CFTC Reinstates CPO and CTA Registration Relief Related to QEPs

The US Commodity Futures Trading Commission (CFTC) has issued a no-action letter to provisionally relieve a type of private fund manager registered with the US Securities and Exchange Commission (SEC) as an investment adviser (RIA) from the obligation to register as a commodity pool operator (CPO) or commodity trading advisor (CTA). This relief applies solely to commodity pools in which interests are offered exclusively to sophisticated, generally institutional, investors known as qualified eligible persons (QEPs).

The no-action relief effectively reverses the CFTC’s recission in 2012 of Regulation 4.13(a)(4), which had provided a registration exemption for CPOs and CTAs comparable to what is described in the no-action letter. This article outlines the regulatory background, the terms of the no-action position, and the practical implications for affected private fund managers and their clients.

KEY TAKEAWAYS

• In December 2025, the CFTC’s Market Participants Division (MPD) issued a no-action letter (No-Action Letter 25-50) that effectively reinstates the QEP Exemption issued in 2003 and rescinded in 2012.
• The QEP Exemption arose from CFTC Regulation 4.13(a)(4), which exempted RIAs from registration as a CPO (and, by extension, from registration as a CTA under 4.14(a)(5)) where the RIAs managed private funds in which participation interests were offered only to “qualified eligible persons”—i.e., certain sophisticated, often institutional investors, including “qualified purchasers” as defined in the Investment Company Act of 1940 (Company Act) and non-US persons.
• Unlike CPOs that rely on other exemptions from registration under CFTC Regulation 4.13, CPOs relying on this no-action position are not required to offer pool participants mandatory redemption rights pursuant to CFTC Regulation 4.13(e).
• The CFTC indicated that it will consider whether to pursue a formal rulemaking to reinstate the QEP Exemption.

BACKGROUND

The QEP Exemption, originally adopted in 2003 under CFTC Regulation 4.13(a)(4), was intended to facilitate participation in commodity interest markets by collective investment vehicles and their advisers through the reduction of duplicative regulation for RIAs. [1] The QEP Exemption applied to CPOs of pools in which participation interests are offered only to QEPs, as defined in CFTC Regulation 4.7(a)(6), which include institutional investors, qualified purchasers under the Company Act, family offices, high-net-worth individuals, and non-US persons. [2] In adopting the QEP Exemption, QEPs were deemed sufficiently sophisticated to assess investment risks without prescriptive regulatory protections. When the CFTC rescinded the QEP Exemption, it cited concerns about the need for enhanced regulatory oversight and reporting data in order to assess the risks that private funds posed. [3]

Since the rescission, RIAs have been subject to CPO and CTA registration obligations (absent qualifying from another exemption), even where their investor base consists exclusively of QEPs. To avoid that, some fund managers have structured their funds to rely on CFTC Regulation 4.13(a)(3), a registration exemption for funds that trade only a de minimis amount of commodity interests (de minimis exemption). In the alternative, they could rely on CFTC Regulation 4.7, which provides relief from certain CPO and CTA disclosure, reporting and recordkeeping requirements for pools in which interests are offered only to QEPs, but which is not an exemption from registration. [4]

NO-ACTION RELIEF: SCOPE AND CONDITIONS

No-Action Letter 25-50 was granted by MPD in response to a request from the Managed Funds Association (MFA), an industry group representing fund managers, in which MPD confirmed it will not recommend an enforcement action against a person (QEP No-Action CPO) that either fails to register or withdraws from registration as a CPO, if such person meets the requirements set forth below: [5]

• The fund manager is an RIA;
• The fund manager is currently required to register as a CPO or relies on an exemption from registration set forth in CFTC Regulation 4.13;
• The interests in the pool operated by the fund manager are exempt from registration under the Securities Act and are not marketed to the public in the United States, except as permitted under SEC Rule 506(c) of Regulation D; [6]
• The fund manager reasonably believes all pool participants qualify as QEPs either at the time of investment or at the time of relying on the exemption;
• The fund manager files Form PF (Reporting Form for Investment Advisers to Private Funds and Certain Commodity Pool Operators and Commodity Trading Advisors) with the SEC and a copy is received by the CFTC; and
• The fund manager complies with relevant sections of CFTC Regulations 4.13(b) (requiring electronic filing of the CPO’s notice of exemption) and 4.13(c) (relating to books and records requirements and special calls from the CFTC to demonstrate the CPO’s eligibility for reliance). [7]

In addition to relief from CPO registration, No-Action Letter 25-50 grants QEP No-Action CPOs relief from certain related requirements.

• Relief from CTA registration. QEP No-Action CPOs may also claim relief from CTA registration for the relevant pools, consistent with CFTC Regulation 4.14(a)(5). [8]
• Relief from mandatory redemption rights. Under CFTC Regulation 4.13(e), a CPO that operates one or more pools for which it is required to register and one or more pools for which it would be exempt must provide participants in the pools to which an exemption would apply a right to redeem the investor’s interests in the pool. MPD declined to extend this mandatory redemption right to QEP No-Action CPOs, accepting MFA’s argument that the imposition of this requirement would be economically unfeasible in that it would be inconsistent with the often heavily negotiated liquidity terms and redemption rights central to a fund’s investment management decisions.

POLICY RATIONALE AND REGULATORY HARMONIZATION

The no-action position is rooted in the original policy rationale for the adoption of the QEP Exemption: QEPs are sophisticated investors capable of evaluating risks, and duplicative regulation is costly and unnecessary for RIAs.

Additionally, the MFA stated that the exemption from CPO/CTA registration for QEP No-Action CPOs would not deprive the CFTC of critical market data, since other CFTC regulations and reporting regimes (e.g., large trader reports, [9] position limits, [10] and swap reporting [11]) provide information in these areas. MFA also stated that the relief would advance recent initiatives to harmonize regulatory requirements between the CFTC and SEC,[12] and also aligns with recommendations from a 2017 report by the US Department of the Treasury that identified the rescission of the QEP Exemption as an action that increased regulatory burdens while lacking a commensurate investor protection benefit. [13]

OPEN ISSUE

Certain fund managers have expressed concern that taking advantage of the no-action relief may deprive them of status as an “eligible contract participant” (ECP). Under the Commodity Exchange Act (CEA), only ECPs are permitted to enter into commodity interest transactions that are not traded on registered exchanges. [14] A commodity pool qualifies as an ECP if, among other things, it is “formed and operated by a person subject to regulation under” the CEA. [15]

No-Action Letter 25-50 raises the question of whether a CPO that chooses not to register as a CPO would be considered a person subject to regulation under the CEA—if not, that would be a strange result insofar as ECP status could inure only to commodity pools for which CPOs are required to register as a result of participants in those pools being deemed not sophisticated enough for those pool investments to be subject to lighter regulation (i.e., exemption from the investor protection requirements that come with CPO registration).

CONCLUSION

No-Action Letter 25-50 marks a significant shift in regulatory treatment for RIAs offering interests solely to QEPs. As a result of the rescission of the QEP Exemption, RIA fund managers had increasingly structured funds in such a way as to be able to rely on the de minimis exemption from CPO registration, as well as other exemptions. Now, CPOs relying on the de minimis exemption may find it preferable to rely on the relief in No-Action Letter 25-50 so that they do not have to monitor and comply with the de minimis trading thresholds set forth in CFTC Regulation 4.13(a)(3)(ii). By extending relief to eligible managers from CPO and CTA registration requirements with respect to QEP-only offerings, MPD aims to reduce regulatory burdens while promoting liquidity in the commodity interest markets and facilitating hedging activities for investors. Firms should carefully assess their eligibility, comply with all conditions for relief, and stay abreast of ongoing developments in this area to ensure continued compliance.