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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.

©2020 Katten Muchin Rosenman LLP


About this Author

Christian B. Hennion, Finance Attorney, Katten Muchin Law Firm

Christian B. Hennion concentrates his practice in financial services and asset management matters, including counseling fund managers, registered investment advisers and commodity trading advisors on both transactional and regulatory matters. Chris has advised a wide range of US and international managers, from start-ups to large institutions, regarding a variety of matters, including private fund launches and reorganizations, advisory engagements, Investment Advisers Act and Commodity Exchange Act compliance obligations, Securities and Exchange Commission (SEC) and Commodity Futures...

Gregory Uffner, Financial Services Attorney, Katten Law Firm

Gregory Uffner is an associate in the Financial Services practice. 

While in law school, Gregory was an associate editor for the Moot Court Board, a member of the Fordham Urban Law Journal and served as managing editor for the Fordham Sports Law Forum.