The  Commodity Futures Trading Commission "CFTC" adopted a final rule that rescinds the exemption from registration as a commodity pool operator (CPO) under CFTC Rule 4.13(a)(4). Rule 4.13(a)(4) exempts a commodity pool operator from registration if all investors in the fund are “qualified eligible persons.” Rule 4.13(a)(4) imposed no limits on the amount of futures trading that could be conducted, and was commonly relied on by many managers of hedge funds and funds of funds.

The rescission of CFTC Rule 4.13(a)(4) became effective April 24, 2012. However, CPOs that are currently relying on Rule 4.13(a)(4) will have until December 31, 2012 to claim another exemption. Advisers of funds currently relying on the 4.13(a)(4) exemption have four options:

• stop trading in commodity futures, retail FX contracts and swaps (other than security-based swaps);
• rely upon a different registration exemption;
• obtain no-action relief from the CFTC; or
• register as a CPO

Depending upon the nature of and investors in a fund, a number of alternative CFTC exemptions may be available, including the Rule 4.5 or 4.13(a)(3) exemptions or Rule 4.7 partial exemption.

The CFTC also amended CFTC Rule 4.5 to impose new conditions on the ability of mutual funds and other registered investment companies to effect transactions in futures and swaps without the need for CPO registration; imposed new data reporting requirements under Forms CPO-PQR and CTA-PR; rescinded the relief provided in CFTC Rule 4.7(b)(3), under which the annual reports of certain commodity pools were not required to be certified; instituted a new requirement that CPOs and CTAs annually file notices claiming an exemption from registration; and imposed additional risk disclosure requirements upon CPOs and CTAs that engage in swap transactions.