The Commodity Futures Trading Commission's (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) recently issued no-action relief for failure to register with the CFTC as a commodity trading advisor (CTA) to any "Family Office" that provides advisory services to a "Family Client" ("CTA Letter"). The relief supplements prior relief ("Letter No. 12-37") for Family Offices from registration as a commodity pool operator (CPO).
A Family Office is generally a professional organization that is wholly owned by clients in a family and is exclusively controlled (directly or indirectly) by one or more members of a family and/or entities controlled by a family.
Family Offices previously relied upon the exemption from CPO registration for pools offered only to qualified eligible persons that was contained in CFTC Reg. 4.13(a)(4). CTAs that advised such exempt pools were likewise exempt from CTA registration. CFTC Reg. 4.13(a)(4) was repealed in 2012, but Letter No. 12-37 addressed only CPO registration requirements and was silent with respect to relief from registration as a CTA.
In the CTA Letter, DSIO expressed the view that the no-action relief from registration as a CPO should also apply to a Family Office in the context of CTA registration. Accordingly, the CTA Letter grants no-action relief from CTA registration for Family Offices that are eligible for relief under Letter No. 12-37 in connection with their advisory services to Family Clients and that (i) submit a claim electing the relief and (ii) otherwise remain in compliance with Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940.
The relief is not self-executing. An eligible Family Office must file with DSIO a claim for relief from registration as a CTA, which is effective upon filing so long as the claim is accurate and complete. The claim must:
- State the name, main business address, and main business telephone number of the Family Office claiming the relief;
- State the capacity (i.e., CTA) and, where applicable, the name of the pool(s), for which the claim is being filed;
- Be electronically signed by the Family Office; and
- Be filed with DSIO using the email address dsionoaction@cftc.gov with the subject line "Family Office CTA Relief."
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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