CFTC Grants Exemptive Relief from Certain RIC Liquidation Requirements

Subject to specified conditions, the CFTC Division of Swap Dealer and Intermediary Oversight granted exemptive relief to certain CPOs from CFTC Rule 4.22(c)(7) requirements to obtain participant waivers. The relief allows the CPOs to provide unaudited financial statements in conjunction with Annual Reports when liquidating a series of an SEC-registered investment company (“RIC”).

In granting this relief, the CFTC noted the difficulty for a CPO to obtain written waivers from each participant of a series fund given the difficulty in determining the identity of pool participants who purchase their ownership interests through financial intermediaries.

Lofchie Comment: This small exemptive action, which is not, of itself, terribly significant from a market perspective, is a great example of why the CFTC’s withdrawal of the historical exemption that SEC-registered investment companies had previously from regulation as a commodity pool was unwise. SEC-registered investment companies are astronomically regulated by the SEC. Adding an additional layer of CFTC regulation is just an expense to RICs and is a drain on the resources of the CFTC, which has quite enough to do without creating more needless work for itself.

Given the new administration’s drive for the elimination of wasteful regulation, the CFTC should look at the restoration of the “commodity pool” exemption for registered investment companies. See prior comments on this issue: CFTC Adopts Harmonization Rules for Registered Investment Companies (with Delta Strategy Group Description, Lofchie Comment and Mehta Comment).

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