CFTC restores registration exemption for private fund managers Skip to main content

CFTC restores registration exemption for many private fund managers

CFTC restores registration exemption for many private fund managers

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Overview

The regulatory framework governing the intersection of derivatives markets and the private fund industry has reached a pivotal inflection point. On December 19, 2025, the Market Participants Division of the Commodity Futures Trading Commission (CFTC) issued no-action relief that effectively restores the CFTC Rule 4.13(a)(4) commodity pool operator (CPO) exemption, which was rescinded in 2012. Rulemaking to restore the exemption may follow, but the no-action relief is immediately applicable.

Many private fund managers will be able to rely on the restored exemption, including managers who registered with the CFTC after the exemption was rescinded and managers who have been relying on the de minimis exemption.

In Depth

Historical context

Rule 4.13(a)(4) was initially established in 2003 and grounded in the realization that US Securities and Exchange Commission (SEC) registered investment advisers (RIAs) were already subject to a comprehensive regulatory regime under the Investment Advisers Act of 1940. Unlike Rule 4.13(a)(3), Rule 4.13(a)(4) was conditioned on who the fund is being sold to rather than on the specific instruments being utilized. Rule 4.13(a)(4) was only available to RIAs of private funds that limited its offering to qualified eligible persons (QEP).[1] RIAs to registered investment companies (Registered Funds) had an analogous blanket exemption provided by CFTC Rule 4.5.[2]

As part of a series of Dodd-Frank-related rulemakings in 2012, Rule 4.13(a)(4) was rescinded and a de minimis component was added to Rule 4.5.[3] The impact of those recissions was as follows:

  • Private funds. Most private fund managers who utilized any derivatives faced a choice of either limiting their CFTC-regulated derivatives trading to comply with one of the de minimis thresholds provided by Rule 4.13(a)(3)[4] or registering with the CFTC as a CPO and utilizing the post-registration Rule 4.7 relief.[5]
  • Registered funds. The addition of the de minimis component gave Registered Fund managers a similar choice: remain exempt by complying with one of the de minimis thresholds under Rule 4.5 or register as a CPO and rely on post-registration Rule 4.12(c) relief.

Other vehicles. Some (perhaps unintended) consequences of the recission were various entities that were primarily subject to other regulatory regimes but had historically relied on Rule 4.13(a)(4). The CFTC issued several relief letters and rulemakings to remedy those situations.[6] Similarly, CFTC staff issued no-action relief to fund of funds (FOF), given Rule 4.13(a)(3)’s incompatibility with them.

Staff relief

Relief conditions

In what is framed as an interim solution, CFTC staff issued no-action relief that provides a Rule 4.13(a)(4)-analogous “bridge” exemption (4.13(a)(4) Relief) until the CFTC can formally reinstate the rule. The 4.13(a)(4) Relief is available to a CPO that (i) is an RIA, (ii) operates a commodity pool that is offered on a private placement basis (e.g., Regulation D offering),[7] and (iii) reasonably believes at the time of investment[8] that each pool participant meets the QEP definition. CFTC staff also conditioned the relief on the CPO filing Form PF with the SEC with respect to such pool, as well as complying with several other Rule 4.13 components, all of which an exempt or registered CPO that is an RIA would already be subject to.[9] Unlike Rule 4.13 exemptions, which are claimed on NFA’s website, 4.13(a)(4) Relief is claimed by submitting an email to CFTC staff.[10]

Additional components

Generally, a CPO that intends to “step down” from registration (e.g., reliance on Rule 4.7) to a Rule 4.13 exemption is required by Rule 4.13 to first offer investors the right to redeem; the 4.13(a)(4) Relief also provides relief from such requirements.[11]

Finally, CFTC staff confirmed that this relief extends to the Commodity Trading Advisor (CTA) Rule 4.14(a)(5) exemption as well (i.e., a CPO relying on the 4.13(a)(4) Relief is also eligible to rely on Rule 4.14(a)(5) with respect to such pool).[12]

Next steps

The impact of this letter will vary:

  • Registered CPOs looking to utilize the 4.13(a)(4) Relief can consider two approaches: fully deregistering with the CFTC and relying on the 4.13(a)(4) Relief or transitioning to the 4.13(a)(4) Relief while remaining registered.[13] CPOs considering the utilization of the 13(a)(4) Relief should nonetheless consider the appropriate deregistration timeline. Such CPOs should also confirm whether there are any contractual obligations to provide notification or receive consent from clients before changing CFTC status or any other client sensitivities.
  • Exempt CPOs can also consider whether to transition from the more restrictive Rule 4.13(a)(3) to this new exemption.
  • Managers of vehicles that are utilizing one of the CFTC no-action letters described above (e.g., securitization vehicles, real estate investment trusts (REITs)) should consider whether transitioning to 4.13(a)(4) Relief would provide more flexibility. Similarly, FOF managers relying on the 12-38 relief and non-US managers relying on Rule 3.10(c)(5)[14] may also find that the 4.13(a)(4) Relief provides greater flexibility.
  • Institutional investors such as family offices, pension plans, and FOF should consider whether the change in CFTC status of the commodity pools they are invested in has any downstream impact. RIAs to 3(c)(7) funds[15] have an easy path to satisfying the investor suitability component of the 4.13(a)(4) Relief as all of its investors most likely already qualify as QEPs.[16] Other private fund managers (e.g., operating funds that rely on Section 3(c)(1)) should consider whether all of its investors meet the QEP conditions. (Note that the CFTC recently raised the QEP monetary thresholds.)[17]

While the relief can be highly useful for most managers, there are certain managers that may be unable to utilize it. Specifically, advisers that are not RIAs (e.g., non-US advisers that are exempt reporting advisers). Additionally, while both private funds and Registered Funds were similarly impacted by the 2012 rule changes (the recission of Rule 4.13(a)(4) and amendments to Rule 4.5, respectively), this relief only addresses private fund managers. Advisers to Registered Funds and certain business development companies continue to be limited to relying on a de minimis exemption or registering. Finally, CTAs to non-pool clients may have more limited relief available, relative to CTAs of commodity pool clients relying on the 4.13(a)(4) Relief.

This action represents a significant departure from the post-2012 regulatory status quo and signals a broader institutional shift toward reducing duplicative oversight. Increased coordination between the two agencies is particularly welcome with the implementation of a full crypto-asset regulatory framework expected. Nonetheless, while this development offers a substantial opportunity to streamline compliance programs, managers should carefully consider various factors before utilizing the 4.13(a)(4) Relief, including the lack of certainty regarding a permanent solution, the impact of any future associated rulemakings, and potential downstream contractual or operational commitments. While reliance on the exemption may certainly be feasible for many managers, given these complexities, a thorough, case-by-case evaluation is recommended before proceeding.

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Authors

Jake Preiserowicz
Partner | Washington, DC
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Marc E. Elovitz
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Endnotes

[1] “Qualified eligible persons” includes, among others, “qualified purchasers” and “non-US persons.” See CFTC Regulation 4.7(a)(2) and (a)(3), 17 CFR 4.7(a)(2) and (a)(3).

[2] Rather than being conditioned on only marketing to sophisticated and institutional investors, Rule 4.5’s availability was conditioned on simply being a Registered Fund.

[3] These rule changes were issued in conjunction with other Dodd-Frank rulemakings, which primarily addressed the statutory mandate to incorporate “swaps” into the CFTC’s regulatory framework.

[4] The Rule 4.13(a)(3) exemption is available to operators of commodity pools that, in addition to certain other requirements, only offer the pool to accredited investors or QEPs and stays below either the 5% initial margin threshold or the 100% notional threshold. See CFTC Relegation 4.13(a)(3), 17 CFR 4.13(a)(3).

[5] Rule 4.7 is available to registered CPOs that limit participation in the pool to QEPs.

[6] See e.g., CFTC, Swap Dealer and Intermediary Oversight, CFTC No-Action Letter No. 12-44 (Dec. 7, 2012) (REITs; CFTC, Swap Dealer and Intermediary Oversight, CFTC Interpretive Letter No. 12-14 (Oct. 11, 2012) (Asset-Backed Securities); CFTC, Swap Dealer and Intermediary Oversight, CFTC Interpretive and No-Action Letter No. 12-45 (Dec. 7, 2012) (Asset-Backed Securities); CFTC, Swap Dealer and Intermediary Oversight, CFTC Interpretive and No-Action Letter No. 12-40 (Dec. 4, 2012) (REITs); CFTC, Swap Dealer and Intermediary Oversight, CFTC Interpretive and No-Action Letter No. 12-37 (Nov. 29, 2012) (Family Offices).

[7] Specifically, interests in the offering are exempt from registration under the Securities Act of 1933 and not marketed to the public, although this does not preclude a 506(c) offering.

[8] Or, for existing commodity pools, at the time of transition to reliance on 4.13(a)(4) Relief.

[9] The additional requirements include effectively representing, by claiming such exemption, that none of the CPO’s principals are subject to a CFTC statutory disqualification. The CPO must also maintain certain books and records, which are available for inspection upon request, and remains subject to special calls to demonstrate exemption eligibility.

[10] This no-action relief is claimed by emailing the exemption notice to CFTC staff at mpdnoaction@cftc.gov and is considered effective upon sending. While the relief technically does not extend to the annual reaffirmation requirement, it is presumably CFTC staff’s expectation that the reinstatement of Rule 4.13(a)(4) will be codified by the next reaffirmation deadline (March 2027).

[11] Specifically:

  • Rule 4.13(b)(2) requires this of CPOs that are fully deregistering with the intention of relying on a Rule 4.13 exemption.
  • Rule 4.13(e)(2) requires this of a CPO that remains registered but relies on Rule 4.13 with respect to one or more pools.

[12] Rule 4.14(a)(5) is an exemption available where the CPO and CTA are the same entity. It is exempt from CTA registration if it is already relying on a CPO exemption with respect to such client. CFTC staff did not address how other CTA exemptions, such as 4.14(a)(8), would work in the context of 4.13(a)(4) Relief.

[13] While still an NFA member, this does provide some flexibility for future considerations, particularly until the exemption is more firmly solidified by formal rulemaking.

[14] Rule 3.10(c)(5) is available to non-US CPOs to non-US funds. Non-US CPOs who have historically restricted US investors from investing in their fund to remain exempt from CFTC registration can now consider 4.13(a)(4) Relief as an alternative.

[15] RIAs who operate funds that rely on Section 3(c)(7) of the Investment Company Act of 1940 as an exemption from registration as an investment company as all of its investors are qualified purchasers.

[16] See Note 1, above.

[17] On September 12, 2024, the CFTC adopted amendments to Rule 4.7 that raised the financial thresholds for investors to be QEPs. QEPs subject to Rule 4.7’s Portfolio Requirement must now meet the $4 million Asset Threshold, $400,000 Deposit Threshold, or a combination thereof. See 89 Fed. Reg. 78793 (Sept. 26, 2024); CFTC Increases Financial Thresholds for Qualified Eligible Person Status (Sep. 18, 2024).