Alert February 14, 2012

CFTC Rescinds QEP Exemption from Commodity Pool Operator Registration

The CFTC issued a final rule eliminating the so-called “QEP exemption” from registration with the CFTC as a commodity pool operator (a “CPO”) under CFTC Rule 4.13(a)(4).  The QEP exemption was available to a pool if (a) its investors were “qualified eligible persons” (within the meaning of CFTC Rule 4.7(a)(2)) (“QEPs”) or “accredited investors” (as defined in Regulation D under the Securities Act of 1933 (the “Securities Act”)) and (b) the interests in the pool were exempt from registration under the Securities Act and not marketed to the public in the United States.  Persons relying on the QEP exemption will have until December 31, 2012 to either (1) avail themselves of another exemption from registration as a CPO or (2) register as a CPO with the CFTC.  For all other persons, the rescission of the QEP exemption is effective 60 days after its publication in the Federal Register.  

In a change from its original proposal, the CFTC did NOT rescind CFTC Rule 4.13(a)(3), which provides an exemption for CPOs of pools that have “de minimis” futures activity as defined in the rule.  The CFTC did, however, amend Rule 4.13(a)(3) to modify the calculation of “de minimis” thresholds to include swap transactions based on the amount of “commodity interests” traded.  The CFTC has proposed, but not yet finalized, a rule amending the definition of “commodity interest.”