating pursuant to exemptions in Regulation 4.13. Moreover, such
costs would likely be mitigated by potential claimants' experience and
familiarity in complying with existing, similar requirements applicable
to exempt and registered CPOs.
Additionally, with respect to CPOs relying on Letter 25-50 for
certain pools, the Commission preliminarily believes that the
requirements of Regulation 4.13(e)(2) should not apply when such pools
transition to instead claiming the exemption in Proposed Regulation
4.13(a)(4). The Commission preliminarily believes that this approach
would ease this transition to formally exempt status for such RIA-CPOs
and their pools, limiting disruption in their on-going operations, and
would lessen the costs they experience arising from the generally
applicable compliance requirements in Regulation 4.13. Moreover,
because these requirements mirror many conditions already present in
Letter 25-50, the Commission preliminarily expects these costs of
compliance and transition to a Regulation 4.13 exemption to be modest;
the Commission recognizes, however, that some additional costs may be
incurred as a result of minor variations between Letter 25-50 and the
Proposal. With respect to registered CPOs claiming Proposed Regulation
4.13(a)(4) for pools without prior reliance on Letter 25-50, the
Commission believes it appropriate for such CPOs and pools to fully
comply with the other requirements of 17 CFR 4.13, including 17 CFR
4.13(e)(2). Ultimately, the Commission preliminarily concludes that
costs incurred by persons claiming Proposed Regulation 4.13(a)(4)
arising from Regulation 4.13's broader compliance requirements are
necessary to establish consistent, minimal oversight of all exempt
pools and to provide transparency and similar levels of protection to
existing pool participants when a pool transitions from regulated to an
exempt status.
With respect to another conforming amendment, the proposed
amendment to Regulation 4.14(a)(8), the baseline is the existing
exemption for investment advisers that currently does not recognize the
CPOs of pools exempt under Proposed Regulation 4.13(a)(4) as permitted
advisory clients. If the proposed amendment is finalized, investment
advisers who qualify and advise, among other clients listed therein,
CPOs of pools that would be exempt under Proposed Regulation 4.13(a)(4)
would incur costs associated with the notice filing required by this
CTA exemption. These investment advisers may already be claiming the
CTA exemption in Regulation 4.14(a)(8) with respect to advisory clients
currently permitted thereunder, in which case any filing costs arising
directly from this Proposal would be further minimized.
Finally, the Commission recognizes that persons seeking to claim
Proposed Regulation 4.13(a)(4) would incur legal, operational, and
administrative costs arising from the proposed requirement that a
person file Form PF with the SEC, to the extent SEC regulations require
such a filing with respect to the Eligible Pool. Additionally, in
forming a pool qualifying for Proposed Regulation 4.13(a)(4), there may
be costs arising from establishing a securities offering exempt under
the Securities Act and subject to the proposed marketing limitations.
However, because these costs associated with formation and Form PF
reporting, as required, arise from existing SEC regulations, the
Commission preliminarily believes that these aspects of Proposed
Regulation 4.13(a)(4) would not create any additional costs than those
that would already be experienced by such persons in forming and
operating their private funds.
With respect to the Small Pool Exemption, the baseline is the
exemption found at Regulation 4.13(a)(2) with the existing
requirements, including the gross capital contributions limitation of
$400,000. The Commission expects that CPOs who qualify for the Small
Pool Exemption as a result of the proposed increase of that threshold
to $800,000 would experience costs arising from the initial and annual
notice filings and general compliance requirements found in Regulation
4.13. Given that such CPOs able to qualify for the expanded Small Pool
Exemption would be permitted to deregister and become exempt from CPO
registration, the Commission expects the costs associated with
Regulation 4.13 notices and compliance to be modest in comparison to
the costs of full registration and compliance with all CPO regulations
in 17 CFR part 4.
Further, because this Proposal will solely provide optional
alternatives to registration with the Commission as a CPO or CTA, which
alternative no CPO or CTA is required to elect, the Commission believes
that this Proposal will not impose any additional costs on such
persons. In fact, the Commission believes that it is reasonable to
expect that those CPOs and CTAs that elect to rely on the proposed
exemptions from registration would generally only do so to the extent
that they believe they will save costs in the aggregate by virtue of
such reliance.
3. Costs and Benefits of the Commission's Proposal as Compared to
Alternatives
The Commission considered several alternatives to the Proposal.
First, for analytical completeness, the Commission considered retaining
the regulatory status quo and determining not to promulgate regulations
establishing a CPO exemption available to RIAs operating pools limited
to sophisticated investors, which would have caused Letter 25-50 to
expire. However, the Commission preliminarily believes that, when
compared to the Proposal, this approach would lead to significant costs
to market participants, who would be required to comply with two
separate, but simultaneously applicable, regulatory regimes
administered by the SEC and the Commission with limited regulatory or
public interest benefit. This would result in substantial costs to RIA-
CPOs, especially to those who have already filed a claim pursuant to
Letter 25-50 and withdrawn from CPO registration in reliance thereon.
Additionally, these entities would be precluded from achieving or
maintaining significant benefits discussed above arising from
[[Page 54278]]
the substantial reduction of duplicative and overlapping regulatory
regimes governing their investment management activities, and in fact,
would experience significant costs related to reapplying for CPO
registration and resuming their part 4 compliance with respect to
qualifying pools under Letter 25-50 and the Proposal. Finally, this
approach would deprive market participants of the regulatory clarity
and certainty provided by Proposed Regulation 4.13(a)(4), leaving them
to rely upon the no-action positions that are subject to modification
or withdrawal by the issuing Commission division and lack the
permanence and predictability of a regulatory amendment.
Second, the Commission considered proposing a new exemption based
upon substantially different eligibility criteria than the conditions
contained in Letter 25-50 by including additional reporting or
operational conditions. As compared to the Proposal, establishing
different eligibility criteria for this CPO exemption would result in
some costs, especially to those market participants who qualify for the
no-action positions in Letter 25-50, but would not qualify under a CPO
exemption with more or different requirements. Such entities, many of
whom have already begun the process of withdrawing from CPO
registration after claiming Letter 25-50, may incur significant costs
as a result of reapplying for CPO registration and resuming part 4
compliance. The Commission has preliminarily determined that additional
restrictions beyond minor adjustments to the conditions of Letter 25-50
would not provide material regulatory or customer protection benefits
and would likely significantly limit the utility of the exemption.
With respect to the Small Pool Exemption, the Commission considered
leaving the original gross capital contributions threshold in place. As
compared to the Proposal, CPOs who would qualify for the increased
threshold in Proposed Regulation 4.13(a)(2) would continue to incur
costs associated with CPO registration and compliance for their small
pools, with limited regulatory benefit to participants, and be
prohibited from benefiting from the expanded availability of the Small
Pool Exemption. This approach would also limit the overall benefit from
the Proposal of modernizing long-standing financial thresholds and
maintaining the appropriate scope of the original Small Pool Exemption,
in light of changing economic conditions.
Because the Proposal strikes an appropriate balance between
substantially reducing costs to market participants through eliminating
duplicative and overlapping regulations, and maintaining sufficient
oversight and customer protection in the commodity interest markets,
while also integrating and updating the CPO exemption regime in
Regulation 4.13, the Commission preliminarily believes that the
proposed amendments would be the most appropriate approach for market
participants and participants in their offered pools.
4. Section 15(a) Factor Analysis
Section 15(a) of the CEA \102\ requires the Commission to consider
the effects of its actions in light of the following five factors
discussed below: (a) the protection of market participants and the
public; (b) the efficiency, competitiveness, and financial integrity of
futures markets; (c) price discovery considerations; (d) sound risk
management practices; and (e) other public interest considerations.
---------------------------------------------------------------------------
\102\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
i. Protection of Market Participants and the Public
Section 15(a)(2)(A) of the CEA \103\ requires the Commission to
evaluate the costs and benefits of a proposed regulation in light of
considerations of the protection of market participants and the public.
The Commission preliminarily believes that the proposed amendments
would generally maintain the efficacy of protections for market
participants and the public provided by the CEA and the Commission's
part 4 regulations.
---------------------------------------------------------------------------
\103\ 7 U.S.C. 19(a)(2)(A)
---------------------------------------------------------------------------
Proposed Regulation 4.13(a)(4) would provide an exemption to CPOs
that are RIAs and who offer pools solely to Eligible Participants,
i.e., certain QEPs and accredited investors, focusing on reducing
regulatory and compliance burden for those CPOs who are subject to
comprehensive regulation and oversight by the SEC. The Commission
preliminarily believes that it can provide this exemption, while
retaining meaningful investor protection safeguards provided by 17 CFR
part 4 to the investing public engaging with registered CPOs and CTAs.
Importantly, participation in the would-be exempt pools is limited to
investors with the financial sophistication, resources, and experience
necessary to evaluate complex investment risks, and who the Commission
has previously determined are less in need of the substantial
protections provided by its part 4 regulations. The Commission
preliminarily believes that the Proposal strikes an appropriate
regulatory balance, especially in the context of otherwise regulated
intermediaries and sophisticated investors, the former of which bear
significant costs for CPO registration and compliance in addition to
SEC regulatory costs, and the latter who receive incremental or modest
benefits as a result of those costs. The Commission preliminarily
believes that the Proposed RIA-QEP Exemption efficiently leverages
existing oversight of RIAs, which applies investor protection
requirements like fiduciary obligations, periodic financial reporting,
examinations, and enforcement authority.
The Proposal would also expand the availability of the Small Pool
Exemption by increasing its gross capital contributions threshold to
account for inflation and current economic conditions. The Commission
preliminarily believes it is prudent and appropriate to periodically
review its regulations and update them as necessary to ensure that
policies like registration exemptions remain fit to their original
purpose and scope and continue to function as intended in the commodity
interest markets. Overall, the Proposal if adopted, would allow market
participants to experience better targeted, more efficient application
of CFTC regulations and requirements to registered intermediaries, by
reducing duplicative regulatory regimes and focusing CFTC resources on
customer protection and compliance to members of the investing public
with fewer resources and less experience, who may be more vulnerable
and benefit the most from that protection.
ii. Efficiency, Competitiveness, and Financial Integrity of Futures
Markets
Section 15(a)(2)(B) of the CEA requires the Commission to evaluate
the costs and benefits of a proposed regulation in light of
``efficiency, competitiveness, and financial integrity of futures
markets.'' \104\ The Commission preliminarily believes that the
Proposal would generally improve efficiency, competitiveness, and
financial integrity of futures markets. The Proposal would reduce
duplicative and overlapping regulations applicable to intermediaries in
these markets, and it is intended to facilitate efficiency and
competitiveness by applying the ``minimum effective dose'' of
regulation to these markets and their participants. As a result, the
Proposal, if adopted, would reduce regulatory costs for RIA-CPOs
qualifying for the RIA-QEP Exemption, and could potentially encourage
more
[[Page 54279]]
qualifying entities to participate in commodity interest markets due to
lowering regulatory and compliance costs. Consequently, the markets may
experience an increase in participation of RIA-CPOs operating and
advising qualifying investment vehicles, and that, in turn, may result
in increased liquidity and competition in these markets. As a result of
reducing duplicative regulatory regimes and costs and increasing the
participation of experienced intermediaries and sophisticated
investors, the Commission preliminarily believes that the Proposal will
have a positive impact on the efficiency, competitiveness, and
financial integrity of futures markets.
---------------------------------------------------------------------------
\104\ 7 U.S.C. 19(a)(2)(B).
---------------------------------------------------------------------------
iii. Price Discovery
Section 15(a)(2)(C) of the CEA requires the Commission to evaluate
the costs and benefits of a proposed regulation in light of price
discovery considerations.\105\ The Proposal is not expected to have a
significant direct effect on price discovery. To the extent that the
RIA-QEP Exemption results in greater participation by experienced RIAs
and their sophisticated clients, the Proposal may indirectly support
more robust market participation, and thus, contribute positively to
price formation and discovery processes.
---------------------------------------------------------------------------
\105\ 7 U.S.C. 19(a)(2)(C).
---------------------------------------------------------------------------
iv. Sound Risk Management Practices
Section 15(a)(2)(D) of the CEA requires the Commission to evaluate
the costs and benefits of a proposed regulation in light of sound risk
management practices.\106\ The Proposal maintains key structural
protections by relying on the SEC's risk management framework for RIAs
and, where applicable, Form PF reporting to monitor systemic risk. For
Eligible Pools, the Proposal does not significantly reduce protections
applicable to retail participants, as such pools involve only Eligible
Participants. Further, to the extent RIA-CPOs repurpose their resources
currently spent on CPO registration and compliance requirements by
claiming the Proposed RIA-QEP Exemption, RIA-CPOs may choose to use
such resources in further developing sound risk management practices.
---------------------------------------------------------------------------
\106\ 7 U.S.C. 19(a)(2)(D).
---------------------------------------------------------------------------
v. Other Public Interest Considerations
Section 15(a)(2)(E) of the CEA requires the Commission to evaluate
the costs and benefits of a proposed regulation in light of other
public interest considerations.\107\ Replacing the no-action positions
in Letter 25-50 with formally adopted regulations provides
transparency, stability, and predictability to market participants. The
Proposal also advances long-standing Commission goals of avoiding
unnecessary regulatory burdens, harmonizing requirements with other
federal regulators, and calibrating compliance obligations to the
sophistication and financial resilience of market participants.
---------------------------------------------------------------------------
\107\ 7 U.S.C. 19(a)(2)(E).
---------------------------------------------------------------------------
Additionally, the Commission preliminarily believes that, by
leveraging the existing SEC oversight of RIAs and private fund-
commodity pools eligible for the Proposed RIA-QEP Exemption, the
Commission would be better able to direct its limited resources to
registered intermediaries, commodity pools, pool participants, and
advisory clients in an effective and targeted manner. Specifically, the
Commission intends to focus its intermediary regulations on CPOs and
CTAs engaging with pool participants and advisory clients more in need
of direct intervention and protection, including those persons who are
new investors in the commodity interest markets, or who possess fewer
resources to assess the risks of an investment opportunity. Further,
the Commission preliminarily believes that, by virtue of claiming
Proposed Regulation 4.13(a)(4), eligible RIA-CPOs may also be able to
reallocate their internal compliance resources currently devoted to
CFTC obligations toward other aspects of their operations, like risk
management functions and investor-facing activities. With respect to
the Small Pool Exemption, the Commission preliminarily believes the
public interest is served when it regularly evaluates and updates
financial thresholds in its regulations to ensure such thresholds
maintain their original intended scope and relevance in the context of
current economic conditions.
The Commission requests comment on all aspects of its consideration
of the costs and benefits of the Proposal, including any available
quantifiable data and analysis.
D. Antitrust Considerations
Section 15(b) of the CEA requires the Commission to take into
consideration the public interest to be protected by the antitrust laws
and endeavor to take the least anticompetitive means of achieving the
purposes of the CEA in issuing any order or adopting any Commission
rule or regulation.\108\ The Commission believes that the public
interest to be protected by the antitrust laws is generally to protect
competition. The Commission requests comment on whether the Proposal
implicates any other specific public interest to be protected by the
antitrust laws.
---------------------------------------------------------------------------
\108\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------
The Commission has considered the proposed amendments in this
Proposal to determine whether they are anticompetitive and has
preliminarily identified no anticompetitive effects. The Commission
requests comment on whether the Proposal is anticompetitive and, if it
is, what the anticompetitive effects are.
Because the Commission has preliminarily determined that the
Proposal is not anticompetitive and has no anticompetitive effects, the
Commission has not identified any less anticompetitive means of
achieving the purposes of the CEA. The Commission requests comment on
whether there are less anticompetitive means of achieving the relevant
purposes of the CEA that would otherwise be served by adopting the
amendments proposed in this Proposal.
E. Executive Orders 12866, 13563, and 14192
Executive Orders 12866 (``E.O. 12866'') \109\ and 13563 \110\
direct agencies to assess all costs and benefits of available
regulatory alternatives and, if regulation is necessary, to select
those regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety, and other
advantages; and distributive impacts). Section 3(f) of E.O. 12866
defines a ``significant regulatory action'' as any regulatory action
that is likely to result in a rule that may: (1) have an annual effect
on the economy of $100 million or more or adversely affect in a
material way the economy, a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local, or tribal governments or communities; (2) create a serious
inconsistency or otherwise interfere with an action taken or planned by
another agency; (3) materially alter the budgetary impact of
entitlements, grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, or the President's priorities.
---------------------------------------------------------------------------
\109\ Executive Order 12866, Regulatory Planning and Review, 58
FR 51735 (Oct. 4, 1993).
\110\ Executive Order 13563, Improving Regulation and Regulatory
Review, 76 FR 3821 (Jan. 21, 2011).
---------------------------------------------------------------------------
OMB has determined that this action is not a significant regulatory
action as defined in E.O. 12866, as amended, and
[[Page 54280]]
therefore it was not subject to E.O. 12866 review.
This Proposal, if finalized as proposed, is expected to be a
deregulatory action under Executive Order 14192.\111\
---------------------------------------------------------------------------
\111\ See Executive Order 14192, Unleashing Prosperity Through
Deregulation, 90 FR 9065 (Jan. 31, 2025).
---------------------------------------------------------------------------
List of Subjects in 17 CFR Part 4
Commodity pool operators, Commodity trading advisors, Investment
advisers, Reporting and recordkeeping requirements, Securities, Swaps.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend 17 CFR part 4, as follows:
PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS
0
1. The authority citation for part 4 shall continue to read as follows:
Authority: 7 U.S.C. 1a, 2, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a,
and 23.
0
2. Amend Sec. 4.13 by:
0
a. Revising paragraph (a)(2)(ii);
0
b. Revising paragraph (a)(4);
0
c. Revising paragraphs (b)(1)(ii) and (e)(2), to read as follows:
Sec. 4.13 Exemption from registration as a commodity pool operator.
* * * * *
(a) * * *
(2) * * *
(ii) The total gross capital contributions it receives for units of
participation in all of the pools it operates or that it intends to
operate do not in the aggregate exceed $800,000.
* * * * *
(4) With respect to each pool for which the person claims exemption
under this paragraph (a)(4):
(i) Interests in the pool are exempt from registration under the
Securities Act of 1933, and such interests are offered and sold without
marketing to the public in the United States, provided that this
prohibition on marketing shall not apply to a pool that is also offered
pursuant to Sec. 230.506(c) of this title;
(ii) The person is registered with the Securities and Exchange
Commission as an investment adviser under the Investment Advisers Act
of 1940;
(iii) The person reasonably believes, at the time of investment
(or, in the case of an existing pool, at the time of conversion to a
pool meeting the criteria of paragraph (a)(4) of this section), that:
(A) Each natural person participant (including such person's self-
directed employee benefit plan, if any) is a natural person listed in
paragraph (i) of the definition of ``qualified eligible person'' in
Sec. 4.7(a)(6) of this part; and
(B) Each non-natural person participant is a ``qualified eligible
person,'' as that term is defined in Sec. 4.7(a)(6) of this part, or
an ``accredited investor,'' as that term is defined in Sec. Sec.
230.501(a)(1)-(3), (a)(7), or (a)(8), of this title;
(iv) The person files Form PF, if it is required to do so by Form
PF and/or related securities regulations;
(v) Nothing in paragraph (a)(4) of this section will prohibit the
person from claiming an exemption under this section, if it
additionally operates one or more pools that meet the criteria of
paragraph (a)(3) of this section.
* * * * *
(b) * * *
(1) * * *
(ii) Specify the paragraph number pursuant to which the person is
filing the notice (i.e., Sec. 4.13(a)(1), (2), (3), (4) or (5)) and
represent that the pool will be operated in accordance with the
criteria of that paragraph;
* * * * *
(e) * * *
(2) If a person operates one or more commodity pools described in
paragraph (a)(3) or (a)(4) of this section, and one or more pools for
which it must be, and is, registered as a commodity pool operator, the
person is exempt from the requirements applicable to a registered
commodity pool operator with respect to the pool or pools described in
paragraph (a)(3) or (a)(4) of this section; Provided, that the person:
(i) Furnishes in written communication physically delivered or
delivered through electronic transmission to each prospective
participant in a pool described in paragraph (a)(3) or (a)(4) of this
section that it operates:
(A) A statement that it will operate the pool as if the person was
exempt from registration as a commodity pool operator;
(B) A description of the criteria pursuant to which it will so
operate the pool;
(ii) Complies with paragraph (c) of this section; and
(iii) Provides each existing participant in a pool that the person
elects to operate as described in paragraphs (a)(3) or (a)(4) of this
section a right to redeem the participant's interest in the pool, and
informs each such participant of that right no later than the time the
person commences to operate the pool as described in paragraphs (a)(3)
or (a)(4) of this section.
* * * * *
0
3. Revise Sec. 4.14(a)(8)(i)(D), to read as follows:
Sec. 4.14 Exemption from registration as a commodity trading advisor.
* * * * *
(a) * * *
(8) * * *
(i) * * *
(D) A commodity pool operator who has claimed an exemption from
registration under Sec. 4.13(a)(3) or 4.13(a)(4), or, if registered as
a commodity pool operator, who may treat each pool it operates that
meets the criteria of Sec. 4.13(a)(3) or 4.13(a)(4) as if it were not
so registered; and
* * * * *
Issued in Washington, DC, on August 18, 2026, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Commodity Pool Operators and Commodity Trading Advisors: Reduction of
Duplicative Regulation Through Intermediary Registration Exemptions;
Expansion of the Exemption for Small Commodity Pools--Voting Summary
On this matter, Chairman Selig voted in the affirmative. No
Commissioner voted in the negative.
[FR Doc. 2026-17079 Filed 8-20-26; 8:45 am]
BILLING CODE 6351-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on August 21, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.