Today, the CFTC announced that they have adopted a final rule requiring funds that invest more than a de minimus amount in commodities to register as commodity pool operators ("CPOs"). According to CFTC Chairman Gary Gensler, this will "reinstate the regulatory requirements in place prior to 2003 for registered investment companies."
Notably, citing the comment letter submitted by the Mutual Fund Directors Forum, the final rule release specifically states that fund directors do not have to register as CPOs. This is significant because registering as a CPO carries numerous obligations and responsibilities, as well as additional liability risk. In relevant part, the release stated:
The Commission agrees that the investment adviser is the most logical entity to serve as the registered investment company's CPO. To require a member or members of the registered investment company's board of directors to register would raise operational concerns for the registered investment company as it would result in piercing the limitation on liability for actions undertaken in the capacity of director. Thus the Commission concludes that the investment adviser for the registered investment company is the entity required to register as the CPO.
The final rule received a 4-1 vote in a private voting process with Commissioner Jill E. Sommers dissenting. In her dissent, Commissioner Sommers stated that the rule gives the false impression that the CFTC will be able to actively monitor pools for systemic risk. She also challenged the adequacy of the cost-benefit analysis performed, stating "it is unlikely, in my view, that the cost-benefit analysis supporting the rules will survive judicial scrutiny if challenged."