Dec 07, 2016 | News

CFTC Approves Final Rule Amendments For CPO Annual Audits

The CFTC unanimously approved certain amendments to its Part 4 regulations that relates to Commodity Pool Operators and their reporting obligation. Previously, the CFTC had granted relief by way of no-action letters and other exemptions.

The amendments affect CPO reporting in three general areas:

  1. A CPO now may employ certain alternative generally accepted accounting principles, practices, and standards in account statements to investors for and in the Annual Report. Regulation 4.22(d)(2) is amended to allow a pool organized outside the United States to use accounting principles, practices, and standards accepted in the United Kingdom, Ireland, Luxembourg, or Canada for the presentation of the Annual Report and other required reporting.
  2. A CPO is relieved from providing an audited Annual Report for a “Stub Period.”  The “Stub Period” is considered four months or less from the pool’s fiscal year end.  Additionally,the pool must have fewer than 15 participants excluding those who have contributed no more than $3,000,000 in the aggregate.  However, the CPO would be required to obtain a waiver from non-insider pool participants regarding those participants right to receive an audited Annual Report.  A non-insider is considered any person not controlled by or under common control with the CPO or CTA or any principal of the foregoing. This waiver can be incorporated into subscription agreements between the pool and its participants.
  3. If the CPO is in a situation where all of the pool’s participants have a specified close relationship with the pool operator, the pool is relieved from providing an audited Annual Report altogether.  These parties could include the CPOs CTAs or other parties under common control of the pool’s CPO.  A CPO is required to provide an Annual Report at least once during the life of a pool.

For further information on the CFTC Amendment, click here.