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The Commodity Futures Trading Commission (CFTC) recently issued a No-Action Letter that provides relief to advisers to funds-of-funds. This No-Action Letter, which was issued on November 29, 2012, gives comfort to an adviser to a "fund-of-funds" (that is, an investment fund that invests some or all of its assets in other investment funds) that otherwise may have needed to register as a commodity pool operator (CPO) with the CFTC and the National Futures Association (NFA) before December 31, 2012.
In this No-Action Letter, the CFTC's Division of Swap Dealer and Intermediary Oversight (the Division) states that it will not recommend enforcement action against advisers to funds-of-funds that fail to register as a CPO until the later of June 30, 2013, or six months following the effective date of any guidance issued regarding the de minimis thresholds in Rule 4.13(a)(3). Fund-of-funds advisers must submit a claim by December 31, 2012, with the CFTC in order to take advantage of the No-Action relief.
Rescission of Appendix A
The need for this No-Action relief results from the February 2012 rescission of Appendix A of Part 4 of the CFTC Rules (Appendix A). Appendix A provided guidance on the application of the CFTC Rule 4.13(a)(3) de minimis exemption for funds-of-funds that indirectly hold commodity interests by virtue of their pass-through exposure to commodity interests held by underlying investment funds. Without Appendix A, it was unclear how a fund-of-funds could avoid registering as a CPO.
Following the rescission of Appendix A, the Division released Questions and Answers Guidance (Q&A Guidance), which provided some guidance (in spite of the technical rescission of Appendix A) for fund-of-funds advisers on how to apply the de minimis thresholds and interpretations contained in Appendix A. However, advisers to funds-of-funds expressed concern about uncertainties created by the Q&A Guidance and the anticipation of further guidance the CFTC has indicated it would give to funds-of-funds regarding this issue. Accordingly, the Division deemed it appropriate to provide No-Action relief for advisers to funds-of-funds that may otherwise have been required to register as a CPO with the CFTC by December 31, 2012.
No-Action Relief
The No-Action Letter provides relief, but is not self-executing. In order for an adviser to a fund-of-funds that is not a registered mutual fund to avail itself of the No-Action relief provided by the Letter, the adviser must submit a claim and remain in compliance with the following criteria:
Jeffrey A. Clopeck, Henry Nelson Massey and Eliza Sporn Fromberg wrote the article, "SEC's Dating Advice For Internet Platforms And Its Impact," for Law360. The article analyzes how some internet platforms are offering private placements in reliance on Rule 506(b) of Regulation D with approval from the Securities and Exchange Commission. This form of "speed dating" with prospective investors by Internet platforms offering private placements is allowed so long as the platform asks probing questions.
Day Pitney Alert
Stamford, Conn., August 24, 2015 - Day Pitney is pleased to announce that 68 attorneys have been selected for inclusion in the 2016 Best Lawyers in America. Best Lawyers ranks lawyers through peer-review surveys, and has been published annually since 1983.
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