The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") granted no-action relief to a commodity pool operator ("CPO") from registration requirements under CEA Section 4m(1) in relation to its role as the trustee of certain commodity pools. In lieu of this requirement, the CPO will delegate responsibilities to an investment advisor for the relevant pools.
The CPO failed to meet the common control requirement instituted by CFTC No-Action Letter 14-126 (i.e., that the Delegating CPO and the Designated CPO be under common control with each other where they are legal entities). However, the DSIO agreed to grant exemptive relief based on, among other factors, an agreement that the two CPOs are "jointly and severally liable" for violations of the CEA or CFTC Rules.
The CFTC recently granted substantively similar relief to two CPOs (see previous coverage).
Commentary / Bob Zwirb
Since relief from the common control requirement of CFTC Letter 14-126 has been granted repeatedly (at least a dozen times during calendar year 2017 alone), and it was never particularly clear why the CFTC imposed this condition, it is time for generic relief to be adopted in place of the current time consuming and costly individualized no-action route. That is, the common control requirement should be eliminated and replaced by the requirement that the relevant firms be jointly liable for misconduct.
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