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Registered Investment Companies Registering as Commodity Pool Investors

Issue

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Summary

The Asset Management Group (AMG) of SIFMA provides comments to the Commodity Futures Trading Commission (CFTC) on CFTC’s proposed amendments to its rules that would harmonize compliance obligations between the CFTC and the Securities Exchange Commission (SEC) for investment companies registered under the Investment Company Act of 1940 (RICs), whose investment advisers will be subject to registration as commodity pool operators (CPOs) due to recent amendments to CFTC Rule 4.5.2.  SIFMA AMG believes the proposal falls short of its objective, and shares several observations and recommendations regarding the proposal, including:

  • Additional regulation imposed by CPO requirements would provide no identifiable benefit to the investor protections already provided to RICs.
  • The harmonization amendments should take into account the significant differences between open-end RICs and closed-end RICs and tailor the requirements for such vehicles under the CFTC rules accordingly.
  • The CFTC should recognize the comprehensive disclosure that RICs are already required to provide to investors under the SEC rules and should not require RICs that are commodity pools to provide duplicative, inconsistent, unnecessary or potentially misleading information in CPO disclosures.
  • Compliance with one agency’s requirements may jeopardize a registrant’s compliance with the other agency’s requirements.  The SEC and CFTC should reach a coordinated resolution before this proposal is finalized.

 

PDF

Submitted To

CFTC

Submitted By

SIFMA AMG

Related Committee(s)

  • Asset Management

Date

24

April

2012

Excerpt

April 24, 2012

Mr. David A. Stawick
Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington DC 20581

Re: Harmonization of Compliance Obligations for Registered Investment Companies Required to Register as Commodity Pool Operators

Dear Mr. Stawick:
The Asset Management Group (the “AMG”) of the Securities Industry and Financial Markets Association (“SIFMA”) appreciates the opportunity to provide the Commodity Futures Trading Commission (the “CFTC”) with comments to the CFTC’s proposed amendments to its rules (the “Proposed Rules”)1 regarding the requirements applicable to investment companies registered under the Investment Company Act of 1940 (the “Investment Company Act”) whose investment advisers will be subject to registration as commodity pool operators (“CPOs”) due to recent amendments to CFTC Rule 4.5.2

The AMG’s members represent U.S. asset management firms whose combined assets under management exceed $20 trillion. Many AMG member firms advise investment companies registered under the Investment Company Act (“RICs”) that may invest in commodity futures, commodity options and swaps (collectively, “Commodity Interests”) as part of their investment strategies. Because the recent amendments to CFTC Rule 4.5 effectively reinstate the registration requirement for CPOs of RICs that invest in Commodity Interests above certain enumerated thresholds, the advisers to many RICs will be required to register as CPOs and comply with disclosure duties and other requirements applicable generally to CPOs under Part 4 of the CFTC’s rules.

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1 Harmonization of Compliance Obligations for Registered Investment Companies Required to Register as Commodity Pool Operators, 77 Fed. Reg. 11345 (Feb. 24, 2012) (the
“Harmonization Release”), available at http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2012-3388a.pdf.
2 The AMG previously submitted comment letters to the CFTC regarding proposed amendments to the CPO registration requirements for registered investment companies on October
18, 2010 (the “October 2010 Letter”), April 12, 2011 (the “April 2011 Letter”), and August 4,
2011 (the “August 2011 Letter”), and submitted remarks for the CFTC roundtable held on July 6,
2011 (the “July 2011 Remarks”).

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