CFTC Provides No-Action Relief From CPO and CTA Registration to a Private University
On September 13, the Division of Swap Dealer and Intermediary Oversight (DSIO or Division) of the Commodity Futures Trading Commission (CFTC or Commission) granted no-action relief from commodity pool operator (CPO) and commodity trading advisor (CTA) registration to a private university, subject to certain conditions. At issue was (1) the university’s collective management of an endowment fund that includes the funds of multiple organizations affiliated with the university (Affiliated Organizations); and (2) the offering, solicitation and operation of multiple planned giving arrangements for donors to the university, which generally provided for a periodic income stream to identified beneficiaries for a specified period of time before the donation reverted wholly to the university’s benefit (Planned Giving Accounts).
In granting relief, the DSIO noted (without addressing the university’s alternative request for an interpretation that it was not a “commodity pool”) that CPO and/or CTA registration could be implicated by these arrangements, because the university’s investments office was managing “commingled assets of multiple sources, with direct or indirect exposures to commodity interests.” Nonetheless, the DSIO granted no-action relief in respect of amounts contributed by the Affiliated Organizations, noting that:
The interests of the university and the Affiliated Organizations are very closely aligned, in that both desire to further the mission of the university as a whole;
The relationship between the Affiliated Organizations and the university is the reason why Affiliated Organizations commit their assets to the endowment fund; and
The university does not engage in solicitation of the Affiliated Organizations in respect of their investments, and its sole clients are the Affiliated Organizations and Planned Giving Accounts.
CFTC Letter No.17-43 allowed the university to “grandfather” existing arrangements with Affiliated Organizations, but imposed certain conditions on the types of Affiliated Organizations that could invest in the endowment fund prospectively, as further discussed in the letter.
In granting relief with respect to the Planned Giving Accounts, the Division noted that the same aligned interests between the university and Planned Giving Accounts distinguish this structure from typical CPO-CTA arrangements. Moreover, the Division concluded that the university is soliciting donations to support its academic goals and university mission through the Planned Giving Accounts, rather than offering investment management or advisory services, notwithstanding certain tax benefits and income streams accruing to the donors and their beneficiaries. Finally, the Division concluded that alternative regulation under the Uniform Prudent Investor Act and Uniform Prudent Management of Institutional Funds Act was sufficient and appropriate to govern the university’s management of assets for the Affiliated Organizations and the Planned Giving Accounts, without also applying the Commodity Exchange Act and CFTC regulations to these arrangements.
The full CFTC Letter No.17-43 is available here.