CFTC Invalidates CPO Registration Exemptions for 17 Foreign Entities

July 14th | 2020

The CFTC announced it has issued an order deeming the commodity pool operator (CPO) exemptions of 17 entities to be ineffective following a special call by the Division of Swap Dealer and Intermediary Oversight (DSIO). Each of the entities, purportedly based abroad, had claimed an exemption from CPO registration in accordance with CFTC Regulation 4.13(a)(2), which provides that a person is not required to register as a CPO if:

  1. None of the pools it operates has more than 15 participants at any time; and

  2. The total gross capital contributions it receives for units of participation in all of the pools it operates or that it intends to operate do not in the aggregate exceed $400,000.

Working with the National Futures Association (NFA), the two agencies identified credible reason to believe that certain entities may have claimed the exemption without meeting the eligibility criteria. In April, the CFTC contacted, through what is called a “special call”, the 17 entities and sought to verify their eligibility. None of them responded or otherwise demonstrated they were eligible for the 4.13(a)(2) exemption.

DSIO Director Joshua B. Sterling put it succinctly: “This Commission action, and the related use of its special call authority, sends a strong message that we take our registration and exemption regime seriously; this regime is fundamental to our oversight of market participants, and we are dedicated to ensuring its integrity and to reacting swiftly when firms fail to comply with the rules.”

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