"Why Your Investment Management Company May Soon Be a CFTC-Regulated Entity" by Julia Lu, John Clark and Kimberly Versace

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March 9, 2012

In February 2012, the CFTC adopted final rules amending its registration and compliance requirements for entities deemed to be “commodity trading advisors” (“CTAs”) or “commodity pool operators” (“CPOs”). Due to the changes, many previously exempt investment advisers and managers of private funds (including funds-of-funds and other hedge funds) soon may be required to register with the U.S. Commodity Futures Trading Commission (“CFTC”) as CTAs or CPOs.

In this memorandum, Richards Kibbe & Orbe LLP attorneys Julia Lu, John A. Clark and Kimberly M. Versace summarize the practical consequences for managers and advisers of private funds – in particular, those private funds that directly or indirectly maintain exposure to swap contracts (among other derivatives) and those that traditionally have relied on the so-called “All-QEPs Exemption” from registration that was keyed to fund participation by sophisticated investors (i.e., “qualified eligible persons,” or “QEPs”).  The memorandum also explains the technical changes to the Commodity Exchange Act and CFTC regulations governing registration and compliance requirements.

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