This no-action relief requires that another individual or entity has been delegated proper authority over the commodity pool and has registered as a CPO. The Letter was issued as a result of responses to the frequently asked questions (“FAQ”) issued on 14 August, 2012.
The Division has now clarified that it expects firms that wish to rely on this no-action relief to physically file a request for such relief and not solely rely on the FAQ. This follows the Division receiving a limited number of requests for such no-action relief since 2012. The Division expects that hundreds of firms need to file for no-action relief and, as such, has developed an expedited approach for those that meet the criteria specifically set out in the Letter. The Division’s streamlined approach includes the use of a template form, provided as an attachment to the Letter, to request the no-action relief.
The Letter primarily addresses two types of no-action requests typical of investment managers: (1) where a general partner of a limited partnership or a managing member of a limited liability company (“Delegating CPO”) delegates investment management authority to an investment manager (“Designated CPO”) and the Delegating CPO does not solicit participants for, or manage the assets of, the relevant commodity pool; and (2) where one or more persons serve as members of a board of directors or other governing body of an offshore commodity pool (for example, the members of a Cayman board of directors). Similar to the terms of no-action relief historically granted by the Division, the criteria include a requirement that the Delegating CPO and Designated CPO have executed a legally binding document whereby each party undertakes joint and several liabilities for any violation of the CEA or the Commission’s regulations by the other party in connection with the operation of the relevant commodity pool (“CPO Joint and Several Liability”). The Letter also addresses when an “Unaffiliated Board Member” (as defined, generally, a board member with little or no relationship to the Designated CPO) may use the streamlined approach to request relief from being subject to CPO Joint and Several Liability.
Investment managers should consult with their advisers and carefully review their CPO delegation documentation to determine if they are eligible to obtain the streamlined no-action relief pursuant to the terms of the Letter.