June 18, 2019

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CFTC Staff Issues Interpretive Guidance Regarding Aggregation by Passive Pool Investors

On May 2, the Commodity Futures Trading Commission’s Division of Market Oversight responded to a request for an interpretation regarding CFTC Rule 150.4(b)(1), which provides an exception from the CFTC’s speculative position limit aggregation rules for certain “passive” investors in commodity pools. Generally, for purposes of calculating compliance with speculative position limits, the CFTC’s rules require persons to aggregate “all positions in accounts for which [such] person, by power of attorney or otherwise, directly or indirectly controls trading or holds a 10 percent or greater ownership or equity interest.” However, in recognition of the limited information and control typically provided to unaffiliated investors in collective investment funds, the rules recognize a limited exception for such investors.

In this case, the requested interpretation addressed a situation in which a large institutional investor, through its significant (but passive) ownership stake in a commodity pool that employs a private equity or venture capital investment strategy, might indirectly own more than 10 percent of an underlying “portfolio company” in which the pool was invested. Specifically, the investor sought clarification that it would not be required to aggregate any commodity interest positions that might be held by operating businesses in which the pool had invested—for example, businesses in the agricultural and energy industries. In its interpretation, the Division clarified that, so long as the investor was otherwise eligible for the exception under Rule 150.4(b)(1) (that is, a passive investor not specifically precluded from relying on the exception pursuant to CFTC Rules 150.4(b)(1)(i)-(iii)), and did not either control trading for, or have another relationship with, the portfolio company that would trigger aggregation, the investor would not be required to “look through” the pool to aggregate the positions of its underlying portfolio companies. The Division noted, however, that its interpretation would not apply in a situation in which a passive investor “invests in alternative or parallel funds with the intention to circumvent position limits.”

The Division’s response letter is available here.

©2019 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...


Dina Wegh concentrates her practice in financial services matters.

While in law school, Dina served as a managing director for A Jailhouse Lawyer's Manual and was on the staff of the Human Rights Law Review.