May 26, 2020

CFTC Relief from Provisions of Rules 4.7(b) and 4.13(a)(3) to Harmonize with JOBS Act Amendments to Rule 506(c) and Rule 144A

On September 9, 2014, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) issued CFTC Letter No. 14-116 (Letter 14-116). Letter 14-116 grants exemptive relief from specific provisions of CFTC Rules 4.7(b) and 4.13(a)(3) to commodity pool operators (CPOs) to be consistent with the Jumpstart Our Business Startups (JOBS) Act's amendments to the Securities and Exchange Commission (SEC) Regulation D adding Rule 506(c) and revising Rule 144A under the Securities Act of 1933, as amended (Securities Act). Rule 506(c), as amended pursuant to the JOBS Act, permits issuers to engage in general solicitation and general advertising as long as certain conditions are satisfied. Prior to the issuance of Letter 14-116, CFTC rules generally prevented certain private funds from relying on amended Rule 506.

Letter 14-116 provides relief from the CFTC Rule 4.7(b) requirement that an offering be exempt pursuant to section 4(a)(2) of the Securities Act and be offered solely to qualified eligible persons (QEPs). Letter 14-116 also provides relief from the requirement of CFTC Rule 4.13(a)(3)(i) that securities be "offered and sold without marketing to the public."

To be eligible for the relief, the following requirements must be satisfied:

  • the CPO must be relying on the Rule 506(c) exemption or be a CPO using a Rule 144A reseller; and

  • the CPO must be relying on either CFTC Rule 4.7 or 4.13(a)(3).

The relief is not self-executing. A notice of claim must be filed in the form described below:

  • state the name, business address and main business telephone number of the CPO claiming the relief;

  • state the name of the pool(s) for which the claim is being filed;

  • state whether the CPO claiming relief is a Rule 506(c) issuer or is using one or more Rule 144A resellers;

  • specify whether the CPO intends to rely on the exemptive relief pursuant to Rule 4.7(b) or 4.13(a)(3), with respect to the listed pool(s);

  • if relying on Rule 4.7(b), represent that the CPO meets the conditions of the exemption, other than that provision's requirements that the offering be exempt pursuant to section 4(a)(2) of the Securities Act and be offered solely to QEPs, such that the CPO meets the remaining conditions and is still required to sell the participations of its pool(s) to QEPs;

    • if relying on Rule 4.13(a)(3), represent that the CPO meets the conditions of the exemption, other than that provision's prohibition against marketing to the public;

    • be signed by the CPO, which may be accomplished by attaching a portable document format (PDF) file with a signature of the CPO; and

  • be filed with the DSIO via e-mail using the e-mail address of with the subject line "JOBS Act Marketing Relief."

Once obtained, the relief will not expire absent any final CFTC action in consideration of the JOBS Act and the SEC's regulatory amendments.

A link to Letter 14-116 can be found here.

© 2020 Vedder Price


About this Author

Joseph Mannon, Investment Lawyer, Vedder Price Law Firm

Joseph M. Mannon is a member of Vedder Price P.C.’s Investment Services group.

Mr. Mannon focuses his practice on legal and compliance matters for investment advisers, mutual funds, closed-end funds and unregistered vehicles such as hedge funds, hedge fund of funds and other investment entities.  With regard to unregistered vehicles, he frequently counsels clients on fund formation and structuring matters for funds organized both in the United States and abroad.  He also counsels clients on issues relating to commodity trading advisers and...

Nicole M. Kuchera, Investment Services Attorney, Vedder Price law firm

Nicole M. Kuchera is an Associate at Vedder Price and a member of the Investment Services group in the firm’s Chicago office.

Ms. Kuchera counsels commodities, securities and derivatives professionals, such as hedge funds, investment advisers, commodity pool operators (CPOs), commodity trading advisors (CTAs), futures commission merchants (FCMs), retail foreign exchange dealers (RFEDs), introducing brokers (IBs), swap dealers (SDs), forex (FX) firms, proprietary trading firms, binary options trading firms and broker-dealers (BDs), in day-to-day legal matters. She also drafts private disclosure documents, subscription materials, compliance manuals, corporate documents, contracts/trade agreements and advertising materials; conducts and oversees blue sky due diligence, filings and rescissions; and provides guidance concerning master-feeder structures, domestic and foreign funds, and international offerings.