Amended Rule 4.5 will require
the operators of Registered Funds to either limit such Funds' use of commodity
futures, options, leverage contracts, retail forex contracts, and swaps
(together, "commodity interests") or submit to dual regulation by the
CFTC and the Securities and Exchange Commission ("SEC").
The Commodity Futures Trading
Commission ("CFTC") has adopted amendments to Rule 4.5 under the
Commodity Exchange Act ("CEA") that will greatly narrow that rule's
exclusion for operators of registered investment companies ("Registered
Funds" or "Funds") from regulation as commodity pool operators
("CPOs"). Amended Rule 4.5 will require the operators of Registered
Funds to either limit such Funds' use of commodity futures, options, leverage
contracts, retail forex contracts, and swaps (together, "commodity
interests") or submit to dual regulation by the CFTC and the Securities
and Exchange Commission ("SEC"). Registered Funds that currently
invest in commodity interests will need to evaluate and make significant
changes to their investment and compliance programs before the amendments to
Rule 4.5 take effect.
For persons relying on the Rule 4.5 exclusion as of the effective date of the
rule amendments, April 24, 2012, the requirement to register under amended Rule
4.5 will be effective on the later of: (i) December 31, 2012; or (ii) within 60
days after the CFTC adopts final rules defining "swap" and
establishes margin requirements for such instruments. However, based upon discussions
with CFTC staff, any Registered Fund that does not have a Rule 4.5 notice on
file prior to April 24, 2012 will be required to register at that time if it
cannot come within the rule's new trading limits.
Concurrent with the adoption of the amended Rule 4.5, the CFTC proposed certain
harmonization measures-for advisers to Registered Funds that will be required
to register with the CFTC-to address regulatory issues these Funds will face
under a dual SEC-CFTC regulatory scheme (the "Harmonization Proposal").
The compliance regime that will apply to dually-registered funds will become
effective 60 days after the final rules proposed in the Harmonization Proposal
are published in the Federal Register.
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