On August 18th, the Commodity Futures Trading Commission (CFTC or Commission) issued a Notice of Proposed Rulemaking (NPRM) seeking comment on suggested amendments to CFTC Regulations 4.13 and 4.14. The NPRM would:

  • Add back the Regulation 4.13(a)(4) exemption from commodity pool operator (CPO) registration for certain Securities and Exchange Commission (SEC)-registered investment advisers (RIAs) operating commodity pools (pools) in which the participants (investors) are limited to certain qualified eligible persons (QEPs) and that satisfy specified conditions
  • Add back a related registration exemption for CTAs in Regulation 4.14(a)(8)(D) and
  • Double (from $400,000 to $800,000) the gross capital contributions limit in the current small pool CPO registration exemption in CFTC Regulation 4.13(a)(2), to reflect inflation.

The NPRM comment deadline is 45 days after Federal Register publication.

Background

Prior to 2012, CFTC Regulation 4.13(a)(4) provided an exemption from CPO registration for operators of pools, subject to conditions including limiting the exemption to CPOs of pools whose investors were limited to QEPs who, in the case of natural persons, did not need to have a portfolio of a certain size (the Natural Person Limitation). The CFTC rescinded the Regulation 4.13(a)(4) exemption in 2012 in the wake of the financial crisis and sweeping new CFTC regulation of swaps pursuant to Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Prior to 2012, CFTC Regulation 4.14(a)(8)(D) exempted from CTA registration advisers who limited their commodity trading advice to pools whose CPOs relied on CFTC Regulation 4.13(a)(4) to not register as CPOs. In 2012, the CFTC rescinded the Regulation 4.14(a)(8)(D) exemption in parallel with its removal of the Regulation 4.13(a)(4) CPO registration exemption.

In 2014, in CFTC Staff No-Action Letter 14-126 (Letter 14-126), CFTC staff issued no-action relief from the requirement to register as a CPO to pool operators that, under certain circumstances, delegated their CPO responsibilities to a registered CPO (Designee CPO), which would serve as the CPO of the pool in lieu of the delegating CPO (Delegating CPO).

In 2025, anticipating that the Commission would reinstate the Regulation 4.13(a)(4) exemption, the CFTC staff issued CFTC Staff No-Action Letter 25-50 (Letter 25-50), which generally granted registration relief for CPOs and CTAs on the same terms that existed under prior Regulations 4.13(a)(4) and 4.14(a)(8)(D) until the Commission issued regulations addressing these exemptions. However, Letter 25-50 also expanded the scope of exemptive relief by removing the Natural Person Limitation and by permitting reliance on that relief without complying with the requirement in CFTC Regulation 4.13(e)(2) to allow pool investors the right to redeem their interests in a pool whose CPO transitioned from operating the pool as a registered CPO to relying on the registration relief in Letter 25-50.

In 2026, the CFTC staff issued CFTC Staff No-Action Letter 26-06 providing that a Delegating CPO could rely on the CPO registration relief in Letter 14-126 even if the Designee CPO was an unregistered CPO (in reliance on Letter 25-50) rather than a registered CPO (as required by Letter 14-126).

What Changed

The CFTC proposed three amendments to its regulations:

  1. Restored RIA-QEP Exemption (Proposed Regulation 4.13(a)(4)): CPOs that are RIAs would again be exempt from CPO registration for pools that they operate in which investors are limited to QEPs and certain accredited investors, pool interests are exempt from registration under the Securities Act of 1933 and sold without marketing to the public in the U.S. (with one exception),1 and Form PF is filed by the RIA (if required). The NPRM proposes to restore the Natural Person Limitation and investors’ Regulation 4.13(e)(2) redemption rights for CPOs that would rely on proposed Regulation 4.13(a)(4), which was the situation in 2012 before the CFTC rescinded Regulation 4.13(a)(4)—but which would be contrary to the relief in Letter 25-50.
  2. Related CTA Exemption (Proposed Regulation 4.14(a)(8)(D)): CTAs whose commodity interest trading advice is directed solely to, and for the sole use of, the following would also again be exempt from CTA registration:
    1. CPOs that have claimed the Regulation 4.13(a)(4) exemption; and
    2. Registered CPOs that are permitted to treat each pool that they operate per the criteria of Regulation 4.13(a)(4) as if the CPOs were not so registered.
  1. Small Pool Exemption Limit Increase: The gross capital contributions limit condition in the small pool CPO registration exemption in Regulation 4.13(a)(2), which is measured across all pools a CPO operates or intends to operate, would double from $400,000 to $800,000, the first adjustment since 2003. The other conditions of the exemption would remain the same.2

Why It Matters

The proposed rules would reinstate CPO and CTA registration exemptions that existed prior to the CFTC’s rescission thereof in 2012, integrate, where necessary, the no-action positions in Letter 25-50, and do no harm to the relief granted in CFTC Staff No-Action Letter 26-06.3 For many RIAs already subject to SEC oversight under the Investment Advisers Act of 1940, the practical effect would be a significant reduction in duplicative legal, operational, and administrative costs associated with separate CFTC registration and compliance.

The exemption is limited to pools with sophisticated investors: natural person pool investors must be QEPs who need not satisfy the portfolio requirement; other investors may be QEPs of any kind or accredited investors listed in 17 C.F.R. § 230.501(a)(1)-(3), (a)(7), or (a)(8). Pools offered to retail investors remain subject to full CPO registration requirements.

However, CPOs that relied on Letter 25-50’s removal of the Natural Person Limitation would be forced to register as CPOs again if they operate pools that have investors who are natural persons who would not satisfy the Natural Person Limitation.

Redemption Rights for Investors in New Pools and Existing Pools

Whether a CPO would need to offer redemption rights to investors in a pool for which the CPO would claim the Regulation 4.13(a)(4) CPO registration exemption depends on the CPO’s current registration status and reliance on Letter 25-50:

  • CPOs that withdrew from CPO registration for a pool in reliance on Letter 25-50 would not need to offer redemption rights to existing investors, because they would already have offered investors such rights pursuant to Regulation 4.13(e)(2) when withdrawing from CPO registration or would have instead relied on the no-action position in Letter 25-50 to not provide such redemption rights.
  • But registered CPOs transitioning to operating pools under Regulation 4.13(a)(4) without having previously relied on Letter 25-50 would need to comply with Regulation 4.13(e)(2), including offering investors notice of the transition and an opportunity to redeem.

What To Do Before the Comment Deadline

CPOs should take the following steps in advance of the 45-day comment period deadline:

  • Assess eligibility: Review existing pool structures to determine which pools would qualify for the Regulation 4.13(a)(4) exemption.
  • Evaluate current reliance on no-action letters: Determine whether they currently rely on Letter 25-50 for any pools they operate—as the proposed rule would supersede that letter if finalized—and the implications for their registration and corresponding obligations.
  • Review small pool exemption status: For CPOs relying on Regulation 4.13(a)(2), assess whether the increased $800,000 capital contribution limit affects current or planned pools.
  • Consider submitting comments, directly or through an industry group: This is particularly the case if an exempt CPO relying on Letter 25-50 would be negatively affected by the proposed reinstatement of the Natural Person Limitation or by investors’ redemption rights.
  • Review documentation: Review compliance policies, pool documents, and National Futures Association notice filings to prepare for potential implementation.

Next Steps

For further information or guidance on how CPOs and CTAs can prepare for the proposed CFTC exemptions, please reach out to the authors of this article or to your regular Lowenstein Sandler contact.

1 The exception is for marketing pursuant to SEC Rule 506(c), promulgated pursuant to the Jumpstart Our Business Startups Act (aka, the JOBS Act), which was enacted in 2012, the same year that the CFTC rescinded Regulation 4.14(a)(4). Rule 506(c) permits securities issuers (including private funds) to engage in general solicitation or general advertising in offering and selling securities, provided that all purchasers are accredited investors and the issuer takes reasonable steps to verify that such purchasers meet the SEC’s definition of “accredited investor.”
2 The proposed amendment would not alter the 15-participant per pool limit or the exclusion from the gross capital contributions limit of contributions from a pool’s CPO, CTA, principals of either, and certain related persons of the foregoing.
3 See CFTC-approved, pre-publication version of the NPRM at 27 (noting that “the Proposed QEP Exemption would be broadly available to both Delegating and Designated CPOs with respect to an Eligible Pool, and more broadly, that a no-action position on CPO delegation, like that in CFTC Staff No-Action Letter 14-126, is not necessary where the pool for which responsibility is being delegated is an exempt pool, including an Eligible Pool under the Proposed QEP Exemption, rather than one requiring CPO registration”).