Tag Archives: CFTC Rule 4.13(a)(4)

NFA Provides Guidance on Rule 4.13(a)(4) Recission

Managers Allowed to Pre-File New Exemption

In earlier posts, we briefly discusssed the Rule 4.13(a)(4) exemption recission (we also discussed the topic as part of an article on the managed futures industry post-MF Global bankruptcy). In essence the old 4.13(a)(4) exemption allowed certain fund managers to escape CPO and CTA registration if all of the investors in a fund were qualified eligible persons. While managers who were previously relying on the exemption can maintain their exempt status until December 31 of this year, new managers may not rely on the exemption. Additionally, previously exempt managers are going to need to register or find another CPO exemption that may be applicable.

Many managers are going to be able to seek an exemption under Rule 4.7, the so-called “lite-touch” regulatory regime. In order to facilitate a transition from a 4.13(a)(4) exemption to the 4.7 exemption, the NFA has modified its systems to allow managers to make the transition automatic as of December 31, 2012 through a pre-filing. Managers who pre-file, will not be subject to the regulatory requirements for the new exemption in 2012. Managers who withdraw the 4.13(a)(4) exemption without pre-filing may become subject to certain CFTC requirements. For more information, we have reprinted the NFA notice in full below.

If you have questions with respect to the exemption, please contact us.


Notice to Members I-12-09

June 22, 2012

Guidance to NFA Member CPOs and CTAs that Operate or Advise Pools Pursuant to an Exemption under CFTC Regulation 4.13(a)(4)

On February 24, 2012, the CFTC issued final rules amending CFTC Part 4 Regulations to rescind the exemption from registration available to CPOs offering certain qualifying pools under CFTC Regulation 4.13(a)(4). Although Member CPOs that currently operate a pool(s) pursuant to a 4.13(a)(4) exemption may continue to operate the pool pursuant to that exemption until December 31, 2012, those CPOs must determine whether the 4.13(a)(4) exempt pool qualifies for an exemption from registration under CFTC Regulation 4.13(a)(3) or whether the CPO will become subject to CFTC Part 4 reporting and disclosure requirements for that pool subsequent to December 31, 2012. Similarly, any CTA that advises a 4.13(a)(4) exempt pool pursuant to an exemption under CFTC Regulation 4.14(a)(8)(D) may only continue to advise that pool after December 31 if the CTA continues to be eligible for that exemption because the CPO has filed a 4.13(a)(3) exemption for that pool. Otherwise, the CTA must comply with the applicable Part 4 requirements with respect to that pool.

The final rules also amend a number of CFTC Regulations to require CPOs and CTAs that claim an exemption under CFTC Regulation 4.5, 4.13(a)(1), 4.13(a)(2), 4.13(a)(3), 4.13(a)(5) and 4.14(a)(8) to annually reaffirm the applicable notice of exemption. CPOs and CTAs will have 60 days after the calendar year-end to reaffirm the notice of exemption through NFA’s Electronic Exemption System. The first notice reaffirming these exemptions is due for the calendar year ending December 31, 2012 and annually thereafter. Any CPO or CTA that fails to file a notice reaffirming the exemption will be deemed to have requested a withdrawal of the exemption. If the exemption is deemed withdrawn, the CPO or CTA would be required to comply with the applicable Part 4 Requirements with respect to that pool.

Member CPOs and CTAs are encouraged to review the status of their exempt pools in order to ensure that they are in compliance with the new regulatory requirements.

Other Available Exemptive Relief

A CPO that currently operates a pool(s) pursuant to 4.13(a)(4) that will not qualify for a exemption under 4.13(a)(3) after December 31, 2012 may be able to avail itself of relief from certain regulatory requirements for qualifying pools by filing an exemption under Regulations 4.7, 4.12 or CFTC Advisory 18-96. Similarly, a CTA may be eligible under Regulation 4.7 for certain relief with respect to accounts of qualified eligible persons (QEPs). To determine whether you qualify for any of these exemptions, please consult CFTC Regulations – Part 4. All exemptions other than an exemption under CFTC Advisory 18-96 must be filed through NFA Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. An exemption under CFTC Advisory 18-96 must be filed in hard copy form with NFA’s Compliance Department.

To assist CPOs in the process of withdrawing a 4.13(a)(4) exemption and claiming another available exemption, NFA will modify the Electronic Exemption System to give CPOs that currently hold a 4.13(a)(4) exemption the ability to pre-file for an available exemption that would become effective on January 1, 2013. A CPO that elects to use the pre-filing option will not become subject to the additional reporting and disclosure requirements related to the newly claimed exemption until 2013. Please be aware that a CPO that elects not to use the pre-filing option and withdraws its 4.13(a)(4) exemption and files for another available exemption (other than a 4.13(a)(3) exemption) prior to December 31, 2012 will immediately become subject to the CFTC and NFA regulatory requirements related to the new exemption, including the requirement to file a certified annual report for 2012.

Withdrawing the 4.13(a)(4) Exemption

CPOs may withdraw an exemption by accessing NFA’s Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. Any CPO that elects to withdraw a 4.13(a)(4) exemption prior to December 31, 2012 and does not file a 4.13(a)(3) exemption or other available exemption, will become subject to all reporting and disclosure requirements under CFTC regulations and NFA rules for that pool. CPOs that are not eligible to claim another exemption for a current 4.13(a)(4) pool are not required to affirmatively withdraw that exemption since NFA will automatically terminate 4.13(a)(4) exemptions for all pools on December 31, 2012.

Cessation of Pool

CPOs that filed a 4.13(a)(3) or 4.13(a)(4) exemption for a pool that never commenced operations or that has subsequently ceased operating should update NFA’s records with the applicable information. The CPO must first withdraw the exemption by accessing NFA’s Electronic Exemption System at http://www.nfa.futures.org/NFA-electronic-filings/exemptions.HTML. At the time you withdraw the exemption, you will be directed to the Annual Questionnaire to delete or cease the pool.

Questions concerning these changes should be directed to Mary McHenry, Senior Manager, Compliance ([email protected] or 312-781-1420) or Tracey Hunt, Senior Manager, Compliance ([email protected] or 312-781-1284).


Bart Mallon is a partner with Cole-Frieman Mallon & Hunt LLP, an investment management law firm with a practice area focused on managed futures laws and regulations. Bart can be reached directly at 415-868-5345.

CFTC Rescinds 4.13(a)(4) CPO Registration Exemption

Increases Other Compliance Obligations for CPOs and CTAs 

The CFTC recently adopted final rules amending regulations applicable to both CPOs and CTAs. The CFTC also proposed rules with respect to Regulation 4.5 that would require managers to managed futures mutual funds to register as CPOs. Some of the other changes included:

  • CPOs subject to “lite-touch” regulation under the 4.7 exemption must now provide annual audited returns to investors in their funds
  • Changes the 4.5 exemption from CPO registration for managers to managed futures mutual funds
  • Requires CTAs and CPOs who file exemptions under 4.5, 4.13 and 4.14 to reconfirm the exemption on a yearly basis
  • Adds new Regulation 4.27 requiring CTAs and CPOs to file Form PFForm CPO-PQR and From CTA-PR
  • Requires CTAs and CPOs to provide investors with new disclosures regarding swap transactions, if applicable

Additionally, the CFTC has proposed regulations with respect to harmonizing CFTC regulations and SEC regulations with respect to managed futures mutual funds.  We will be providing additional information on these proposals in the coming days and weeks.

The full CFTC notice can be found here.

The final CFTC regulations can be found here: CPO & CTA Compliance Final Rules

Fact sheet: CTA & CPO Compliance Fact Sheet

Proposed Regulations for Managed Futures Mutual Funds: Proposed CPO Registration Requirement for Mutual Fund Managers


Cole-Frieman & Mallon LLP provides legal services to the managed futures industry.  Bart Mallon can be reached directly at 415-868-5345.