Today, the Commodity Futures Trading Commission (the “CFTC”) issued final rules adopting amendments to Part 4 of its regulations as follows:

• The final rules rescind the exemption from commodity pool operator (“CPO”) registration in CFTC Regulation 4.13(a)(4). This will require those currently relying on the exemption to either (a) rely on a different exemption or (b) register with the CFTC as a CPO, by December 31, 2012. CPOs who are not relying on the 4.13(a)(4) exemption as of the effective date of the final rule (i.e., 60 days after its publication in the Federal Register) must comply with the final rule by such effective date by either relying on a different exemption or registering with the CFTC as a CPO.
• The exemption from CPO registration in CFTC Regulation 4.13(a)(3) will continue to be available. This de minimis exemption is available with respect to a pool that either (i) has no more than 5% in aggregate initial margin and premiums with respect to commodity interest positions; or (ii) the aggregate net notional value of commodity interest positions cannot exceed 100% of the pool’s liquidation value. CPOs relying on this exemption will now be required to file an annual notice affirming their exempt status.
• The exemption from CPO registration in CFTC Regulation 4.5 is being revised to revert to its pre-2003 status (e.g., requiring registered investment companies to limit commodity interest trading that is not for a bona fide hedging purpose in order to claim relief from CPO registration). CPOs who are no longer able to rely on the 4.5 exemption must (a) register with the CFTC by the later of (i) December 31, 2012 or (ii) 60 days after final rulemaking defining the term “swap” and (b) comply with the CFTC’s disclosure, recordkeeping and reporting requirements within 60 days of the final rule implementing a proposed harmonization effort.

We will be circulating a subsequent memorandum that discusses these final rules in greater detail.

If you have any questions about these requirements, please contact an attorney in the Investment Management Group at Seward & Kissel LLP.