Electronic Code of Federal Regulations (e-CFR)
Chapter I. COMMODITY FUTURES TRADING COMMISSION
Part 4. COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS
Subpart A. General Provisions, Definitions and Exemptions
Section 4.13. Exemption from registration as a commodity pool operator.
17 CFR 4.13 – Exemption from registration as a commodity pool operator.
4.13 Exemption from registration as acommodity pool operator.
This section is organized as follows:Paragraph (a)of this section specifies the criteria that must be met to qualify for exemption from registration under this section;paragraph (b)of this section governs the notice that must be filed to claim exemption from registration;paragraph (c)of this section sets forth the continuing obligations of apersonwho has claimed exemption under this section;paragraph (d)of this section specifies information certainpersonsmust provide if they subsequently register;paragraph (e)of this section specifies the effect of registration on apersonwho has claimed an exemption from registration under this section or who is eligible to claim an exemption from registration hereunder; andparagraph (f)of this section specifies the effect of this section on 4.5of this chapter.
(a)Apersonis not required to register under the Act as acommodity pool operatorif:
(i)It does not receive any compensation or other payment, directly or indirectly, for operating the pool, except reimbursement for the ordinary administrative expenses of operating the pool;
(ii)It operates only onecommoditypool at any time;
(iii)It is not otherwise required to register with theCommissionand is not a businessaffiliateof anypersonrequired to register with theCommission; and
(iv)Neither thepersonnor any otherpersoninvolved with the pool does any advertising in connection with the pool (for purposes of this section, advertising includes the systematic solicitation of prospectiveparticipantsby telephone or seminar presentation);
(i)None of the pools operated by it has more than 15participantsat any time; and
(ii)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.
(iii)For the purpose of determining eligibility for exemption underparagraph (a)(2)of this section, thepersonmay exclude the followingparticipantsand their contributions:
(A)The pools operator,commodity trading advisor, and the principals thereof;
(B)A child, sibling or parent of any of these participants;
(C)The spouse of anyparticipantspecified in paragraph (a)(2)(iii)(A) or (B) of this section; and
(D)Any relative of aparticipantspecified in paragraph (a)(2)(iii)(A), (B) or (C) of this section, its spouse or a relative of its spouse, who has the same principal residence as suchparticipant;
(3)For each pool for which thepersonclaims exemption from registration under this paragraph (a)(3):
(i)Interests in the pool are exempt from registration under theSecurities Act of 1933, and such interests are offered and sold without marketing to the public in the United States;
(ii)At all times, the pool meets one or the other of the following tests with respect to itscommodity interestpositions, including positions in security futures products, whether entered into forbona fidehedging purposes or otherwise:
(A)The aggregateinitial margin, premiums, and required minimum security deposit for retail forex transactions (as defined in 5.1(m)of this chapter) required to establish such positions, determined at the time the most recent position was established, will not exceed 5 percent of the liquidation value of the pools portfolio, after taking into account unrealized profits and unrealized losses on any such positions it has entered into;Provided,That in the case of an option that is in-the-money at the time of purchase, the in-the-money amount as defined in 190.01(x)of this chapter may be excluded in computing such 5 percent; or
(B)The aggregate net notional value of such positions, determined at the time the most recent position was established, does not exceed 100 percent of the liquidation value of the pools portfolio, after taking into account unrealized profits and unrealized losses on any such positions it has entered into. For the purpose of this paragraph:
(1)The term notional value shall be calculated for each futures position by multiplying the number of contracts by the size of the contract, in contract units (taking into account any multiplier specified in the contract), by the current market price per unit, for each such option position by multiplying the number of contracts by the size of the contract, adjusted by its delta, in contract units (taking into account any multiplier specified in the contract), by the strike price per unit, for each such retail forex transaction, by calculating the value in U.S. Dollars of such transaction, at the time the transaction was established, excluding for this purpose the value in U.S. Dollars of offsetting long and short transactions, if any, and for any clearedswapby the value as determined consistent with the terms of17 CFR part 45; and
(2)Thepersonmay net futures contracts with the same underlyingcommodityacross designated contract markets and foreign boards of trade; andswapscleared on the same derivativesclearing organizationwhere appropriate; and
(iii)Thepersonreasonably believes, at the time of investment (or, in the case of an existing pool, at the time of conversion to a pool meeting the criteria ofparagraph (a)(3)of this section), that eachpersonwho participates in the pool is:
(A)An accredited investor, as that term is defined in 230.501of this title;
(B)A trust that is not an accredited investor but that was formed by an accredited investor for the benefit of a familymember;
(C)A knowledgeable employee, as that term is defined in 270.3c-5of this title;
(D)A qualified eligibleperson, as that term is defined in 4.7(a)(2)(viii)(A)of this chapter; or
(E)Apersoneligible to participate in a pool for which the pool operator can claim exemption from registration underparagraph (a)(4)of this section; and
(iv)Participations in the pool are not marketed as or in a vehicle for trading in thecommodityfutures orcommodityoptions markets;Provided,That nothing inparagraph (a)(3)of this section shall prohibit thepersonfrom claiming an exemption under this section if it additionally operates one or more pools for which it meets the criteria ofparagraph (a)(4)of this section;
(5)Thepersonis acting as a director or trustee with respect to a pool whose operator is registered as acommodity pool operatorand is eligible to claim relief under 4.12(c)of this chapter,Provided, however,that:
(i)Thepersonacts in such capacity solely to comply with the requirements under section 10A of theSecurities Exchange Act of 1934, as amended, and anySecurities and Exchange Commissionrules and exchange listing requirements adopted pursuant thereto, that the pool have an audit committee comprised exclusively of independent directors or trustees;
(ii)Thepersonhas no power or authority to manage orcontrolthe operations or activities of the pool except as necessary to comply with such requirement; and
(iii)The registered pool operator of the pool is and will be liable for any violation of the Act or theCommissions regulations by thepersonin connection with thepersons serving as a director or trustee with respect to the pool.
(i)Eligibility for exemption under paragraph (a)(1), (a)(2), (a)(3) or (a)(4) of this section is subject to thepersonfurnishing in written communication physically delivered or delivered through electronic transmission to each prospectiveparticipantin the pool:
(A)A statement that thepersonis exempt from registration with theCommissionas acommodity pool operatorand that therefore, unlike a registeredcommodity pool operator, it is not required to deliver a Disclosure Document and a certified annual report toparticipantsin the pool; and
(B)A description of the criteria pursuant to which it qualifies for such exemption from registration.
(ii)Thepersonmust make these disclosures by no later than the time it delivers a subscription agreement for the pool to a prospectiveparticipantin the pool.
(1)Anypersonwho desires to claim the relief from registrationprovidedby this section, must file electronically a notice of exemption fromcommodity pool operatorregistration with the National Futures Association through its electronic exemption filing system. The notice must:
(i)Provide the name, main business address, main business telephone number, main facsimile number and main email address of thepersonclaiming the exemption and the name of the pool for which it is claiming exemption;
(ii)Contain the section number pursuant to which the operator is filing the notice (i.e., 4.13(a)(1), (2), or (3)) and represent that the pool will be operated in accordance with the criteria of that paragraph; and
(iii)Be filed by a representative duly authorized to bind theperson.
(2)Thepersonmust file the notice by no later than the time that the pool operator delivers a subscription agreement for the pool to a prospectiveparticipantin the pool;Provided, however,that in the case of a claim for relief under 4.13(a)(5), thepersonmust file the notice by the later of the effective date of the pools registration statement under theSecurities Act of 1933or the date on which thepersonfirst becomes a director or trustee; andProvided, further,that where apersonregistered with theCommissionas acommodity pool operatorintends to withdraw from registration inorderto claim exemption hereunder, thepersonmust notify its poolsparticipantsin written communication physically delivered or delivered through electronic transmission that it intends to withdraw from registration and claim the exemption, and it must provide each suchparticipantwith a right to redeem its interest in the pool prior to thepersonfiling a notice of exemption from registration
(3)The notice will be effective upon filing,providedthe notice is materially complete.
(4)Annual notice.Eachpersonwho has filed a notice of exemption from registration under this section must affirm on an annual basis the notice of exemption from registration, withdraw such exemption due to the cessation of activities requiring registration or exemption therefrom, or withdraw such exemption and apply for registration within 60 days of the calendar year end through National Futures Associations electronic exemption filing system.
(5)Eachpersonwho has filed a notice of exemption from registration under this section must, in the event that any of the information contained or representations made in the notice becomes inaccurate or incomplete, amend the notice through National Futures Associations electronic exemption filing system as may be necessary to render the notice accurate and complete. This amendment must be filed electronically within 15business daysafter the pool operator becomes aware of the occurrence of such event.
(1)Eachpersonwho has filed a notice of exemption from registration under this section must:
(i)Make and keep all books and records prepared in connection with its activities as a pool operator for a period of five years from the date of preparation;
(ii)Keep such books and records readily accessible during the first two years of the five-year period. All such books and records must be available for inspection upon the request of any representative of theCommission, the United StatesDepartment of Justice, or any other appropriate regulatory agency; and
(iii)Submit to such special calls as theCommissionmay make to demonstrate eligibility for and compliance with the applicable criteria for exemption under this section.
(2)Eachpersonwho has filed a notice of exemption from registration pursuant to paragraph (a)(1) or (a)(2) of this section must:
(i)Promptly furnish to eachparticipantin the pool a copy of each monthly statement for the pool that the pool operator received from afutures commission merchantpursuant to 1.33of this chapter; and
(ii)Clearly show on such statement, or on an accompanying supplemental statement, the net profit or loss on allcommodity interestsclosed since the date of the previous statement.
(d)Eachpersonwho applies for registration as acommodity pool operatorsubsequent to claiming relief under paragraph (a)(1) or (a)(2) of this section must include with its application the financial statements and other information required by 4.22(c)(1)through (5) for each pool that it has operated as an operator exempt from registration. That information must be presented and computed in accordance with generally accepted accounting principles consistently applied. If thepersonis granted registration as acommodity pool operator, it must comply with the provisions of this part with respect to each such pool.
(1)Subject to the provisions ofparagraph (e)(2)of this section, if apersonwho is eligible for exemption from registration as acommodity pool operatorunder this section nonetheless registers as acommodity pool operator, thepersonmust comply with the provisions of this part with respect to eachcommoditypool identified on its registration application or supplement thereto.
(2)If apersonoperates one or morecommoditypools described inparagraph (a)(3)of this section, and one or morecommoditypools for which it must be, and is, registered as acommodity pool operator, thepersonis exempt from the requirements applicable to a registeredcommodity pool operatorwith respect to the pool or pools described inparagraph (a)(3)of this section;Provided,That the person:
(i)Furnishes in written communication physically delivered or delivered through electronic transmission to each prospectiveparticipantin a pool described inparagraph (a)(3)of this section that it operates:
(A)A statement that it will operate the pool as if thepersonwas exempt from registration as acommodity pool operator;
(B)A description of the criteria pursuant to which it will so operate the pool;
(ii)Complies withparagraph (c)of this section; and
(iii)Provideseach existingparticipantin a pool that thepersonelects to operate as described inparagraph (a)(3)of this section a right to redeem theparticipants interest in the pool, and informs each suchparticipantof that right no later than the time thepersoncommences to operate the pool as described inparagraph (a)(3)of this section.
(f)The filing of a notice of exemption from registration under this section will not affect the ability of apersonto qualify for exclusion from the definition of the term commodity pool operator under 4.5in connection with its operation of another trading vehicle that is not covered under this 4.13.
(Secs. 2(a)(1), 4c(a)-(d), 4d, 4f, 4g, 4k, 4m, 4n, 8a, 15 and 17,Commodity Exchange Act7U.S.C.246c(a)-(d), 6f, 6g, 6k, 6m, 6n, 12a, 19 and 21;5U.S.C.552and552b))
[46 FR 26013, May 8, 1981, as amended at46 FR 63035, Dec. 30, 1981;47 FR 57011, Dec. 22, 1982;50 FR 15883, Apr. 23, 1985;67 FR 77411, Dec. 18, 2002;68 FR 47231, Aug. 8, 2003;68 FR 59113, Oct. 14, 2003;69 FR 41426, July 9, 2004;72 FR 1663, Jan. 16, 2007;74 FR 57590, Nov. 9, 2009;75 FR 55428, Sept. 10, 2010;76 FR 28645, May 18, 2011;77 FR 11284, Feb. 24, 2012;77 FR 17329, Mar. 26, 2012]