Alert September 14, 2010

CFTC Proposes to Codify Exemptive Relief for Commodity ETFs

The CFTC issued a release proposing changes to its regulations that will codify relief from certain disclosure, reporting and recordkeeping requirements for commodity pool operators (“CPOs”) whose commodity pool units of participation are publicly offered and listed for trading on a national securities exchange (“Commodity ETFs”).  Like securities based ETFs, Commodity ETFs seek to track the performance of a specific commodity index or alternatively, actively trade commodity interests without regard to an index or benchmark.  The CFTC has previously provided exemptive relief on a case by case basis to Commodity ETFs subject to compliance with conditions like those in proposed amendments.  Actively managed Commodity ETFs must have independent directors or trustees in order to meet exchange listing standards that implement audit committee independence requirements mandated in SEC Rule 10A-3 under the Securities Exchange Act of 1934 adopted pursuant to the Sarbanes-Oxley Act of 2002.  The proposed amendments would provide an exemption from the requirement that a director or trustee of a Commodity ETF able to rely on the relief described above must register as a CPO; the exemption would be available to a director or trustee who served solely for the purpose of complying with the audit committee requirements of Rule 10A-3. 

Comments on the CFTC’s proposal must be received on or before October 25, 2010.