United States: CFTC Staff Issues Self-Executing Registration Relief for Certain Delegating CPOs

On October 15, 2014, the Commodity Futures Trading Commission ("CFTC") staff issued Letter 14-126 (the "October Letter"), which provides self-executing registration relief to a commodity pool operator ("CPO") of a fund that delegates its rights and obligations as a CPO to another entity that will serve as the registered CPO of the fund, if certain conditions are met. The October Letter replaces CFTC Letter 14-69 (the "May Letter"), which required each CPO to receive its own no-action letter to be able to delegate its CPO functions to a registered CPO (discussed in a previous Ropes & Gray Alert, available here). If the conditions of the October Letter are not met, a CPO will still need to obtain its own no-action letter. We recommend that private fund sponsors take this opportunity to review the CPO status of the parties that may be CPOs with respect to the fund (i.e., a fund's general partner, manager, directors and/or trustees), and consider whether the fund can rely on the self-executing relief made available by the October Letter to avoid registration obligations otherwise applicable to each CPO.


Historically, the CFTC staff has considered a private fund's general partner, manager, directors or trustees to be the fund's CPO. Accordingly, a fund sponsor that uses special purpose entities to serve as general partners or limited liability company managers of the funds it advises, or that has directors or trustees for its funds, may have multiple CPOs, each of which would be required (absent no-action relief from the CFTC) to register separately as a CPO or claim an applicable exemption. The May Letter established a streamlined process whereby the CFTC staff would grant relief on an expedited basis when certain criteria were met and a form of request was filed. For many, satisfying the criteria under the May Letter proved to be problematic. For instance, affiliated directors often could not use the streamlined process because they are involved in solicitation of investors or in portfolio management for the fund. Other CPOs could not use the streamlined process because they appointed trading advisors with investment management authority over fund assets. In addition, CPOs were reluctant to affirmatively attest that they would maintain the books and records of the fund in accordance with CFTC Rule 1.31 (which contains outdated technical provisions). Moreover, as it turned out, the CFTC staff actually granted only a small number of the requests they received based on the streamlined process.

The October Letter addresses many of the impediments to streamlined relief under the May Letter. Specifically, the October Letter revised the enumerated criteria to allow a CPO to appoint third-party trading advisors, to allow directors to participate in solicitation (as associated persons of the registered CPO) and in portfolio management (as principals or employees of the registered CPO), and to remove the attestation of compliance with Rule 1.31. Significantly, CPOs will no longer be required to submit requests for relief. So long as the criteria enumerated in the October Letter are satisfied, the relief under the October Letter is self-executing.

The Criteria for Relief

In the October Letter, the CFTC staff set forth specific criteria that must be met to qualify for the self-executing relief. In essence, there must be a legally binding document pursuant to which the delegating CPO has delegated to the designated CPO all of its investment management authority with respect to the fund (the CPO may in turn appoint third-party trading advisors). If a delegating CPO is not an individual, then the legally binding document must require the delegating and designated CPOs to be jointly and severally liable for any violation of the Commodity Exchange Act or the CFTC rules of the other in connection with the fund. Similarly, if a delegating CPO is an individual and is affiliated with the designated CPO, then the legally binding document must require the delegating and designated CPOs to be jointly and severally liable for one another's violations of the Commodity Exchange Act or the CFTC rules with respect to the fund. If a delegating CPO is an individual but is not affiliated with the designated CPO, there is no such requirement. Affiliation for this purpose is based on being a member of management or an employee of the designated CPO (or an affiliate), having substantial beneficial ownership of the designated CPO (or an affiliate), or having an interest or relationship that could interfere with the ability to act independently of management of the designated CPO (or an affiliate). 

The delegating CPO must not participate in the solicitation of investors except as an associated person of the registered CPO, and must not manage any property of the fund except as a principal or employee of the designated CPO or of a trading advisor for the fund. There must be a legitimate business purpose for the designated CPO being a separate entity from the delegating CPO. The designated CPO must be registered as a CPO and must maintain the books and records of the delegating CPO with respect to the fund, and the delegating CPO must not be subject to a statutory disqualification under the Commodity Exchange Act. Finally, if neither the delegating CPO nor the designated CPO is an individual, then one such CPO must control, be controlled by, or be under common control with the other CPO (criterion #6). 

Many CPOs that did not previously qualify for the streamlined approach under the May Letter will now qualify for the relief under the October Letter. Issues remain, however, including those arising under criterion #6. As a result of criterion #6, unaffiliated entity directors, trustees, general partners or managing members that are delegating CPOs will be required to request no-action relief from the CFTC staff. We understand that the CFTC staff is aware that this issue remains and that the staff may consider addressing it in follow-on guidance or in a rulemaking process.

Next Steps

The October Letter does not affect the validity of any prior staff letter issued with respect to CPO registration relief for a delegating CPO, including any relief granted pursuant to the May Letter. However, the staff will no longer consider requests for relief under the May Letter, including any requests previously submitted that are still pending. If a CPO has not received a delegation no-action letter from the staff, it should consider taking advantage of the relief under the October Letter.

To take advantage of the relief under the October Letter, CPOs should first review the criteria and confirm that the criteria are satisfied. This process would include reviewing the applicable investment management or separate delegation agreements to ensure that they contain provisions addressing the requirements of the October Letter, and amending these agreements as needed. CPOs should also establish a process to make sure that agreements for future funds contain the necessary provisions to meet the criteria and that all agreements are updated as needed to reflect changes, including changes in directors. 

A CPO that is unable to qualify for the relief set forth in the October Letter should prepare its own request for delegation no-action relief based on its specific facts and circumstances and submit it to the staff for consideration. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.