September 13, 2019

Joshua B. Sterling
Director, Division of Swap Dealer and Intermediary Oversight
U.S. Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street NW
Washington, DC 20581

Re: Request for Clarification of Cross-Border Statements in Part 4 Proposal Preamble

Dear Mr. Sterling:
Congratulations on your new position as the Director of the Commission’s Division of Swap Dealer and Intermediary Oversight (“DSIO”). Like many participants and practitioners in the global asset management arena, we are pleased that DSIO is now focused on Part 4 of the Commission’s regulations with a view to improving the Commission’s regulation of commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”), as demonstrated by the pending proposal of amendments to Part 4 that was published for comment last fall (the “Part 4 Proposal”).1 We know there are many demands on your time and the resources of your hardworking staff and write this letter to highlight and synthesize the comments on what we believe is an important aspect of the Proposal that merits DSIO’s attention as DSIO and the Commission progress toward final adoption of some or all elements of the Proposal.

In particular, we are writing to call your attention to, and request clarification of, statements made in the Preamble to the Part 4 Proposal that have raised widespread concerns among industry participants about the potential for adverse and unintended cross-border impact. These statements relate to Rule 3.10(c)(3)(i), the Commission’s existing exemption for offshore CPO and CTA activities that is widely relied on, on a self-executing basis, by a broad range of non-U.S. asset managers and fund sponsors all over the world with respect to their activities on behalf of non-U.S. investors. The statements appear to assume an interpretation of the existing Rule 3.10(c)(3)(i) exemption that would represent a significant departure from both widespread understanding of how the exemption currently operates and the Commission’s longstanding activities-based approach to applying its CPO exemptions. This interpretation would also be contrary to the stated goals of the Part 4 Proposal and the Commission’s historical restraint in asserting extraterritorial jurisdiction over offshore CPOs, where U.S. investors are not involved.

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1 Registration and Compliance Requirements for Commodity Pool Operators and Commodity Trading Advisors, 83 Fed. Reg. 52902 (Oct. 18, 2018). See also CFTC Proposes to Streamline Regulations for Commodity Pool Operators and Commodity Trading Advisors, CFTC Release No. 7825-18 (Oct. 9, 2018) (press release). Most of the components of the Part 4 Proposal involve codifying (and in some cases expanding) existing staff no-action positions and other staff guidance that currently provide relief from CPO and/or CTA registration or regulation in a number of areas, including, among others, family offices, business development companies, reporting and recordkeeping requirements, activities permitted under Securities and Exchange Commission rules implementing the “JOBS” Act, and offshore pools operated by registered CPOs.