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Registered Investment Companies and Commodity Pool Operators

The National Futures Association ("NFA") has petitioned the Commodity Futures Trading Commission to amend its rules in a way that would make some registered investment companies "commodity pool operators." Under current CFTC rules, registered investment companies are generally excluded from the definition of "commodity pool operator." The NFA is requesting a change to that rule such that registered investment companies with greater than "de minimus" investment in commodities be required to register with the CFTC as "commodity pool operators."

Those who fall into the "commodity pool operator" designation must register with the CFTC through the NFA, become a member of the NFA, and comply with extensive disclosure and periodic reporting requirements about commities trading activities. In addition, key personnel must register with the NFA and comply with continuing education and certification requirements.

Registered investment companies have been considered by the CFTC to be outside the definition of a commodity pool operator because of the extensive regulation of RICs under the Investment Company Act of 1940, and their oversight by the SEC.  The NFA's petition maintains that the regulation of RICs under the 1940 Act does not provide adequate protection for investors when RICs are heavily invested in commodities. The NFA also maintains that entities currently falling under the commodity pool operator regulatory regime may take the form of RICs to avoid the extensive CFTC requirements.

The CFTC has not yet acted on the NFA's petition, and has not indicated whether it will do so. If the CFTC does decide to amend its rules, however, it will first issue a proposal, which will be open for public comment.

The full text of the NFA's petition for rulemaking, including suggested rule text, is available at: