Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78793 

1Public Law 111–203, 124 Stat. 1376 (2010). 

2 7 U.S.C. 1a(11). 

limited to, Arrow Falcon Exporters Inc., 

Global Helicopter Technology, Inc., 

Hagglund Helicopters, LLC, JJASPP 

Engineering Services, LLC., Midwest 

Aerospace TC LLC, Northwest Rotorcraft, 

LLC, Overseas Aircraft Support, Inc., 

Richards Heavylift Helo, Inc., Southwest 

Florida Aviation International, Inc., and 

Tamarack Helicopters, Inc. 

Note 2 to paragraph (c)(2)(xi): Helicopters 

with an SW205 designation are Southwest 

Florida Aviation International, Inc., Model 

UH–1H helicopters. 

(xii) Model UH–1L helicopters; current 

type certificate holders include, but are not 

limited to, Bell Textron Inc., Midwest 

Aerospace TC LLC, and Overseas Aircraft 

Support, Inc. 

(xiii) Model UH–1P helicopters; current 

type certificate holders include, but are not 

limited to, Midwest Aerospace TC LLC and 

Robinson Air Crane, Inc. 

(d) Subject 

Joint Aircraft System Component (JASC) 

Code 6700, Rotorcraft flight control. 

(e) Unsafe Condition 

This AD was prompted by an accident 

involving failure of a TT strap, which 

resulted in the main rotor blade detaching 

from the main rotor head. The FAA is issuing 

this AD to address failure of a TT strap. The 

unsafe condition, if not addressed, could 

result in loss of a main rotor blade and 

subsequent loss of control of the helicopter. 

(f) Compliance 

Comply with this AD within the 

compliance times specified, unless already 

done. 

(g) Required Actions 

(1) Remove the TT straps from service and 

replace them with airworthy TT straps at the 

compliance time required by paragraphs 

(g)(1)(i) or (ii) of this AD, as applicable. 

(i) For TT straps that as of the effective date 

of this AD have accumulated 350 or more 

total hours time-in-service (TIS) since first 

installation on any helicopter, within 50 

hours TIS after the effective date of this AD. 

(ii) For TT straps that as of the effective 

date of this AD have accumulated less than 

350 total hours TIS since first installation on 

any helicopter, before the TT straps 

accumulate 400 total hours TIS since first 

installation on any helicopter. 

(2) As of the effective date of this AD, do 

not install the TT straps identified in the 

introductory text of paragraph (c) of this AD 

on any helicopter. 

(h) Special Flight Permit 

Special flight permits are prohibited. 

(i) Alternative Methods of Compliance 

(AMOCs) 

(1) The Manager, Central Certification 

Branch, FAA, has the authority to approve 

AMOCs for this AD, if requested using the 

procedures found in 14 CFR 39.19. In 

accordance with 14 CFR 39.19, send your 

request to your principal inspector or local 

Flight Standards District Office, as 

appropriate. If sending information directly 

to the manager of the Central Certification 

Branch, send it to the attention of the person 

identified in paragraph (j) of this AD. 

Information may be emailed to: AMOC@

faa.gov. 

(2) Before using any approved AMOC, 

notify your appropriate principal inspector, 

or lacking a principal inspector, the manager 

of the local flight standards district office/ 

certificate holding district office. 

(j) Additional Information 

For more information about this AD, 

contact Brian Hanley, Aviation Safety 

Engineer, FAA, 1801 S Airport Road, 

Wichita, KS 67209; phone: (847) 294–8140; 

email: Brian.Hanley@faa.gov. 

(k) Material Incorporated by Reference 

None. 

Issued on September 23, 2024. 

Steven W. Thompson, 

Acting Deputy Director, Compliance & 

Airworthiness Division, Aircraft Certification 

Service. 

[FR Doc. 2024–22095 Filed 9–23–24; 4:15 pm] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 1, 3, 4, 30, 43, and 75 

RIN 3038–AF25 

Commodity Pool Operators, 

Commodity Trading Advisors, and 

Commodity Pools Operated: Updating 

the ‘Qualified Eligible Person’ 

Definition; Adding Minimum 

Disclosure Requirements for Pools 

and Trading Programs; Permitting 

Monthly Account Statements for Funds 

of Funds; Technical Amendments 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission or 

CFTC) is adopting amendments to 

certain provisions of its regulations (the 

Final Rule) that would update the 

Portfolio Requirement thresholds within 

the ‘‘Qualified Eligible Person’’ 

definition; include revisions that are 

consistent with long-standing 

Commission exemptive letters 

addressing the timing of certain pools’ 

periodic financial reporting; and make 

several technical amendments related to 

the structure of the regulations that are 

the subject of this Final Rule. 

DATES: 

Effective date: This rule is effective 

November 25, 2024. 

Compliance date: Commodity pool 

operators (CPOs) and commodity 

trading advisors (CTAs) must comply 

with the increased Portfolio 

Requirement thresholds in Commission 

regulation § 4.7(a) by March 26, 2025. 

The optional monthly account statement 

reporting schedule for certain § 4.7 

pools in Commission regulation 

§ 4.7(b)(3)(iv) is available to CPOs as of 

the effective date, and compliance is 

required upon election of that schedule 

by the CPO. 

FOR FURTHER INFORMATION CONTACT: 

Amanda L. Olear, Director, 202–418– 

5283 or aolear@cftc.gov; Pamela M. 

Geraghty, Acting Deputy Director, 202– 

418–5634 or pgeraghty@cftc.gov; 

Elizabeth Groover, Acting Associate 

Director, 202–418–5985 or egroover@

cftc.gov; or Andrew Ruggiero, Special 

Counsel, 202–418–5712 or aruggiero@

cftc.gov; each in the Market Participants 

Division at the Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction and Background 

II. The Final Rule 

A. General Overview of Comments 

Received 

B. Minimum QEP Disclosure Requirements 

Under Commission Regulation § 4.7 

C. Updating Financial Thresholds in the 

Portfolio Requirement of the ‘‘Qualified 

Eligible Person’’ Definition 

D. Permitting Monthly Account Statements 

for Certain 4.7 Pools Consistent With 

Commission Exemptive Letters 

E. Other Technical Amendments 

F. Effective and Compliance Dates for the 

Final Rule 

III. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Cost-Benefit Considerations 

D. Antitrust Considerations 

I. Introduction and Background 

As amended by the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Dodd-Frank Act),1 section 1a(11) of 

the Commodity Exchange Act (CEA or 

Act) defines the term ‘‘commodity pool 

operator’’ as any person engaged in a 

business that is of the nature of a 

commodity pool, investment trust, 

syndicate, or similar form of enterprise, 

and who, with respect to that 

commodity pool, solicits, accepts, or 

receives from others, funds, securities, 

or property, either directly or through 

capital contributions, the sale of stock or 

other forms of securities, or otherwise, 

for the purpose of trading in commodity 

interests.2 CEA section 1a(10) defines a 

‘‘commodity pool’’ as any investment 

trust, syndicate, or similar form of 

enterprise operated for the purpose of 


khammond on DSKJM1Z7X2PROD with RULES
78794 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

3 7 U.S.C. 1a(10). 

4 7 U.S.C. 1a(12). 

5 7 U.S.C. 6m(1) (It shall be unlawful for any CTA 

or CPO, unless registered under this chapter, to 

make use of the mails or any means or 

instrumentality of interstate commerce with his 

business as such CTA or CPO). See also 17 CFR 

3.10. 

6 7 U.S.C. 1a(11)(B); 7 U.S.C. 1a(12)(B)–(C). 

7 7 U.S.C. 6n. 

8 7 U.S.C. 8a(5). 

9 17 CFR part 4. 

10See 7 U.S.C. 6n; 17 CFR 4.5, 4.6, 4.13, 4.14. 

11See, generally, 17 CFR 4.20 through 4.26, 4.30 

through 4.36. 

12See, e.g., 17 CFR 4.20(c), 4.30(a) (prohibiting 

the commingling of pool funds with those of any 

other person and prohibiting CTAs from accepting 

funds from advisory clients in the CTA’s name, 

respectively). 

13 17 CFR 4.24, 4.25, 4.34, 4.35. 

14 17 CFR 4.22. 

15 17 CFR 4.7. 

16See, e.g., 77 FR 11252 (Feb. 24, 2012) 

(rescinding the relief from the audit requirement for 

pool annual reports previously provided under 

Commission regulation § 4.7(b)(4)); 84 FR 67355 

(Dec. 10, 2019). 

17Commodity Pool Operators, Commodity 

Trading Advisors, and Commodity Pools: Updating 

the ‘Qualified Eligible Person’ Definition; Adding 

Minimum Disclosure Requirements for Pools and 

Trading Programs; Permitting Monthly Account 

Statements for Funds of Funds; Technical 

Amendments, 88 FR 70852 (Oct 12. 2023) (NPRM 

or Proposal). 

18These numbers were drawn from data in 

National Futures Association Form PQR filings for 

Q4 2022. 

19 In fact, as of March 31, 2023, there were 

approximately 1,128 CPOs registered with the 

Commission, and on average, approximately 5,257 

pools were reported via CFTC Form CPO–PQR on 

a quarterly basis in FY 2022. Assuming there is no 

material difference in the number of registered 

CPOs and pools reported between the closings of 

Q4 2022 and of Q1 2023, NFA and CFTC data show 

that approximately 69% of registered CPOs operate 

§ 4.7 pools, and approximately 81% of all pools 

reported on CFTC Form CPO–PQR are § 4.7 pools. 

After amendments to Form CPO–PQR and 

Commission regulation § 4.27 adopted in 2020, the 

Commission accepts NFA Form PQR as substituted 

compliance for the required completion of its own 

Form CPO–PQR. See 17 CFR 4.27. Therefore, the 

data sources for both NFA and CFTC are 

fundamentally the same, if not identical. 

20With these updated figures, § 4.7 CPOs 

continue to comprise approximately 69% of all 

CPOs registered with the Commission, and 4.7 

CTAs 66% of all CTAs registered with the 

Commission, while approximately 86% of all 

commodity pools operated by a registered CPO are 

§ 4.7 pools. 

21Such exemptive letters are routinely drafted by 

Commission staff in the Market Participants 

Division (MPD) and constitute an exercise of the 

authority in Commission regulation §§ 4.12(a) and 

140.93. See 17 CFR 4.12(a) and 140.93. 

trading in commodity interests.3 CEA 

section 1a(12) defines the term 

‘‘commodity trading advisor’’ as any 

person who, for compensation or profit, 

engages in the business of advising 

others, either directly or through 

publications, writing, or electronic 

media, as to the value of or the 

advisability of trading in commodity 

interests.4

Generally, CEA section 4m(1) requires 

each person whose activities satisfy 

either the CPO or CTA definition to 

register as such with the CFTC.5 With 

respect to both CPOs and CTAs, the 

CEA also authorizes the Commission to 

include persons within, or exclude them 

from, such definitions, by rule, 

regulation, or order, if the Commission 

determines that such action will 

effectuate the purposes of the CEA.6 In 

addition to the general registration 

authority set forth in CEA section 4m(1), 

CEA section 4n specifically empowers 

the Commission to impose compliance 

obligations related to the registration 

process, recordkeeping, disclosure, and 

reporting.7 Finally, the CEA also gives 

the Commission authority to make and 

promulgate such rules and regulations, 

as in the judgment of the Commission, 

are reasonably necessary to effectuate 

the provisions or to accomplish any 

purposes of the CEA.8

Part 4 of the Commission’s regulations 

specifically governs the operations and 

activities of CPOs and CTAs.9 These 

regulations establish registration 

exemptions and definitional exclusions 

for CPOs and CTAs,10 and contain 

detailed regulations that establish the 

ongoing compliance obligations 

applicable to registered CPOs and CTAs, 

which implement the statutory 

authority granted to the Commission by 

the CEA with respect to such 

registrants.11 Specifically, the regulatory 

compliance requirements facilitate the 

Commission’s oversight of their 

activities in the commodity interest 

markets and promote customer 

protection through operational 

requirements,12 disclosures,13 and 

regular reporting 14 to a registrant’s pool 

participants or advisory clients. 

Commission regulation § 4.7 provides 

exemptions from certain part 4 

compliance requirements regarding 

disclosure, periodic reporting, and 

recordkeeping for registered CPOs and 

CTAs, whose prospective and actual 

pool participants and/or advisory 

clients are restricted to individuals and 

entities considered ‘‘Qualified Eligible 

Persons,’’ and who claim the desired 

exemptions, pursuant to paragraph (d) 

of that section.15 Since its adoption over 

thirty years ago, the Commission has 

occasionally amended Commission 

regulation § 4.7 to enhance its usability 

and ensure that it remains fit for 

purpose.16

After a careful review of the existing 

language and structure of Commission 

regulation § 4.7, and considering the 

public and regulatory interest of 

maintaining and modernizing older, but 

still widely utilized provisions, the 

Commission approved and published in 

the Federal Register a notice of 

proposed rulemaking (NPRM or 

Proposal) comprised of targeted 

amendments to update the regulation in 

several ways.17 The Commission noted 

in the NPRM that, as of the end of FY 

2022, 837 registered CPOs operated 

approximately 4,304 commodity pools 

pursuant to claimed Commission 

regulation § 4.7 exemptions (§ 4.7 pools, 

and together with CTA programs 

operated under Commission regulation 

§ 4.7, the § 4.7 pools and trading 

programs).18 Relatedly, approximately 

865 CTAs claim an exemption under 

Commission regulation § 4.7 for their 

trading programs, which the 

Commission also estimates to number in 

the tens of thousands. The Commission 

further stated that, during discussions 

with CFTC staff, the National Futures 

Association (NFA), the registered 

futures association to whom the 

Commission has delegated many of its 

regulatory oversight functions with 

respect to CPOs and CTAs, predicted 

that this population of CPOs, CTAs, 

commodity pools, and trading programs 

operating pursuant to Commission 

regulation § 4.7 will only continue to 

grow in the future.19 More recent data 

on the usage of Commission regulation 

§ 4.7 shows this to be the case. As of 

June 2024, approximately 824 CPOs 

claim exemptions under Commission 

regulation § 4.7, with respect to 4,763 

§ 4.7 pools, and 822 CTAs claim 

exemptions under Commission 

regulation § 4.7 with respect to at least 

10,000 § 4.7 trading programs.20

In particular, the Commission 

proposed amendments that sought: (1) 

to increase the financial thresholds in 

the Portfolio Requirement of the 

‘‘Qualified Eligible Person’’ (QEP) 

definition in Commission regulation 

§ 4.7(a) to reflect inflation; (2) to require 

certain minimum disclosures for § 4.7 

pools and trading programs operated 

and offered by CPOs and CTAs; (3) to 

add a process under Commission 

regulation § 4.7(b)(3) permitting CPOs to 

elect an alternative account statement 

schedule for certain § 4.7 pools 

consistent with long-standing exemptive 

letters issued by the Commission; 21 and 

(4) to improve the structure and utility 

of Commission regulation § 4.7 through 

several technical adjustments (for 

example, reorganizing the QEP 

definition, updating cross-references, 

etc.). After consideration of the public 

comments received in response to the 

NPRM, as well as several meetings with 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78795 

22All comments on the NPRM, including notices 

of ex parte meetings discussing this rulemaking, are 

available at https://comments.cftc.gov/Public

Comments/CommentList.aspx?id=7443. 23See, e.g., Proposal, 88 FR 70855 (requesting 

comment on the proposed Portfolio Requirement 

increases, as well as posing specific questions for 

commenters to address). 24Comment Letter from the Securities Industry 

and Financial Markets Association Asset 

Management Group (Dec. 11, 2023), available at 

https://comments.cftc.gov/PublicComments/View

Comment.aspx?id=73190&SearchText= (SIFMA 

AMG Letter); Comment Letter from the Investment 

Advisers Association (Dec. 11, 2023), available at 

https://comments.cftc.gov/PublicComments/View

Comment.aspx?id=73192&SearchText= (IAA 

Letter); Comment Letter from the Alternative 

Investment Management Association Limited (Dec. 

11, 2023), available at https://comments.cftc.gov/ 

PublicComments/ViewComment.aspx?id=

73193&SearchText= (AIMA Letter); Comment Letter 

from the Managed Funds Association (Dec. 11, 

2023), available at https://comments.cftc.gov/ 

PublicComments/ViewComment.aspx?id=

73194&SearchText= (MFA Letter); Comment Letter 

from the Investment Company Institute (Dec. 11, 

2023), available at https://comments.cftc.gov/ 

PublicComments/ViewComment.aspx?id=

73195&SearchText= (ICI Letter); Comment Letter 

from the National Futures Association (Dec. 11, 

2023), available at https://comments.cftc.gov/ 

PublicComments/ViewComment.aspx?

73191&SearchText= (NFA Letter); and Comment 

Letter from Dechert, LLP (Dec. 11, 2023), available 

at https://comments.cftc.gov/PublicComments/View

Comment.aspx?73196&SearchText= (Dechert 

Letter). One commenter also submitted a 

supplemental comment letter after the closing of the 

NPRM’s public comment period. See Supplemental 

Comment Letter from the Managed Funds 

Association (Jun. 26, 2024), available at https://

comments.cftc.gov/PublicComments/View

Comment.aspx?id=73840&SearchText= (MFA 

Comment Letter II). The NPRM’s complete 

comment file is available at https://

comments.cftc.gov/PublicComments/CommentList.

aspx?id=7443. 

25 17 CFR 4.7(b)(2) (providing an exemption from 

the specific requirements of Commission regulation 

§§ 4.21, 4.24, 4.25, and 4.26 with respect to each 

§ 4.7 pool). The prescribed ‘‘form statement’’ 

indicates that the CPO’s offering memorandum has 

not been, nor is it required to be, filed with the 

Commission, and that the CFTC has not reviewed 

or approved such offerings or any related offering 

memoranda for the § 4.7 pool. Id. 

26 17 CFR 4.7(c)(1) (providing an exemption from 

the specific requirements of Commission regulation 

§§ 4.31, 4.34, 4.35, and 4.36 with respect to an 

offered § 4.7 trading program). The prescribed 

‘‘form statement’’ indicates the CTA’s brochure has 

not been, nor is it required to be, filed with the 

Commission, and that the CFTC has not reviewed 

or approved such trading program or brochure. Id. 27See 17 CFR 4.7(d). 28 17 CFR 4.7(b)(2); 17 CFR 4.7(c)(1). 29Proposal, 88 FR 70859. 30 Id. 

interested members of the public,22 the 

Commission has determined to finalize 

portions of the Proposal, while 

continuing to consider the remaining 

proposed amendments and alternative 

approaches offered by commenters. 

II. The Final Rule 

A. General Overview of Comments 

Received 

The Commission requested comment 

on all aspects of the NPRM and also 

solicited comment through specific, 

targeted questions about each of the 

individual proposed amendments.23

The Commission received eight 

comment letters in response to the 

Proposal, including six from industry 

associations, one from NFA, and one 

from a law firm that frequently 

represents CPOs and CTAs utilizing 

Commission regulation § 4.7 

exemptions.24 Overall, comments on the 

Proposal were mixed, depending on 

which amendment was being discussed. 

With respect to the Portfolio 

Requirement updates, commenters 

largely agreed with the necessity of the 

proposed increases to account for 

inflation and were, for the most part, 

supportive of that proposed 

amendment. With respect to adding 

minimum disclosure requirements to 

Commission regulation § 4.7 for all QEP 

pool participants and advisory clients, 

commenters disagreed with the 

amendments as proposed and made 

several suggestions seeking to narrow or 

eliminate the proposed disclosures. The 

proposed amendment designed to align 

Commission regulation § 4.7 with 

Commission exemptive letters that 

permit the distribution of monthly, 

rather than quarterly, account 

statements for certain § 4.7 pools 

received unanimous support and will 

consequently be adopted as proposed by 

the Final Rule amendments. The 

following sections discuss the proposed 

amendments in more detail, the 

comments the Commission received 

from the public, as well as the terms of 

the Final Rule being adopted herein. 

B. Minimum QEP Disclosure 

Requirements Under Commission 

Regulation § 4.7 

1. The Proposal 

Currently, Commission regulation 

§ 4.7 provides exemptions from the 

broader part 4 compliance requirements 

for CPOs with respect to pools offered 

solely to QEPs, and for CTAs advising 

or managing the accounts of QEPs, 

including those regulations requiring 

disclosure of general and performance 

information about a pool or trading 

program. Specifically, Commission 

regulation § 4.7(b)(2) provides an 

exemption for CPOs with respect to 

their pools offered solely to QEPs 

regarding: (1) the requirement to deliver 

a disclosure document in Commission 

regulation § 4.21; (2) the general 

disclosures required by Commission 

regulation § 4.24; (3) the performance 

disclosures required by Commission 

regulation § 4.25; and (4) the use and 

amendment requirements in 

Commission regulation § 4.26; so long as 

the CPO provides a form statement on 

the cover page of any offering 

memorandum it chooses to distribute to 

its prospective pool participants (or near 

the signature line of the pool’s 

subscription agreement, if its CPO 

chooses not to distribute an offering 

memorandum).25 Similarly, 

Commission regulation § 4.7(c)(1) 

provides an exemption for CTAs with 

respect to their trading programs offered 

to QEPs regarding: (1) the requirement 

to deliver a disclosure document in 

Commission regulation § 4.31; (2) the 

general disclosures required by 

Commission regulation § 4.34; (3) the 

performance disclosures required by 

Commission regulation § 4.35; and (4) 

the use and amendment requirements in 

Commission regulation § 4.36; provided 

that the CTA includes a form statement 

on the cover page of any brochure or 

disclosure statement it chooses to 

distribute to its prospective advisory 

clients (or near the signature line of the 

advisory agreement, if the CTA chooses 

not to distribute a brochure or 

disclosure statement).26 CPOs and CTAs 

claiming these exemptions 27 are not 

required to deliver or disseminate any 

offering memoranda, brochures, or 

disclosure statements to their 

prospective QEP pool participants or 

advisory clients. Rather, these CPOs and 

CTAs are only required to ensure that 

any information or disclosures they 

elect to provide to QEPs (QEP 

Disclosures), include all disclosures 

necessary to make the information 

contained therein, in the context in 

which it is furnished, not misleading.28

Under the Proposal, the Commission 

proposed to amend the disclosure relief 

provided by current Commission 

regulation § 4.7(b)(2)(i) and (ii) to 

require CPOs to deliver a set of 

disclosures to their § 4.7 pools’ 

prospective QEP participants.29 The 

proposed disclosure requirements 

included descriptions of the § 4.7 pool’s: 

(i) principal risk factors; (ii) investment 

program; (iii) use of proceeds; (iv) 

custodians; (v) fees and expenses; (vi) 

conflicts of interest; and (vii) targeted 

past performance information. 

Generally, the Commission proposed to 

establish these minimum disclosure 

requirements by rescinding or 

narrowing certain of the existing 

exemptions in Commission regulation 

§ 4.7, including those from Commission 

regulation §§ 4.21, 4.24, and 4.25.30

Proposed Commission regulation 

§ 4.7(b)(2)(i)(F) included the 

requirement that QEP Disclosures 

provide all disclosures necessary to 

make the information contained therein, 


khammond on DSKJM1Z7X2PROD with RULES
78796 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

31 17 CFR 1.31. 

32Proposal, 88 FR 70861. 

33Proposal, 88 FR 70856. 

34 Id. 

35 Id. (citing Susan Taylor Martin, How Tampa’s 

James Cordier went from high roller to YouTube 

apology after losing $150 million, Tampa Bay 

Times, Feb. 11, 2019, available at https://

www.tampabay.com/business/how-tampas-jamescordier-went-from-high-roller-to-youtube-apologyafter-losing-150-million-2019206/). 

36Proposal, 88 FR 70857. 

37 Id. 

38 Id. at 70857–58. 

39Proposal, 88 FR 70872. 

40 Id. 

in the context in which it is furnished, 

not misleading, and Proposed 

Commission regulation § 4.7(b)(2)(i)(G) 

continued to require a form disclaimer 

like that currently required by 

Commission regulation § 4.7(b)(2)(i). 

As a consequence of requiring these 

minimum disclosures for § 4.7 pools, 

the Commission also proposed to 

update corresponding recordkeeping, 

and use and amendment requirements. 

Specifically, the Commission proposed 

to amend Commission regulation 

§ 4.7(b)(5) to require that CPOs maintain 

such QEP Disclosures among the other 

books and records of their § 4.7 pools, 

and make them available, upon request, 

to the Commission, NFA, and the U.S. 

Department of Justice, in accordance 

with Commission regulation § 1.31.31

Additionally, the Commission proposed 

to narrow the exemption from 

Commission regulation § 4.26 in its 

entirety to only Commission regulation 

§ 4.26(d), such that compliance with 

Commission regulation § 4.26(a) through 

(c), provisions that generally govern the 

use and amendment of this information, 

would be required, but filing with NFA 

prior to first use would not. 

Consistent with the proposed 

amendments regarding QEP Disclosures 

for § 4.7 pools, the Commission also 

proposed disclosure requirements for 

§ 4.7 trading programs under 

Commission regulation § 4.7(c)(1). 

Specifically, the Commission proposed 

to amend Commission regulation 

§ 4.7(c)(1) to require CTAs to deliver 

certain disclosures to their § 4.7 

advisory clients. The proposed 

disclosure requirements included a 

description of: (i) the trading program; 

(ii) certain persons to be identified; (iii) 

principal risk factors for the CTA’s 

trading program; (iv) fees; (v) conflicts 

of interest; and (vi) targeted past 

performance information. Similar to the 

proposed amendments to Commission 

regulation § 4.7(b)(2)(i), the Commission 

proposed to establish these minimum 

disclosure requirements by rescinding 

or narrowing existing exemptions in 

Commission regulation § 4.7(c)(1) from 

Commission regulation §§ 4.31, 4.34, 

and 4.35.32 Proposed Commission 

regulation § 4.7(c)(2)(i)(G) continued to 

require that QEP Disclosures provide all 

additional disclosures necessary to 

make the information contained therein, 

in the context in which it is furnished, 

not misleading, and Proposed 

Commission regulation § 4.7(c)(2)(i)(H) 

continued to require a form statement 

like that currently required by 

Commission regulation § 4.7(c)(1)(i). 

Further, the Commission proposed to 

update corresponding recordkeeping, 

and use and amendment requirements 

for CTAs offering § 4.7 trading 

programs. Specifically, the Commission 

proposed to amend Commission 

regulation § 4.7(c)(2) to require CTAs to 

maintain QEP Disclosures among the 

other books and records for their § 4.7 

trading programs, and make them 

available to the Commission, NFA, and 

the U.S. Department of Justice, in 

accordance with Commission regulation 

§ 1.31. Additionally, the Commission 

proposed to narrow the exemption from 

Commission regulation § 4.36 in its 

entirety to only Commission regulation 

§ 4.36(d), such that compliance with 

Commission regulation § 4.36(a) through 

(c), provisions that generally govern the 

use and amendment of this information, 

would be required, but filing with NFA 

prior to first use would not. 

In the Proposal, the Commission 

explained that ‘‘[t]he definition of QEP 

in Regulation 4.7 encompasses a broad 

spectrum of market participants from 

large fund complexes and other 

institutional investors with significant 

assets under management to individuals 

with varying backgrounds and 

experience, each of which has vastly 

different resources available to insist 

upon the disclosure of information 

regarding the offered 4.7 pool or trading 

program and then to analyze whatever 

information is provided.’’ 33 Moreover, 

the Commission stated its concern that 

‘‘individual natural persons, who meet 

the QEP definition through the Portfolio 

Requirement, but nonetheless do not 

command the assets of large financial 

institutions, likely lack the ability to 

demand the same level of transparency 

afforded through the prospect of 

additional significant asset allocations,’’ 

which, the Commission preliminarily 

expected, would result in their being 

more likely to rely upon whatever 

information the CPO or CTA chose to 

provide.34 The Commission stated its 

preliminary belief that, ‘‘[t]his perceived 

disparity may increase the likelihood of 

CPOs and CTAs with less rigorous risk 

management and controls to seek capital 

from such individuals who are generally 

less able to engage in the same rigorous 

monitoring,’’ 35 as institutional 

investors. As further support for the 

imposition of minimum disclosure 

requirements, the Commission also 

noted the ‘‘rapid and unrelenting 

pace’’ 36 of product innovation, for 

example in the digital asset space, 

increasing the possibility that ‘‘certain 

QEP participants and clients may not 

have the level of information necessary 

to fully appreciate the nature of the risk 

associated with their trading.’’ 37 The 

Commission preliminarily concluded in 

the Proposal, based upon its analysis of 

the regulatory history behind this 

regulation, the prevalence of § 4.7 

offerings, and the myriad market and 

product developments since 1992, that 

‘‘requiring the provision of specific 

minimum disclosures for CPOs and 

CTAs operating 4.7 pools and trading 

programs will assist in mitigating the 

customer protection gaps that have 

developed since 1992 by ensuring that 

QEPs receive the information necessary 

to make informed investment decisions, 

and that such disclosures are subject to 

Commission and NFA oversight.’’ 38

Further, in explaining the benefits of the 

proposed QEP Disclosure amendments, 

the Commission stated its belief that, 

these proposed amendments would 

mandate a minimum amount of 

transparency into § 4.7 pools and 

trading programs, which could help 

such QEPs protect themselves against 

excessive fees and self-dealing, and 

generally help insure that the products 

offered by such CPOs and CTAs are 

performing and being operated, as 

anticipated.39 Additionally, the 

Commission explained its expectation 

that ‘‘mandating QEP Disclosures and 

requiring that they be materially 

accurate and complete, rather than just 

optional and not materially misleading, 

[would] benefit market participants and 

the public by ensuring that prospective 

investors would receive QEP 

Disclosures containing, at a minimum, 

certain important general and 

performance information that they can 

reliably assume is kept current and 

materially complete with respect to the 

items proposed to be required . . . [and 

that the proposed amendments] would 

allow for improved oversight of the 

regulated activities of CPOs and CTAs’’ 

by the Commission.40 For these reasons, 

among others articulated in the 

Proposal, the Commission proposed 

specific minimum disclosures to bridge 

the customer protection gap that has, in 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78797 

41See generally MFA Letter, at 6; SIFMA AMG 

Letter at 4; AIMA Letter at 2; IAA Comment Letter 

at 5. 

42MFA Letter, at 2. 

43MFA Letter, at 6 

44MFA Letter, at 11. 

45SIFMA AMG Letter, at 5. 

46AIMA Letter, at 2. 

47 IAA Letter, at 5. 

48 Id. 

49NFA Letter, at 3. 

50See Dechert Letter, at 14 (‘‘If the alternative 

approaches we articulate in this comment letter in 

response to the Proposal do not persuade the 

Commission, we would strongly counsel the 

Commission to limit the first stage of rulemaking in 

this area to the amendment of CFTC Rule 4.7 to 

increase the Portfolio Requirement to reflect 

inflation, as proposed, and then to study the effect 

that this change has on the types of QEPs the 

Commission seems most concerned about 

protecting.’’); see also AIMA Letter, at 4–5 (‘‘If the 

Portfolio Requirement thresholds are adjusted 

appropriately, then there is no reason why the 

Commission should also eliminate the disclosure 

exemptions under Regulation 4.7. The Commission 

should first evaluate whether the changes to the 

Portfolio Requirement thresholds address and/or 

mitigate the Commission’s perceived concerns 

about unequal bargaining or negotiating power 

among those QEPs that satisfy the new, higher 

standard.’’). 

51 ICI Letter, at 9. 

52 IAA Letter, at 5. 

53See MFA Letter, at 6 (‘‘There is no evidence 

cited in the [NPRM] or elsewhere, however, that 

QEPs currently lack sufficient information to make 

informed decisions.’’); AIMA Letter, at 7 (‘‘Second, 

the Commission concludes that the current 

exemption framework is insufficient because [it] 

fails to ensure that all QEPs (natural persons, 

specifically) can demand and receive the 

information necessary to make informed investment 

decisions and/or effectively monitor their 

investments. The Proposal, however, lacks a 

concrete example of any instance where this may 

be the case.’’). 

54MFA Letter, at 8; Dechert Letter, at 10; IAA 

Letter at 5; ICI Letter, at 3–7. 

55 Dechert Letter, at 10 (stating further that ‘‘CTAs 

that are SEC-registered investment advisers, like 

CPOs that are SEC-registered investment advisers, 

already distribute regulatory disclosures to 

investors, such as Form ADV, making it 

unnecessary for these CTAs to create new 

disclosure documents’’). This commenter further 

asserted that the Commission’s concerns with 

respect ‘‘to natural person QEPs should also be 

sufficiently addressed by adjusting [the Portfolio 

Requirement].’’ Id. 

its view, developed since the adoption 

of Commission regulation § 4.7 in 1992. 

2. Feedback From Commenters 

Generally, commenters were opposed 

to the proposed QEP Disclosures for 

§ 4.7 CPOs and CTAs, citing a number 

of concerns relating to cost, purpose, 

practicality in certain common 

structuring scenarios, and redundancy. 

All seven commenters provided 

feedback on the proposed minimum 

disclosure requirements, including 

several that offered alternative 

approaches to the proposed method of 

adding minimum QEP Disclosures to 

Commission regulation § 4.7 for the 

Commission to consider. 

A majority of the commenters 

opposed or disagreed with the proposed 

minimum disclosure requirements 

because they believed the additional 

requirements were unnecessary.41 One 

commenter opposed the proposed QEP 

Disclosures generally because they 

believe ‘‘imposing mandatory minimum 

disclosures would be premature,’’ 

‘‘would not provide any protections 

above and beyond current regulations,’’ 

‘‘could lead to the presentation of 

potentially misleading investor 

disclosures,’’ and because ‘‘the costs to 

4.7 CPOs and CTAs would be unduly 

burdensome.’’ 42 This commenter 

disagreed that QEPs currently lack 

sufficient information to make informed 

decisions and stated that raising the 

Portfolio Requirement may mitigate the 

concerns the Commission expressed in 

the Proposal.43 The commenter asserted 

further that the current standard in 

Commission regulation § 4.7 that 

requires disclosures, if any are 

provided, to not be misleading is 

sufficient because disclosures provided 

in the § 4.7 pool context have become 

market practice and are made to satisfy 

the preferences and demands of 

sophisticated investors.44 Other 

commenters echoed this sentiment, with 

one suggesting that ‘‘private fund 

managers commonly include a 

description of the fund’s investment 

objectives and strategy in marketing 

materials and offering documents,’’ 45

and another stating that it would 

‘‘essentially render the entire 4.7 

regime, and the exemptions provided 

thereunder, moot.’’ 46 Another 

commenter described the minimum 

QEP disclosure requirements as 

‘‘unnecessary to achieve the 

Commission’s policy goals and . . . 

unduly costly and even 

counterproductive,’’ 47 and further 

stated that they are ‘‘not aware that 

prospective or current QEP investors or 

clients in pools and trading accounts 

operated by these members, virtually all 

of which are qualified purchasers not 

subject to the Portfolio Requirement, 

have requested or otherwise indicated a 

need for such additional disclosure.’’ 48

Finally, NFA cautioned against the 

proposed disclosure requirements, and 

stated that ‘‘over the years NFA has 

received few complaints from 4.7 

exempt pool participants and managed 

account program clients that CPOs and 

CTAs have not provided them with 

information upon request.’’ 49 Several of 

these commenters specifically 

recommended that the Commission 

adopt the proposed amendments to the 

Portfolio Requirement, and then 

evaluate the 4.7 population to determine 

whether the separately proposed 

minimum disclosure requirements are 

necessary.50

Among the general opposition to the 

minimum disclosure requirements, 

multiple commenters disputed the 

Commission’s stated concern that some 

QEPs may lack the ability to demand the 

same level of transparency as those 

QEPs with significantly higher asset 

allocations, resulting in their being more 

likely to rely upon whatever 

information the CPO or CTA chose to 

provide. One commenter acknowledged 

that there could be a disparity in QEPs’ 

ability to obtain information, by 

suggesting that the minimum disclosure 

requirements should be limited to 

natural person QEPs, and stating that, 

‘‘if the CFTC’s policy behind the 

Proposal is to ensure that investors who 

do not have leverage are provided 

minimum disclosures, then the focus 

should be on investors who have direct 

privity with the CTA and do not have 

a large enough investment mandate to 

be able to negotiate disclosure.’’ 51 A 

second commenter pointed to language 

within current Commission regulation 

§ 4.7, in which ‘‘[p]rospective QEP 

clients of CTAs already have the right, 

under existing regulations, to decline to 

have their accounts treated as exempt 

accounts under Regulation 4.7.’’ 52

Other commenters challenged the 

Commission’s concerns more 

generally.53

Aside from this general opposition, 

some commenters provided specific 

feedback on the potential negative 

impacts the proposed minimum 

disclosure requirements may have on 

dually-registered investment advisers 

and complex fund structures that rely 

on § 4.7 exemptions.54 One commenter 

stated that, ‘‘the proposed disclosure 

requirements create conflicts and 

duplicative burdens for CPOs and CTAs 

dually-registered as investment advisers 

with the SEC [Securities and Exchange 

Commission] when operating exempt 

pools or advising exempt accounts.’’ 55

Another commenter provided 

background, from the perspective of 

CTAs, on the ‘‘critical’’ regulatory relief 

provided by Commission regulation 

§ 4.7 for registered and offshore funds 

requiring a registered CTA, explaining 

that CTAs registered as investment 

advisers are already subject to 

‘‘extensive disclosure on Form ADV,’’ 

and that ‘‘both registered and offshore 

funds are currently required to provide 

robust disclosure documents that 

describe the fund’s investment 

objective, policies, and risks, and such 

disclosures necessarily describe the 

CTA’s trading strategy and associated 


khammond on DSKJM1Z7X2PROD with RULES
78798 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

56 ICI Letter, at 8. 57SIFMA AMG Letter, at 5; IAA Letter, at 5, n.5; 

and, ICI Letter, at 4–7. 58MFA Letter, at 8. 59SIFMA AMG Letter, at 4 (arguing that ‘‘[t]hese 

investors have the power to request the information 

they require to make informed investment decisions 

and have little need for exhaustive mandated 

disclosures that were designed originally with retail 

clients in mind’’). 

60 ICI Letter, at 4–7. These scenarios included: (1) 

CPOs and CTAs in a master-feeder relationship; (2) 

advisers and sub-advisers to a registered fund 

requiring CPO and CTA registration; (3) U.S. 

investment advisers to offshore funds; and (4) 

offshore advisers to offshore funds that also advise 

U.S. funds. Id. 

61See generally ICI Letter, at 4–7. 

62MFA Letter, at 12. 

63SIFMA AMG Letter, at 5. The Commission 

notes that SIFMA AMG provided this specific 

recommendation only with respect to CTAs’ § 4.7 

trading programs. SIFMA AMG did not provide a 

similar recommendation for CPOs and their § 4.7 

pools. 

64 Id. 

65 Dechert Letter, at 5. This approach was also 

acknowledged by other commenters in both 

comment letters and during ex parte meetings with 

Commission staff as a possible, acceptable 

alternative to the Proposal. See, e.g., MFA Comment 

Letter II, at 2 (stating ‘‘if the CFTC decides to move 

forward with any proposed disclosure 

requirements, it is critical that the Commission 

exempt CPOs and CTAs with respect to 4.7(a)(2) 

investors from the disclosure requirements’’). 

66 ICI Letter, at 9. 

67Proposal, 88 FR 70853–55. 

68See 17 CFR 1.3 (defining ‘‘person’’ as including 

individuals, associations, partnerships, 

corporations, and trusts). 

69Proposal, 88 FR 70853, n. 17–18 (describing 

these two different types of QEPs in further detail). 

70 17 CFR 4.7(a)(1)(v)(A), or as amended by the 

Final Rule, 17 CFR 4.7(a)(5)(i). The Commission 

explains further below that the Final Rule adopts 

several technical amendments reorganizing and 

renumbering portions of Commission regulation 

§ 4.7, including the paragraph containing 

definitions. As a result of the Final Rule, the new 

citations for the Portfolio Requirement thresholds 

will be 17 CFR 4.7(a)(5)(i) through (iii). 

risks.’’ 56 Multiple commenters also 

argued that the minimum disclosure 

requirements are either unnecessary or 

inappropriate when applied to common 

usage scenarios involving complex fund 

structures or scenarios in which the 

CPO or CTA relies upon Commission 

regulation § 4.7 solely because no other 

appropriate exemption for their activity 

exists.57 One commenter argued that 

‘‘layering’’ the current performance and 

disclosure rules on complex multistrategy mandates ‘‘would not provide 

clearer or more accurate disclosures to 

investors,’’ and instead, ‘‘would 

potentially require any disclosures to 

attempt to compensate for the flexibility 

inherent in these products and 

potentially result in disclosures that are 

so generic as to be meaningless to 

investors.’’ 58 Another commenter stated 

that, ‘‘many of [their] CTA members are 

also CPOs and offer separate accounts 

only to QEPs who seek to invest a 

substantial amount of capital through a 

separate account structure rather than 

pool participation,’’ describing these 

account arrangements as ‘‘often heavily 

negotiated.’’ 59 Another commenter 

provided background on the relief 

Commission regulation § 4.7 provides to 

registered and offshore funds requiring 

a registered CTA, describing four 

common scenarios where investment 

advisers rely on Commission regulation 

§ 4.7 for CTA compliance relief with 

respect to a registered or offshore fund 

requiring a registered CPO and CTA.60

With respect to these CTA-specific 

scenarios, the commenter argued that if 

the proposed disclosure requirements 

were implemented in these contexts, 

commonly controlled entities would 

likely be required to provide disclosures 

to entities or persons that either already 

receive them, or already have access to 

such information, or would result in the 

Commission implementing regulatory 

authority over certain entities that the 

CFTC has traditionally sought not to 

oversee directly.61

Last, and perhaps most significantly, 

four commenters provided the 

Commission with potential alternatives 

to the minimum disclosure requirement 

framework proposed in the NPRM. One 

commenter suggested that the 

Commission instead amend 

Commission regulation § 4.7 to require 

CPOs and CTAs to provide disclosures 

to QEP investors, the scope and 

substance of which, however, would be 

‘‘determined at the discretion of the 4.7 

CPO or CTA.’’ 62 Another commenter 

suggested that the Commission instead 

consider limiting the required QEP 

Disclosures to ‘‘risk factors, the CTA’s 

trading programs, fees and conflicts of 

interest to be provided to clients who 

are (a) natural persons and (b) legal 

organizations who are not eligible 

contract participants.’’ 63 This 

commenter also requested that, ‘‘where 

such information is disclosed to clients 

or prospective clients through 

compliance with an existing regulatory 

regime (e.g., via disclosure in the CTA’s 

Form ADV Part 2 brochure), the 

Commission should permit satisfaction 

of the disclosure requirement by 

substituted compliance.’’ 64 A third 

commenter asked the Commission to 

consider adopting the disclosure 

requirements such that they would ‘‘not 

apply where exempt pool participants 

and exempt account clients qualify as 

QEPs under CFTC Rule 4.7(a)(2),’’ 

referring to those QEPs that are not 

subject to the Portfolio Requirement 

discussed in further detail below.65

Finally, a fourth commenter opined that 

the minimum disclosure requirements 

‘‘should only apply to Regulation 4.7 

CTA clients that are natural persons 

who are residents of the United 

States.’’ 66

3. Further Consideration of Proposed 

Minimum QEP Disclosures 

After considering the feedback 

received, the Commission has 

determined it appropriate to take 

additional time to consider the concerns 

articulated as well as the alternatives to 

the proposed QEP disclosure 

amendments put forward by 

commenters. Therefore, the Final Rule 

does not adopt minimum disclosure 

requirements to Commission regulation 

§ 4.7. Rather, the Commission is 

prioritizing in this Final Rule the 

adoption of amendments to Commission 

regulation § 4.7 that incorporate the 

proposed Portfolio Requirement 

increases in the QEP definition and add 

the monthly account statement schedule 

for certain § 4.7 pools, while it 

continues to evaluate regulatory 

alternatives and may adopt further 

changes in the future. 

C. Updating Financial Thresholds in the 

Portfolio Requirement of the ‘‘Qualified 

Eligible Person’’ Definition 

As explained briefly above, the 

Commission proposed to amend the 

definition of the ‘‘Portfolio 

Requirement,’’ in Commission 

regulation § 4.7 by updating its financial 

thresholds in a manner that accounts for 

the effects of inflation over the thirtytwo years since their initial adoption 

with the intention of continuing to align 

the Portfolio Requirement with the 

Commission’s original regulatory 

intent.67 Commission regulation § 4.7 

bifurcates the definition of QEP into two 

different groups of persons that may 

qualify: (1) those persons 68 who do not 

need to satisfy an additional Portfolio 

Requirement to be considered a QEP; 

and (2) those persons who must satisfy 

the Portfolio Requirement to be 

considered a QEP.69 The Commission 

further explained that the current 

Portfolio Requirement contains two 

thresholds whereby a person can be 

deemed a QEP: (1) owning securities 

(including pool participations) of 

issuers not affiliated with such person 

and other investments with an aggregate 

market value of at least $2,000,000 70

(Securities Portfolio Test); or (2) having 

on deposit with a futures commission 

merchant (FCM), for its own account at 

any time during the six months 

preceding either the date of sale to that 

person of a pool participation in the 

§ 4.7 pool or the date the person opens 

an account with the CTA for a § 4.7 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78799 

71 17 CFR 4.7(a)(1)(v)(B), or as amended by the 

Final Rule, 17 CFR 4.7(a)(5)(ii). 

72 17 CFR 4.7(a)(1)(v)(C), or as amended by the 

Final Rule, 17 CFR 4.7(a)(5)(iii). 

73Proposal, 88 FR 70854. 

74 Id. 

75Using the indexes, as of February 2023, the 

Commission explained in the NPRM that 

$2,000,000 had the same buying power as 

$4,270,000, and $200,000 had the same buying 

power as approximately $427,000. Id. 

76 Id. 

77See SIFMA AMG Letter, at 11; AIMA Letter, at 

4; IAA Letter, at 2; Dechert Letter, at 14. 

78See MFA Letter, at 3 (explaining that ‘‘an 

increase in the investor qualification thresholds for 

QEPs could modernize CFTC Regulation 4.7 to meet 

contemporary expectations regarding sophisticated 

investors,’’ and that the proposed increases ‘‘would 

bring the Portfolio Requirement monetary threshold 

into closer alignment with the qualified purchaser 

. . . standard, consistent with the investor base for 

many 4.7 pools’’); SIFMA AMG Letter, at 11 (‘‘[W]e 

think it makes sense to update the Portfolio 

Requirement to ensure that QEPs remain limited to 

those investors who are truly sophisticated.’’); 

AIMA Letter, at 4 (‘‘We broadly support the 

proposed changes to the Portfolio Requirement 

Thresholds.’’); IAA Letter, at 2 (‘‘We do not object 

to the Commission’s proposal to update the 

Portfolio Requirement thresholds for QEPs to adjust 

for inflation.’’); Dechert Letter, at 14 (‘‘[W]e do not 

have an issue with CFTC’s proposal to increase the 

two thresholds in the Portfolio Requirement.’’). 

79See, e.g., MFA Letter, at 5 (‘‘Doubling the QEP 

dollar thresholds is sufficient to address the 

Commission’s current investor protection and 

modernization goals, without conditioning the 

increase on the adoption of a prescriptive, retail 

orientated disclosure regime contained in the 

Disclosure and Performance Rules.’’); SIFMA AMG 

Letter, at 11 (‘‘In our view, this update should 

address the Commission’s concerns articulated in 

the Proposal at large regarding investor 

sophistication and access to information, thus 

obviating the need to impose mandatory disclosure 

requirements in addition.’’); AIMA Letter, at 4 (‘‘If 

the Portfolio Requirement thresholds are adjusted 

appropriately, then there is no reason why the 

Commission should also eliminate the disclosure 

exemptions under Regulation 4.7.’’); IAA Letter, at 

2 (‘‘We believe that raising [the Portfolio 

Requirement thresholds] should be sufficient to 

address the Commission’s concerns, and that the 

additional proposed disclosures are not 

necessary.’’). 

80Proposal, 88 FR 70854 (citing the 1992 

Proposed Rule, 57 FR 3152). 

trading program, at least $200,000 in 

exchange-specified initial margin and 

option premiums, together with 

required minimum security deposits for 

retail forex transactions, for commodity 

interest transactions 71 (Initial Margin 

and Premium Test). Commission 

regulation § 4.7 also provides that 

persons may satisfy the Portfolio 

Requirement by owning a portfolio 

comprised of a combination of the funds 

or property specified in the Securities 

Portfolio Test and the Initial Margin and 

Premium Test, which, when expressed 

as percentages of the required amounts, 

meet or exceed 100%.72 Therefore, if a 

person required to satisfy the Portfolio 

Requirement meets one of the tests (or 

some combination of the two), as 

described above, the CPO or CTA may 

consider such person qualified as a QEP 

and accept them as a § 4.7 pool 

participant or advisory client, 

respectively. 

In the Proposal, the Commission 

explained its preliminary conclusions 

that updating the dollar thresholds 

within the Securities Portfolio Test and 

the Initial Margin and Premium Test 

would be appropriate because the 

thresholds had not been updated since 

their adoption in 1992.73 The 

Commission further explained its belief 

that the Consumer Price Index for All 

Urban Consumers (CPI–U) and the 

Consumer Price Index for Urban Wage 

Earners and Clerical Workers (CPI–W) 

would be suitable benchmarks for 

determining the general impact of 

inflationary pressures on the existing 

Portfolio Requirement thresholds; 

employing those indexes, the 

Commission ultimately proposed 

doubling the Securities Portfolio Test to 

$4,000,000, and the Initial Margin and 

Premium Test to $400,000, while also 

retaining the existing option to meet the 

Portfolio Requirement through a 

combination of the two tests adding up 

to 100%.74 Although the Commission 

acknowledged that the proposed update 

to the dollar thresholds were not an 

exact reflection of the impact of 

inflation,75 the Commission reasoned 

that approximating these thresholds to 

the nearest million and hundred 

thousand provided clear and fair 

thresholds that would better facilitate 

compliance.76 After careful 

consideration of the comments received, 

as well as additional analysis of the 

benchmarks the Commission initially 

used to determine the impact of 

inflation on the existing Portfolio 

Requirement thresholds, the 

Commission is adopting the 

amendments to the Portfolio 

Requirement as proposed. 

Commenters generally supported the 

Commission’s proposed amendments to 

the Portfolio Requirement. Of the eight 

responses the Commission received on 

the Proposal as a whole, five 

commenters responded directly to the 

Commission’s proposal to update the 

Portfolio Requirement.77 MFA, SIFMA 

AMG, AIMA, IAA, and Dechert 

supported the Commission’s proposal to 

update the Portfolio Requirement,78

although some commenters further 

stated that the adoption of these 

threshold increases should not be 

coupled with the addition of minimum 

disclosure requirements in Commission 

regulation § 4.7. In particular, several 

commenters expressed their view that 

appropriately updating the Portfolio 

Requirement thresholds should alleviate 

the concerns raised by the Commission 

in the NPRM by providing additional 

customer protection for natural persons 

(and other QEPs subject to the Portfolio 

Requirement) and modernizing 

Commission regulation § 4.7, which 

would thereby render any additional 

disclosure requirements unnecessary.79

The Commission agrees that increasing 

the thresholds brings Commission 

regulation § 4.7 back into alignment 

with the Commission’s original 

intention in 1992 for the purpose of 

differentiating between retail investors 

and more sophisticated market 

participants. The increases to the 

Portfolio Requirement thresholds ensure 

that persons unable to meet those 

metrics receive the full panoply of 

disclosures and other customer 

protections required for non-QEP pool 

participants and advisory clients. 

Although the Commission is not 

finalizing the proposed amendments 

that would add minimum disclosure 

requirements to Commission regulation 

§ 4.7 in this Final Rule, the Commission 

notes that commenters asserted that 

raising the Portfolio Requirement 

thresholds would also address the 

Commission’s concerns regarding the 

informational discrepancy between 

CPOs’ and CTAs’ prospective and actual 

pool participants and advisory clients. 

The Commission proposed the increases 

to the thresholds in the Portfolio 

Requirement to ensure that it continued 

to serve as ‘‘objective criteria’’ to 

distinguish between retail participants 

in the commodity interest markets and 

those persons ‘‘with a high degree of 

sophistication with regard to 

investments as well as financial 

resources to withstand the risk of their 

investments.’’ 80 Essentially, increasing 

the Portfolio Requirement thresholds in 

the manner proposed in the NPRM 

effectively bridges the financial gap that 

has developed between the amounts the 

Commission adopted in 1992 and the 

actual buying power of those amounts 

in 2024, due to inflationary effects 

experienced in that time period. 

In addition to general support from 

commenters, the Commission believes 

that updated information from the 

indexes used to benchmark the 

proposed thresholds within the 

Portfolio Requirement continues to 

support the proposed increases. In 

developing this Final Rule, the 

Commission revisited the two inflation 

indexes published by the United States 

Bureau of Labor Statistics (BLS) used to 

devise the proposed amendments to the 

Portfolio Requirement. As explained in 

the Proposal, the Commission consulted 


khammond on DSKJM1Z7X2PROD with RULES
78800 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

81See the U.S. BLS Handbook of Methods, for 

more information on the CPI, CPI–U, and CPI–W, 

available at https://www.bls.gov/opub/hom/cpi/ 

presentation.htm. As described by the BLS 

Handbook of Methods, CPI–U represents the buying 

habits of the residents of urban and metropolitan 

areas in the United States and covers over 90 

percent of the U.S. population. Id. Comparatively, 

the CPI–W is computed using the same prices as the 

CPI–U, but the weights of the CPI–W are based on 

a subset of the CPI–U population, covering 

approximately 30 percent of the U.S. population. Id. 

The CPI–W also includes households where more 

than one-half of the household’s earners must have 

been employed for at least 37 weeks during the 

previous 12 months. Id. Given the relevance of 

these indexes to the population of natural persons 

that may qualify as QEPs via the Portfolio 

Requirement, the Commission believes these 

indexes are the most appropriate to use in 

determining today’s buying power of the Portfolio 

Requirement’s monetary thresholds established in 

1992. 

82See Proposal, 88 FR 70854 The indexes show 

that inflation has had an appreciable effect on the 

monetary thresholds promulgated in the 1992 Final 

Rule. The CPI–U and CPI–W data expose that the 

current thresholds may no longer be indicative of 

a high level of investor sophistication, acumen, and 

resources that the Commission anticipated when 

the Portfolio Requirement was promulgated. Based 

on analysis using CPI–U data, for example, as of 

February 2023, the Securities Portfolio Test’s 

$2,000,000 threshold has equal purchasing power 

as approximately $4,270,000, and the $200,000 

specification in the Initial Margin and Premiums 

Test has equal purchasing power as approximately 

$427,000. See also id. at 70854, n. 30. 

83 Id. at 70855. 

84The actual calculator for CPI–U can be found 

at https://www.bls.gov/data/inflation_

calculator.htm. Similar to the Proposal, the 

Commission is choosing to include the July 2024 

CPI–U data above because it provides a clear 

example of today’s buying power of the Portfolio 

Requirement, as it was established in August 1992, 

and because the data can be easily accessed and 

verified via the BLS inflation calculator link 

provided herein. In comparing the results of each 

index, as applied to the Portfolio Requirement 

thresholds, the Commission found no material 

difference between the CPI–W and CPI–U. Analysis 

using the CPI–W provided similar buying power 

figures to those produced by the CPI–U analysis. 

Given that the Commission is proposing updated 

thresholds rounded down to the nearest million and 

hundred thousand, the Commission believes that 

providing the CPI–U analysis is sufficient for 

purposes of this Final Rule. 

85NFA Letter, at 3. NFA also stated that the 

Commission, in its 1992 Proposal, acknowledged 

that the SEC’s accredited investor definition under 

SEC Regulation D was used as the ‘‘foundation’’ to 

define categories of QEPs. See also 57 FR 3148, 

3151–3152 (Jan. 28, 1992) (1992 Proposal). 

86 1992 Proposal, 57 FR 3151. 

87 Id. (emphasis added). 

88 17 CFR 230.501(a)(6). 

the CPI–U and CPI–W to understand the 

approximate effect of inflation on the 

dollar value thresholds within the 

Portfolio Requirement and the current 

buying power of those thresholds.81 The 

purpose of consulting these benchmarks 

was to determine whether the dollar 

thresholds within the Portfolio 

Requirement still reflect the heightened 

standard of investor activity and 

sophistication that the Commission 

considered sufficient for certain persons 

to qualify as a QEP in adopting the 

Portfolio Requirement in 1992. At the 

time of the Proposal, the Commission 

preliminarily concluded that the 

thresholds within the Portfolio 

Requirement were significantly 

devalued by over three decades of 

inflationary effects, such that the 

thresholds no longer served as the 

investor protection guardrails that the 

Commission originally intended.82 If 

left unaddressed, the Commission 

believes that the gap between the actual 

buying power of the original Portfolio 

Requirement thresholds and the 

Commission’s original intent of limiting 

QEPs to financially sophisticated 

persons with significant commodity 

interest trading experience will only 

widen. In the Proposal, the Commission 

specifically requested feedback from 

commenters on whether the CPI–U and 

CPI–W indexes were ‘‘the most 

appropriate for considering inflation on 

the thresholds within the Portfolio 

Requirement,’’ and if not, the 

Commission also requested feedback on 

any other indexes or methods it should 

use in assessing the effect of inflation.83

The Commission did not receive any 

feedback in response to this question, 

and therefore, will continue to use the 

CPI–U and CPI–W indexes as 

benchmarks for its analysis. Using the 

same example, the Commission used in 

the Proposal, based on analysis using 

CPI–U data, as of July 2024, the 

$2,000,000 threshold in the Securities 

Portfolio Test has the same buying 

power as approximately $4,464,726, and 

the $200,000 threshold in the Initial 

Margin and Premiums Test has the same 

buying power as approximately 

$446,472.84 As shown by the example, 

the disparity in buying power will 

continue to be exacerbated over time. 

Although the Commission believes 

the updated information from the 

inflation indexes justifies updating the 

Portfolio Requirement thresholds, some 

commenters raised concerns that an 

increased Portfolio Requirement would 

have wider consequences. One 

commenter raised a concern that, if the 

Commission significantly raised the 

Portfolio Requirement’s financial 

standards, it ‘‘may move certain persons 

that may desire to participate in a 4.7 

pool or managed account program 

further away from the SEC’s current 

accredited investor qualification 

standards for private offerings,’’ and 

recommended that the Commission 

work with the SEC to review the 

accredited investor definition and 

determine if any changes are 

appropriate, rather than update the 

Portfolio Requirement thresholds on its 

own.85 The Commission agrees with the 

commenter that it is desirable to 

harmonize overlapping regulatory 

regimes where possible and appropriate, 

and recognizes that it is perhaps 

particularly relevant to Commission 

regulation § 4.7, where the Commission 

specifically identified and utilized the 

SEC’s accredited investor definition as a 

‘‘foundation’’ for developing the 

exemption.86 Despite that 

acknowledgement, the Commission is 

not persuaded that increasing the 

financial thresholds within the Portfolio 

Requirement would create a large 

enough gap between the two 

frameworks, so as to render them 

unworkable in tandem. The Portfolio 

Requirement is a unique feature of 

Commission regulation § 4.7 that has 

never appeared as a qualification in the 

SEC’s accredited investor definition. In 

1992, as part of the Commission’s 

discussion of the SEC’s accredited 

investor definition serving as a 

‘‘foundation’’ for Commission regulation 

§ 4.7, the Commission stated that it 

‘‘[proposed] a definition of QEP that is 

designed generally to include persons 

who qualify as accredited investors 

under Regulation D [17 CFR 230.500 

through 230.508] and who meet certain 

additional qualifications.’’ 87 The 

Commission was clear in 1992 that the 

Portfolio Requirement was intended to 

be an ‘‘additional qualification’’ on top 

of meeting the accredited investor 

definition, and that its consideration of 

aspects of the accredited investor 

definition in developing Commission 

regulation § 4.7 were with respect to the 

categories of QEPs and not the Portfolio 

Requirement. The Portfolio Requirement 

is a CFTC-only component of 

Commission regulation § 4.7 that was 

developed intentionally to impose a 

heightened standard for QEPs as 

opposed to simply relying on the 

provisions of the securities laws. It is 

entirely plausible that, under the 

existing frameworks, a person may 

qualify as an accredited investor, but 

also not be a QEP. For example, 

§ 230.501(a)(6) of Regulation D defines 

an accredited investor as any natural 

person who had an individual income 

in excess of $200,000 in each of the two 

most recent years, or joint income with 

that person’s spouse in excess of 

$300,000 in each of those years.88 If a 

natural person narrowly meets that 

accredited investor income test, it is 

entirely possible that they do not have 

sufficient assets to meet the Securities 

Portfolio Test, or sufficient commodity 

interest trading to meet the Initial 

Margin and Premiums Test under the 

current Portfolio Requirement in 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78801 

89See 1992 Final Rule, 57 FR 34854, quoting 

1992 Proposal, 57 FR 3151 (explaining that the 

Commission intended to define QEP status by 

means of objective criteria that such persons 

possess either the investment expertise and 

experience necessary to understand the risks 

involved, as evidenced by the registered status of 

certain investment professionals, or have an 

investment portfolio of sufficient size to indicate 

that the participant has substantial investment 

experience and thus a high degree of sophistication 

with regard to investments as well as financial 

resources to withstand the risk of their 

investments). 

90This list includes, but is not limited to: (1) 

certain investment companies registered under the 

Investment Company Act of 1940 (ICA) or business 

development companies as defined in section 

2(a)(48) of the ICA: (2) banks as defined in section 

3(a)(2) of the Securities Act of 1933 (Securities Act); 

or any savings and loan association or other 

institution defined in section 3(a)(5)(A) of the 

Securities Act acting for its own account or for the 

account of a QEP; (3) certain insurance companies 

acting for their own account or that of a QEP; (4) 

certain state employee benefit plans; (5) certain 

employee benefit plans within the meaning of the 

Employee Retirement Income Security Act of 1974 

(ERISA); (6) private business development 

companies; (7) certain organizations described in 

section 501(c)(3) of the Internal Revenue Code (IRC) 

with total assets in excess of $5,000,000; (8) certain 

corporations, Massachusetts or similar business 

trusts, or partnerships, limited liability companies 

or similar business ventures; (9) natural persons 

meeting the individual net worth or joint net worth 

tests within the ‘‘accredited investor’’ definition; 

(10) natural persons who would otherwise be 

considered accredited investors; (11) certain pools, 

trusts, insurance company separate accounts, or 

bank collective trusts; and (12) certain government 

entities. 

91This list includes, but is not limited to: (1) 

registered FCMs, registered retail foreign exchange 

dealers (RFEDs), registered swap dealers, and 

principals thereof; (2) a registered broker or dealer, 

or principal thereof; (3) certain registered CPOs, and 

principals thereof (active for two or more years, and 

$5,000,000 in total aggregate commodity pool 

assets); (4) certain registered CTAs, and principals 

thereof (active for two or more years, and advising 

commodity accounts, in the aggregate, of $5,000,000 

or more); (5) certain investment advisers registered 

under the Investment Advisers Act of 1940 (IAA), 

and principals thereof; (6) ‘‘qualified purchasers’’ as 

defined in section 2(a)(51)(A) of the ICA; (7) 

‘‘knowledgeable employees’’ as defined in 17 CFR 

270.3c–5 pursuant to the ICA; (8) certain persons 

associated with an exempt pool or account; (9) 

certain trusts; (10) organizations described in 

section 501(c)(3) of the IRC, where the trustee, 

founder, or person making investment decisions is 

also a QEP; (11) non-United States persons; and (12) 

exempt pools. 

92 1992 Proposal, 57 FR 3152. 

93MFA Letter, at 4. 

94 Id. 

95See Proposal, 88 FR 70855, Request #2 (‘‘The 

Commission is also seeking any data or information, 

from CPOs and CTAs that utilize Regulation 4.7, on 

the estimated number of advisory clients and pool 

participants that currently qualify as QEPs via the 

existing Portfolio Requirement, but would not so 

qualify if the increased monetary thresholds in the 

Portfolio Requirement described above are 

adopted.’’). 

96The only mechanism available for the 

Commission to confirm the existence of this 

population would be to review all documents 

required to be kept by § 4.7 CPOs and CTAs that 

validate their advisory clients’ or pool participants’ 

status as QEPs and assess how many would fall 

within the ‘‘gap’’ population. 

97Proposal, 88 FR 70854–55 (‘‘Acknowledging 

that the Portfolio Requirement will likely result in 

a certain portion of currently-qualifying QEPs no 

longer meeting the thresholds, the Commission 

noted that current Regulation 4.7(a)(3) provides that 

CPOs must assess a person’s QEP status at the time 

of sale of any pool participation units including 

satisfying the Portfolio Requirement. Likewise, 

CTAs must make a similar assessment at the time 

that a person opens an exempt account. As opposed 

to requiring mandatory redemptions or terminations 

of advisory relationships for those current QEPs 

who may not meet the proposed heightened 

thresholds, the Commission expects that continuing 

this requirement minimizes the potential for 

disruption to the 4.7 pool or trading program, as 

well as possible negative consequences for the 

current QEPs. Therefore, the proposal was for the 

retaining the requirements of Regulation 4.7(a)(3) in 

Proposed Regulation 4.7(a)(6)(ii). Additionally the 

Commission sought comment on this issue in the 

proposal.). 

Commission regulation § 4.7. To put it 

simply, in the context of natural 

persons, the accredited investor 

definition attempts to measure financial 

sophistication by annual income or net 

worth, whereas the Portfolio 

Requirement is focused on a person’s 

experience trading and managing a 

portfolio of sufficient size to 

demonstrate an understanding of the 

risks in the securities and commodity 

interest markets; the latter being 

arguably more relevant to assessing a 

person’s sophistication and investment 

acumen given the complexity and 

unique risks associated with the 

commodity interest markets.89

Moreover, not all persons are required 

to meet the Portfolio Requirement to be 

QEPs. The Portfolio Requirement only 

applies to persons listed under current 

Commission regulation § 4.7(a)(3),90

whereas those categories of persons 

listed under current Commission 

regulation § 4.7(a)(2) do not have to 

meet its terms to be QEPs.91 In creating 

and adopting the QEP definition and 

Commission regulation § 4.7, the 

Commission viewed these two 

categories as separate ‘‘classes’’ and 

intentionally provided an additional 

eligibility condition, in the form of the 

Portfolio Requirement, for those persons 

listed in current Commission regulation 

§ 4.7(a)(3).92 The amendments to the 

financial thresholds being adopted 

today do not expand the Portfolio 

Requirement to the other persons 

enumerated under current Commission 

regulation § 4.7(a)(2) or otherwise alter 

these two original categories of QEPs. 

The establishment of the Portfolio 

Requirement was an intentional, 

alternative mechanism for qualification 

as a QEP, functioning independent of 

the SEC’s accredited investor definition, 

and has been part of the terms of 

Commission regulation § 4.7 since its 

inception in 1992. As such, the 

Commission is not persuaded that 

updating the Portfolio Requirement by 

adjusting its thresholds would 

meaningfully disrupt existing 

harmonization between CFTC and SEC 

regulatory regimes, as the two standards 

were never identical and were not 

intended to be. Nor does the 

Commission believe that it should delay 

increasing the Portfolio Requirement 

until the accredited investor definition 

is otherwise amended. 

Another commenter expressed 

concern that the increases to the 

financial thresholds within the Portfolio 

Requirement could have negative effects 

on persons who currently qualify as 

QEPs, but would no longer be 

considered QEPs under the updated 

Portfolio Requirement.93 Specifically, 

the commenter advocated for the 

grandfathering of investors who are 

currently QEPs, but would no longer 

qualify as such under the increased 

Portfolio Requirement, and encouraged 

the Commission to ‘‘clarify and explain 

its expectations with respect to 4.7 

offerings with pool participants that are 

both QEPs, and former QEPs that no 

longer satisfy the [increased] Portfolio 

Requirement.’’ 94 In the Proposal, the 

Commission specifically requested any 

data or information from CPOs or CTAs 

that utilize Commission regulation § 4.7 

on the number of advisory clients and 

pool participants that would be directly 

affected by the increase.95 Despite 

raising this concern and the 

Commission’s specific request, neither 

this commenter nor any other provided 

information or data on the number of 

advisory clients or pool participants that 

currently qualify as QEPs via the 

existing Portfolio Requirement, but 

would not so qualify if the increased 

thresholds are adopted. 

Notwithstanding the lack of specific 

information to assess the magnitude of 

the class of persons affected, the 

Commission acknowledges that some 

persons will fall within this ‘‘gap’’ 

population that would no longer be 

considered QEPs under the updated 

Portfolio Requirement.96 Because of that 

reality, the Commission preliminarily 

addressed its position with respect to 

such former QEPs within the Proposal.97

For the sake of clarity, however, the 

Commission today restates its position 

below on how it expects CPOs and 

CTAs to comply with the updated 

Portfolio Requirement for its advisory 

clients or pool participants that 

previously qualified as QEPs, but would 

not so qualify under the updated 

Portfolio Requirement. 

The Commission intends to retain, 

and will apply, the provision which 

requires that, for persons that must 


khammond on DSKJM1Z7X2PROD with RULES
78802 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

98See 17 CFR 4.7(b)(5) and (c)(2) (requiring CPOs 

and CTAs to maintain books and records including, 

without limitation, records relating to the 

qualifications of qualified eligible persons). 

99Proposal, 88 FR 70863 (citing 17 CFR 4.7(b)(3), 

4.22(a) and (b)). 

100 17 CFR 4.7(b)(3)(i). 

101 In the Proposal, the Commission defined 

‘‘Funds of Funds’’ as pools that invest in unrelated 

funds, pools, or other collective investment 

vehicles. Proposal, 88 FR 70856, n. 42. 

102Proposal, 88 FR 70863 (citing CFTC Letters 

18–29, 19–01, 19–03, 20–11, 21–16, and 23–04). 

103 Id. 

104Proposal, 88 FR 70878. 

105 Id. at 70863. 

106SIFMA AMG Letter, at 11; IAA Letter, at 7; 

NFA Letter, at 5; Dechert Letter, at 11. 

107Proposal, 88 FR 70863. 

satisfy the Portfolio Requirement, a CPO 

or CTA must have the reasonable belief, 

at the time of sale of a pool participation 

in an exempt pool, or at the time that 

a person opens an exempt account, that 

such person satisfies the Portfolio 

Requirement. In effect, if a CPO or CTA 

has previously sold a pool participation 

or opened an exempt account for a 

person that qualified as a QEP under the 

previous Portfolio Requirement, but 

who does not meet the updated 

Portfolio Requirement, the CPO or CTA 

would not be required to redeem such 

person’s pool participations, or to 

terminate the advisory relationship with 

that person. However, a CPO or CTA 

would not be permitted to sell any 

additional pool participations or open 

any additional exempt accounts for any 

person that does not meet the updated 

Portfolio Requirement. The avoidance of 

required redemption or account closure 

should limit any potential disruptions 

or negative consequences either to the 

§ 4.7 pool or trading program, or the 

pool participant or advisory client. 

The Commission believes, however, 

that it would run counter to the intent 

of the updated Portfolio Requirement to 

permit a wholesale grandfathering of 

any persons who had previously been 

considered QEPs prior to the update. 

Additionally, the Commission is 

concerned that doing so may lead to an 

influx of persons into § 4.7 pools and 

trading programs prior to the 

implementation date of the updated 

Portfolio Requirement, solely to evade 

the increased financial thresholds. The 

Commission notes that, pursuant to 

current Commission regulation § 4.7 

requirements, CPOs and CTAs are 

responsible for determining the QEP 

status of their prospective pool 

participants or advisory clients, 

regardless of how such QEP meets that 

definition, and must retain evidence of 

such determinations as part of their 

books and records.98

D. Permitting Monthly Account 

Statements for Certain § 4.7 Pools 

Consistent With Commission Exemptive 

Letters 

As the Commission explained in the 

Proposal, Commission regulation 

§ 4.7(b)(3) provides an exemption from 

the requirement in Commission 

regulation § 4.22(a) and (b) that CPOs 

provide monthly account statements 

containing specific information to 

participants in their commodity pools.99

With respect to § 4.7 pools, CPOs are 

permitted to distribute account 

statements no less frequently than 

quarterly within 30 days after the end of 

the reporting period.100 The 

Commission noted, however, that CPOs 

of § 4.7 pools that are ‘‘Funds of 

Funds’’ 101 have reported to Commission 

staff that they often have difficulty 

complying with the quarterly account 

statement schedule required by 

Commission regulation § 4.7(b)(3). The 

Commission stated further that such 

CPOs regularly request exemptive letters 

from the Commission to permit them to 

follow an alternate account statement 

schedule, explaining that because they 

cannot control the timing of when they 

receive financial information from 

underlying investee collective 

investment vehicles, investor Fund of 

Funds CPOs often do not receive the 

requisite information for their own § 4.7 

pool periodic reporting until the 30-day 

period for distribution is nearly expired. 

The Commission explained that, over 

the years, it has routinely granted these 

exemptive letter requests, permitting 

requesting CPOs to distribute monthly, 

rather than quarterly, account 

statements for their § 4.7 Fund of Funds 

pools within 45 days of the monthend,102 and that this approach allowed 

the requesting CPOs additional time to 

receive and gather the information 

required for their account statements, 

while also ensuring that QEP pool 

participants receive both more accurate 

and more frequent reporting. 

Consistent with its past efforts to 

memorialize routinely granted 

Commission letter relief via regulatory 

amendments, the Commission proposed 

to add paragraph (b)(3)(iv) to 

Commission regulation § 4.7, noting that 

the amendment was intended to 

streamline availability, provide 

consistency, and eliminate the need for 

Commission staff to process and 

respond to requests individually.103

Proposed Commission regulation 

§ 4.7(b)(3)(iv) stated, where the exempt 

pool is invested in one or more other 

pools or funds operated by third parties, 

the commodity pool operator may 

choose instead to prepare and distribute 

to its pool participants statements on a 

monthly basis within 45 days of the 

month-end, provided that such account 

statements otherwise meet the 

requirements of Commission regulation 

§ 4.7(b)(3), and that the CPO notifies its 

§ 4.7 pool participants of this alternate 

distribution schedule either in the 

pool’s offering memorandum, or upon 

adoption of this reporting schedule.104

The Commission requested comment on 

the proposed amendment, in particular 

whether it effectively creates a 

mechanism in Regulation § 4.7(b)(3) that 

is equivalent to the exemptive letters 

currently issued by the Commission, 

and whether the alternate account 

statement distribution schedule and 

notice requirements are clear.105

In response to this aspect of the 

NPRM, the Commission received 

positive feedback from multiple 

commenters, with one commenter 

noting specifically that ‘‘seeking and 

receiving the exemptive relief has come 

with a time and cost burden for CPOs’’ 

operating § 4.7 Fund of Fund pools and 

indicating that the proposed 

amendment would be a welcome 

alternative to that process.106 Given the 

positive public comments, the lack of 

any suggested changes to this 

amendment, as well as its continued 

belief that considering and adopting 

regulatory amendments consistent with 

staff letter relief provides clarity, 

consistency, and streamlines 

availability, the Commission is adopting 

Proposed Commission regulation 

§ 4.7(b)(3)(iv) as proposed. 

E. Other Technical Amendments 

The Proposal also included a number 

of technical amendments to 

Commission regulation § 4.7 designed to 

improve its efficiency and usefulness for 

intermediaries and their prospective 

and actual QEP pool participants and 

advisory clients, as well as the general 

public.107 For example, the Commission 

proposed to delete the introductory 

paragraph to Commission regulation 

§ 4.7 and to generally restructure the 

definitions section in Commission 

regulation § 4.7(a), eliminating what it 

viewed as unnecessary subparagraph 

levels in the QEP definition and 

alphabetizing the definitions for ease of 

reference. The Commission also 

proposed additional amendments to 

ensure that cross-references within 

Commission regulation § 4.7 and in 

other part 4 regulations were accurate. 

The Commission sought comment on 

those technical amendments and 

requested commenters detail any other 

technical amendments it should 

consider for ease of use, as well as 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78803 

108Proposal, 88 FR 70855 (‘‘3. How much time 

would CPOs and CTAs need to determine that their 

existing QEP pool participants and clients would 

continue to satisfy the increased Securities Portfolio 

or Initial Margin and Premium Tests, if adopted as 

proposed?’’); see also Proposal, 88 FR 70859 

(‘‘Should the Commission consider an 

implementation period for the proposed 

amendments, and if so, how much time should the 

Commission allow for CPOs and CTAs to develop 

and prepare QEP Disclosures that would comply 

with the proposed amendments?’’). 

109SIFMA Letter, at 11 (‘‘If, however, the 

Commission declines to do so, we ask that the 

Commission allow for at least an 18-month 

compliance period to allow CPOs and CTAs 

adequate time to develop the necessary compliance 

programs.’’). 

110See discussion in section II.C above for more 

detail on the implementation and applicability of 

the amended Portfolio Requirement to existing QEP 

pool participants and advisory clients. 

111 5 U.S.C. 601, et seq. 

112See, e.g., Policy Statement and Establishment 

of Definitions of ‘‘Small Entities’’ for Purposes of 

the Regulatory Flexibility Act, 47 FR 18618, 18620 

(Apr. 30, 1982). 

113 Id. at 18619–20. Commission regulation 

§ 4.13(a)(2) exempts a person from registration as a 

CPO when: (1) none of the pools operated by that 

person has more than 15 participants at any time, 

and (2) when excluding certain sources of funding, 

the total gross capital contributions the person 

receives for units of participation in all of the pools 

it operates or intends to operate do not, in the 

aggregate, exceed $400,000. See 17 CFR 4.13(a)(2). 

114 Id. at 18620. 

115Proposal, 88 FR 70863–66. 

whether there were any other crossreferences within Commission 

regulation § 4.7 not addressed by the 

Proposal that should be corrected. The 

Commission received no comments on 

these technical amendments, and no 

commenters identified additional 

technical amendments or corrections 

that it should consider. Nevertheless, as 

a result of the reorganization of the 

definitions in Commission regulation 

§ 4.7 accomplished by this Final Rule, 

the Commission has identified several 

regulations outside of 17 CFR part 4 that 

now require technical corrections 

because they refer to certain definitions 

in Commission regulation § 4.7. 

Specifically, the Commission is 

correcting references to defined terms in 

Commission regulation § 4.7 found in 

Commission regulation §§ 1.35, 3.10, 

30.6, 43.6, and 75.10. Therefore, the 

Commission is adopting the technical 

amendments in the NPRM largely as 

proposed, along with technical 

corrections to the regulatory crossreferences outside of part 4 that are 

listed herein. 

F. Effective and Compliance Dates for 

the Final Rule 

In the Proposal, the Commission 

requested feedback from commenters on 

the time needed to comply with the 

proposed Portfolio Requirement update 

and the proposed minimum disclosure 

requirements.108 The Commission only 

received one comment in response, 

requesting an 18-month implementation 

timeline for the proposed minimum 

disclosure requirements.109 As 

discussed above, the Final Rule is not 

adopting minimum disclosure 

requirements in Commission regulation 

§ 4.7 at this time. Nonetheless, the 

Commission is adopting distinct 

compliance dates for each remaining 

component of the Final Rule. 

The compliance date for the increased 

Portfolio Requirement thresholds shall 

be six months from publication of the 

Final Rule in the Federal Register. As 

discussed in section II.C above, the 

updated Portfolio Requirement will 

require § 4.7 CPOs and CTAs to adjust 

their processes for assessing the QEP 

status for both new and existing pool 

participants and advisory clients. 

However, given that the Portfolio 

Requirement update would not require 

§ 4.7 CPOs and CTAs to redeem pool 

participations or otherwise end advisory 

relationships with those QEPs who no 

longer meet the Portfolio Requirement, 

as amended by the Final Rule, and that 

§ 4.7 CPOs and CTAs only need to 

update their QEP evaluation processes 

with the new thresholds on a forwardlooking basis, the Commission believes 

a 6-month implementation period is 

appropriate.110

Finally, the component of the Final 

Rule permitting alternative monthly 

account statement schedule for certain 

§ 4.7 pools that are Funds of Funds, i.e., 

new Commission regulation 

§ 4.7(b)(3)(iv), shall be effective as of the 

Final Rule’s effective date, as described 

above, and following the effective date, 

compliance will be required when a 

CPO elects to utilize this schedule for a 

qualifying § 4.7 pool. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that Federal agencies, in 

promulgating regulations, consider 

whether the regulations they propose 

will have a significant economic impact 

on a substantial number of small 

entities, and if so, to provide a 

regulatory flexibility analysis regarding 

the economic impact on those 

entities.111 If the rules are determined to 

have a significant economic impact, 

such agencies must provide a regulatory 

flexibility analysis regarding such 

economic impact. Each Federal agency 

is required to conduct an initial and 

final regulatory flexibility analysis for 

each rule of general applicability for 

which the agency issues a general notice 

of proposed rulemaking. The Final Rule 

amendments adopted by the 

Commission today would affect only 

persons registered or required to be 

registered as CPOs and CTAs and those 

commodity pools and trading programs 

operated under Commission regulation 

§ 4.7 and offered solely to QEPs. 

1. CPOs 

The Commission has previously 

established certain definitions of ‘‘small 

entities’’ to be used by the Commission 

in evaluating the impact of its rules on 

such entities in accordance with the 

requirements of the RFA.112 With 

respect to CPOs, the Commission 

previously has determined that a CPO is 

a small entity for purposes of the RFA, 

only if it meets the criteria for an 

exemption from registration under 

Commission regulation § 4.13(a)(2).113

The regulations adopted in this Final 

Rule apply to persons registered or 

required to be registered as CPOs with 

the Commission (specifically, those 

registered CPOs whose prospective and 

actual pool participants are restricted to 

QEPs) and/or provide relief to 

qualifying registrants from certain 

periodic reporting burdens. 

Accordingly, the Chairman, on behalf of 

the Commission, certifies pursuant to 5 

U.S.C. 605(b) that this Final Rule will 

not have a significant economic impact 

on a substantial number of small 

entities, with respect to CPOs. 

2. CTAs 

Regarding CTAs, the Commission has 

previously considered whether such 

registrants would be deemed small 

entities for purposes of the RFA on a 

case-by-case basis, in the context of the 

particular Commission regulation at 

issue.114 Because certain of these 

registered CTAs may be small entities 

for the purposes of the RFA, the 

Commission considered in the NPRM 

whether the proposed amendments 

would have a significant economic 

impact on such registrants.115 The 

Commission received no comments on 

the initial regulatory flexibility analysis 

conducted in the Proposal. 

The portions of the Final Rule directly 

impacting CTAs would affect only CTAs 

registered or required to register with 

the Commission that offer and operate 

trading programs designed for QEPs. 

Given that the Commission has 

determined to finalize only the Portfolio 

Requirement increases in this Final 

Rule, the Commission believes that the 

Final Rule amendments will have 

almost no economic impact on 

registered CTAs offering § 4.7 trading 

programs because, beyond increasing 


khammond on DSKJM1Z7X2PROD with RULES
78804 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

116 7 U.S.C. 6m, 6n. 117Proposal, 88 FR 70863–66. 

118As of June 2024, there were approximately 

1,241 CTAs registered with the Commission. 

the thresholds in the Portfolio 

Requirement, the Final Rule does not 

add any other compliance burdens for 

CTAs. 

As stated above, the amendments 

adopted today primarily impact 

registered CTAs offering § 4.7 trading 

programs to QEP advisory clients and 

claiming the compliance exemptions 

currently offered by Commission 

regulation § 4.7. As explained in the 

NPRM, data on the specific size of 

registered CTAs offering § 4.7 trading 

programs is limited, but it has been the 

Commission’s experience that such 

CTAs claiming compliance exemptions 

in Commission regulation § 4.7 for the 

purposes of soliciting and serving QEP 

advisory clients are often large financial 

institutions with substantial financial 

assets and advisory experience, or 

affiliates thereof. Although the 

Chairman, on behalf of the Commission, 

certifies under the RFA that the Final 

Rule will not have a significant impact 

on a substantial number of small 

entities, and hereby provides notice of 

that certification to the Small Business 

Administration, the Commission 

nonetheless has determined that 

publishing a final regulatory flexibility 

analysis is appropriate to ensure that the 

impact of the Final Rule is fully 

addressed. Therefore, the Commission 

has prepared the following final 

regulatory flexibility analysis: 

i. A Statement of the Need for, and 

Objectives of, the Rule 

As the Commission stated in the 

Proposal, and as reiterated above in this 

Final Rule, since the 1992 Final Rule 

adopting Commission regulation § 4.7, 

the Commission has witnessed 

substantial increases in the intermediary 

population utilizing those exemptions 

for § 4.7 pools and trading programs 

offered and available to QEPs. This 

development also coincides with 

current commodity interest market 

conditions, in which the Commission 

has seen significant expansion and 

growth in the complexity and diversity 

of commodity interest products offered 

via § 4.7 pools and trading programs, 

which may be more challenging to fully 

understand. As stated above, the CEA 

grants the Commission the authority to 

regulate and register CTAs, as well as to 

require the maintenance of books and 

records and filing of reports that the 

Commission believes is necessary to 

accomplish its regulatory mission and 

the goals of the CEA.116 The 

Commission has determined to adopt 

the proposed increases to the Portfolio 

Requirement in the QEP definition, 

which will require CTAs to adjust their 

methods of evaluating prospective 

advisory clients’ QEP status. 

ii. A Statement of the Significant Issues 

Raised by the Public Comments in 

Response to the Initial Regulatory 

Flexibility Analysis, a Statement of the 

Assessment of the Agency of Such 

Issues, and a Statement of Any Changes 

Made in the Proposed Rule as a Result 

of Such Comments 

The Commission received no 

comments specifically addressing the 

initial regulatory flexibility analysis 

published in the Proposal.117 However, 

the Commission did receive several 

comments, discussed above, stating that 

the proposed amendments, if adopted, 

would prove costly to intermediaries, 

with such costs being passed down to 

QEP pool participants and advisory 

clients, without necessarily resulting in 

the customer protection benefits the 

Commission intended. Commenters 

asserted that the proposed amendments, 

as applied to common usage scenarios 

in complex fund structures, may require 

CTAs to provide QEP Disclosures to 

entities or persons under common 

control who likely already receive or 

have access to such information; that, in 

other contexts, CTAs have relationships 

with highly sophisticated and wellresourced QEPs, whose disclosures and 

access to information are carefully 

negotiated; and finally, that the 

proposed amendments would be 

duplicative of requirements in the 

securities laws dictating the content and 

disclosures in Form ADV, which is 

commonly filed by investment advisers 

dually registered as CTAs, or of 

disclosures already being made as a 

matter of common market practice. 

After considering these comments, as 

well as potential alternatives raised by 

commenters, the Final Rule does not 

adopt any minimum disclosure 

requirements in Commission regulation 

§ 4.7. The Commission will continue 

evaluating the regulatory alternatives 

and may adopt further changes in the 

future. The Commission has determined 

to adopt the proposed increases to the 

Portfolio Requirement in the QEP 

definition as part of this Final Rule, 

which will require CTAs to adjust their 

methods of evaluating prospective 

advisory clients’ QEP status. Therefore, 

the only impact this Final Rule will 

have on CTAs is with respect to the 

adoption of the Portfolio Requirement 

increases that may have a small effect 

on how CTAs evaluate prospective 

advisory clients’ QEP status. 

iii. A Description of and, Where 

Feasible, an Estimate of the Number of 

Small Entities to Which the Rule Will 

Apply 

CTAs are generally not subject to any 

minimum capital requirements, nor 

does the Commission collect data on the 

‘‘size’’ of registered CTAs via 

Commission registration applications or 

other required Commission filings or 

reports. Therefore, the Commission has 

no data to analyze that would enable it 

to estimate how many registered CTAs 

may be considered small entities for 

RFA purposes. The Commission sought 

comment on this issue in its initial 

regulatory flexibility analysis, but 

received no comments addressing this 

issue or providing relevant data. It is the 

Commission’s experience that registered 

CTAs 118 claiming Commission 

regulation § 4.7 exemptions and offering 

§ 4.7 trading programs to QEP advisory 

clients are frequently large financial 

institutions offering a variety of trading 

programs and strategies. Nonetheless, 

the Commission acknowledges that 

some percentage or portion of the 

population of CTAs affected by this 

Final Rule, i.e., those registered or 

required to register with the 

Commission and utilizing the 

exemptions in Commission regulation 

§ 4.7, may be considered small entities 

as defined by the RFA, though the 

Commission lacks the information or 

data necessary to determine or estimate 

how many. 

iv. A Description of the Projected 

Reporting, Recordkeeping, and Other 

Compliance Requirements of the Rule, 

Including an Estimate of the Classes of 

Small Entities Which Will Be Subject to 

the Requirement and the Type of 

Professional Skills Necessary for 

Preparation of the Report or Record 

The Commission is not adopting the 

minimum disclosure requirements, or 

the corresponding proposed 

recordkeeping, use and amendment 

requirements, in Commission regulation 

§ 4.7, but is adopting adjustments to the 

Portfolio Requirement in the QEP 

definition of that provision. The 

Commission anticipates that the Final 

Rule will affect CTAs claiming 

Commission regulation § 4.7 and 

offering § 4.7 trading programs, which, 

as stated above, may include some small 

entities for RFA purposes. Nonetheless, 

regardless of whether a CTA is 

considered a small entity, the 

Commission believes that all registered 

CTAs offering and managing § 4.7 

trading programs generally possess the 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78805 

119 44 U.S.C. 3501, et seq. 120 Id. 

professional skills necessary to 

accurately evaluate the QEP status of 

prospective advisory clients, which is a 

baseline requirement for CTAs operating 

under claimed exemptions in 

Commission regulation § 4.7, and that 

the Final Rule will require only minor 

adjustments to CTAs’ existing processes. 

v. A Description of the Steps the Agency 

Has Taken To Minimize the Significant 

Economic Impact on Small Entities 

Consistent With the Stated Objectives of 

Applicable Statutes, Including a 

Statement of the Factual, Policy, and 

Legal Reasons for Selecting the 

Alternative Adopted in the Final Rule 

and Why Each One of the Other 

Significant Alternatives to the Rule 

Considered by the Agency Which Affect 

the Impact on Small Entities Was 

Rejected 

The Commission did not propose any 

specific small entity exemption, but in 

the initial regulatory flexibility analysis, 

the Commission identified potential 

alternatives to the proposed 

amendments: (1) to not amend 

Commission regulation § 4.7 to add 

disclosure requirements for § 4.7 trading 

programs; (2) to amend Commission 

regulation § 4.7(c)(1) to require 

compliance with the entirety of the 

disclosure regulations generally 

applicable to registered CTAs offering 

trading programs to non-QEP advisory 

clients; or (3) limiting the application of 

the proposed amendments to registered 

CTAs claiming Commission regulation 

§ 4.7 and offering § 4.7 trading programs 

to those CTAs who are not small entities 

for RFA purposes. 

Although the Commission did not 

receive any comments directly on the 

initial regulatory flexibility analysis, 

multiple commenters made suggestions 

regarding how the Commission might 

limit the scope of the proposed 

disclosure requirements, while still 

accomplishing its customer protection 

goals with respect to QEPs most in need 

of regulatory support. In this Final Rule, 

the Commission has determined to 

adopt the proposed increases to the 

Portfolio Requirement in the QEP 

definition as part of this Final Rule, but 

is not adopting the proposed minimum 

disclosure requirements. Nonetheless, 

the Commission will continue to 

evaluate regulatory alternatives relating 

to minimum disclosure requirements 

and may adopt further changes, in the 

future, as appropriate. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA) imposes certain requirements on 

Federal agencies, including the 

Commission, in connection with 

conducting or sponsoring any 

‘‘collection of information’’ as defined 

by the PRA.119 Under the PRA, an 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid control 

number from the Office of Management 

and Budget (OMB). The PRA is 

intended, in part, to minimize the 

paperwork burden created for 

individuals, businesses, and other 

persons as a result of the collection of 

information by Federal agencies, and to 

ensure the greatest possible benefit and 

utility of information created, collected, 

maintained, used, shared, and 

disseminated by or for the Federal 

Government. The PRA applies to all 

information, regardless of form or 

format, whenever the Federal 

Government is obtaining, causing to be 

obtained, or soliciting information, and 

includes required disclosure to third 

parties or the public, of facts or 

opinions, when the information 

collection calls for answers to identical 

questions posed to, or identical 

reporting or recordkeeping requirements 

imposed on, ten or more persons. 

The Final Rule modifies an existing 

collection of information previously 

approved by OMB and for which the 

Commission has received an OMB 

control number. The title for this 

collection is ‘‘Rules Relating to the 

Operations and Activities of Commodity 

Pool Operators and Commodity Trading 

Advisors and to Monthly Reporting by 

Futures Commission Merchants’’ 

(Collection 3038–0005). Collection 

3038–0005 primarily accounts for the 

burden associated with the 

Commission’s part 4 regulations that 

concern compliance generally 

applicable to CPOs and CTAs, as well as 

certain exemptions from registration as 

such and exclusions from those 

definitions, and available relief from 

compliance with certain regulatory 

requirements, e.g., Commission 

regulation § 4.7. In the Proposal, the 

Commission performed a PRA burden 

analysis of the proposed amendments 

and invited the public and other 

interested parties to comment on any 

aspect of the information collection 

requirements discussed therein. The 

Commission did not receive any such 

comments. The Commission is revising 

Collection 3038–0005 to reflect the 

adoption of the Final Rule amendments 

to Commission regulation § 4.7, as 

discussed in further detail below. 

Collection 3038–0005 governs 

responses made pursuant to part 4 of the 

Commission’s regulations, pertaining to 

the operations of CPOs and CTAs, 

including the itemization of compliance 

burdens remaining after CPOs and CTAs 

elect certain exemptions from broader 

compliance obligations in the part 4 

regulations. In the NPRM, the 

Commission proposed new information 

collection obligations including 

minimum disclosure requirements and 

an alternative reporting schedule for 

required account statements. As 

discussed above, the Commission is not 

adopting the minimum disclosure 

requirements proposed in the NPRM in 

this Final Rule. The Commission is, 

however, adopting the amendment 

addressing the reporting schedule for 

distribution of account statements by 

CPOs of § 4.7 pools that are Funds of 

Funds. 

As discussed above, the Commission 

is adopting an amendment to 

Commission regulation § 4.7(b)(3) that, 

consistent with routinely issued 

Commission exemptive letters, permits 

CPOs of § 4.7 pools that are Funds of 

Funds to distribute monthly account 

statements within 45 days of the monthend, provided that such account 

statements otherwise meet the 

requirements of Commission regulation 

§ 4.7(b)(3), and that the CPO notifies its 

§ 4.7 pool participants of this alternate 

distribution schedule either in the 

pool’s offering memorandum, or upon 

adoption of this reporting schedule. 

Collection 3038–0005 currently 

includes a reporting burden associated 

with Commission regulation § 4.7(b)(3) 

that accounts for the quarterly account 

statements currently required to be 

distributed by such CPOs to their § 4.7 

pools’ QEP participants. The 

Commission is revising the collection to 

include an additional reporting burden 

associated with Commission regulation 

§ 4.7(b)(3)(iv), adopted as part of this 

Final Rule, to account for the burden 

associated with monthly reporting as an 

option for § 4.7 pools that are Funds of 

Funds. As it stated in the NPRM, the 

Commission believes that ‘‘a smaller 

subset of CPOs and 4.7 pools [will] rely 

on this reporting schedule, and 

therefore, burden estimates below are 

based on 100 CPOs utilizing this 

alternative monthly account statement 

schedule for up to three 4.7 pools 

each.’’ 120

Accordingly, the aggregate annual 

estimate for the reporting burden 

associated with Commission regulation 

§ 4.7(b)(3)(iv), as added by this Final 

Rule, is as follows: 

Estimated number of respondents: 

100. 


khammond on DSKJM1Z7X2PROD with RULES
78806 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

121MFA Letter, at 12; SIFMA AMG Letter, at 10; 

and AIMA Letter, at 8. 

122MFA Letter, at 12. However, in their comment 

letter, MFA did not provide any specific cost 

considerations or analysis for the Commission to 

consider. 

123SIFMA AMG Letter, at 10. 

124 Id. 

125See, e.g., Proposal, 88 FR 70872 (inquiring as 

to ‘‘the costs of gathering and disseminating the 

other types of information required to be included 

in the QEP Disclosures,’’ and ‘‘how . . . fees and 

expenses charged by CPOs and CTAs . . . [would] 

be affected by the proposed disclosure 

requirements’’). 

Estimated frequency/timing of 

responses: Monthly. 

Estimated number of annual 

responses per respondent: 36. 

Estimated number of annual 

responses for all respondents: 3,600. 

Estimated annual burden hours per 

response: 1. 

Estimated total annual burden hours 

per respondent: 36. 

Estimated total annual burden hours 

for all respondents: 3,600. 

C. Cost-Benefit Considerations 

1. Statutory and Regulatory Background 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its discretionary actions 

before promulgating a regulation under 

the CEA or issuing certain orders. CEA 

section 15(a) further specifies that the 

costs and benefits shall be evaluated in 

light of five broad areas of market and 

public concern: (1) protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of markets; (3) price 

discovery; (4) sound risk management 

practices; and (5) other public interest 

considerations. The Commission may, 

in its discretion, give greater weight to 

any of the five enumerated areas of 

concern, and may, in its discretion, 

determine that, notwithstanding its 

costs, a particular rule is necessary or 

appropriate to protect the public 

interest, or to effectuate any of the 

provisions, or to accomplish any of the 

purposes, of the CEA. The Commission 

considers the costs and benefits 

resulting from its discretionary 

determinations with respect to the 

section 15(a) factors. 

The Commission invited public 

comment on the cost-benefit 

consideration in the Proposal. There 

were several general comments that it 

was ‘‘inadequate.’’ 121 One commenter 

stated that they believed the 

Commission failed to engage in an 

adequate cost-benefit analysis sufficient 

to justify a burdensome and costly 

disclosure regime.122 Similarly, another 

commenter stated that they believed the 

cost-benefit analysis in the Proposal was 

insufficient.123 This commenter further 

encouraged the Commission to 

‘‘carefully evaluate the increased 

operational costs associated with 

requiring CPOs and CTAs offering 4.7 

pools and managed account programs to 

provide the proposed additional 

disclosures,’’ as they ‘‘will almost 

certainly be passed on to the pools’ 

participants and managed account 

programs’ clients.’’ 124 Despite these 

general objections to the Commission’s 

Proposal, commenters provided no 

additional detail regarding how or why 

the Commission’s preliminary costbenefit analysis was ‘‘inadequate,’’ nor 

did commenters respond to the 

Commission’s specific requests for 

comment associated with the Proposal’s 

cost-benefit considerations 

discussion,125 both of which impede the 

Commission’s ability to remediate the 

deficiencies commenters perceived in 

the Proposal’s cost-benefit analysis. 

Regardless, as detailed below, the 

Commission has considered the broad 

criticism asserted by commenters, as 

well as the adjustments made from the 

proposed amendments to those in this 

Final Rule. 

As discussed above, the Commission 

is adopting amendments to Commission 

regulation § 4.7 that will result in 

additional costs for CPOs and CTAs 

operating § 4.7 pools and trading 

programs. In response to certain 

comments, however, the Commission is 

declining to finalize the proposed 

minimum disclosure requirements and 

believes it appropriate to spend 

additional time considering the 

alternative proposals put forward by 

commenters. The Commission believes 

this approach will significantly reduce 

the costs and burdens to § 4.7 CPOs and 

CTAs arising from this Final Rule, as 

compared to those outlined in the 

NPRM. The Final Rule will, however, 

finalize the proposed amendments that 

will (1) increase the Portfolio 

Requirement in Commission regulation 

§ 4.7 such that persons required to meet 

it to be a QEP may satisfy it by either: 

(a) owning securities and other assets 

worth at least $4,000,000; (b) having on 

deposit with an FCM for their own 

account at least $400,000 in initial 

margin, option premiums, or minimum 

security deposits; or (c) owning a 

portfolio of funds and assets that, when 

expressed as percentages of the prior 

two thresholds, have a combined value 

of at least 100%; and (2) add a provision 

to Commission regulation § 4.7(b)(3) 

codifying routinely issued exemptive 

letters allowing CPOs of § 4.7 pools that 

are Funds of Funds to distribute account 

statements on a monthly basis, within 

45 days of the end of the month-end. 

These regulatory amendments adopted 

by the Final Rule will likely generate 

minimal costs to § 4.7 CPOs and CTAs, 

but are expected to result in several 

benefits to intermediaries and pool 

participants and advisory clients. The 

baseline against which these costs and 

benefits are compared is the regulatory 

status quo set forth in current 

Commission regulation § 4.7. The 

Commission has endeavored to 

enumerate material costs and benefits 

and, when reasonably feasible, assign a 

quantitative value to them. Where it is 

not reasonably feasible to quantify costs 

and benefits of the proposed 

amendments, those costs and benefits 

are discussed qualitatively. 

The consideration of costs and 

benefits below is based on the 

understanding that the markets function 

internationally, with many transactions 

involving U.S. firms taking place across 

international boundaries; with some 

Commission registrants being organized 

outside of the United States; with some 

leading industry members typically 

conducting operations both within and 

outside the United States; and with 

industry members commonly following 

substantially similar business practices 

wherever located. Where the 

Commission does not specifically refer 

to matters of location, the discussion of 

costs and benefits below refers to the 

effects of this Final Rule on all activity 

subject to the amended regulations, 

whether by virtue of the activity’s 

physical location in the United States or 

by virtue of the activity’s connection 

with or effect on U.S. commerce under 

CEA section 2(i). Some CPOs and CTAs 

are located outside of the United States. 

2. Increasing Financial Thresholds in 

the Portfolio Requirement of the 

‘‘Qualified Eligible Person’’ Definition 

The Final Rule increases the Portfolio 

Requirement in Commission regulation 

§ 4.7 such that persons required to meet 

the Portfolio Requirement to be 

considered QEPs can do so by either: (1) 

owning securities and other assets 

worth at least $4,000,000; (2) having on 

deposit with an FCM for their own 

account at least $400,000 in initial 

margin, option premiums, or minimum 

security deposits; or (3) owning a 

portfolio of funds and assets that, when 

expressed as percentages of the prior 

two thresholds, have a combined value 

of at least 100%. The Commission did 

not receive any specific comments 

regarding whether any costs associated 

with the Portfolio Requirement financial 

thresholds would change as a result of 

the proposed increases. As stated in the 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78807 

126 1992 Final Rule, 57 FR 34854 (citing and 

quoting 1992 Proposal, 57 FR 3151). 

127 Goldstein and Yang, ‘‘Commodity 

Financialization and Information Transmission,’’ 

2022, Journal of Finance, 77, 2613–2668. 

Proposal and herein, the Portfolio 

Requirement was adopted to identify 

prospective pool participants and 

advisory clients that possess sufficient 

financial experience and sophistication 

to withstand the risks associated with 

their participation in the commodity 

interest markets without the full 

panoply of protections afforded under 

part 4 of the Commission’s regulations. 

As stated previously in this release and 

in the Proposal, the Commission 

believes that increasing such thresholds 

appropriately restores the alignment of 

Commission regulation § 4.7 with the 

Commission’s original intention when it 

was adopted in 1992 to differentiate 

between retail investors and more 

sophisticated market participants, i.e., 

QEPs. 

The Commission recognizes, as it did 

in the Proposal, that increasing the 

thresholds in the Portfolio Requirement 

will result in some subset of QEPs no 

longer qualifying as such, which, should 

such newly designated non-QEPs still 

desire to participate in the commodity 

interest markets, could result in market 

forces supporting the development and 

offering of additional non-§ 4.7 pools 

and trading strategies. This would result 

in more diverse offerings to retail 

commodity interest market participants, 

thereby enhancing the variety and 

vibrancy of the non-QEP marketplace. 

As stated in the Proposal, the 

Commission believes that this 

development would result in more nonQEPs having the opportunity to 

participate in the commodity interest 

markets through commodity pools and 

trading programs better aligned with 

their particular risk tolerances and 

investment goals. 

As noted in the Proposal, due to the 

increases in the Portfolio Requirement 

thresholds, § 4.7 CPOs will likely no 

longer be able to offer pool participation 

units to certain QEPs who will no longer 

qualify under the new thresholds 

adopted herein. Such CPOs, as well as 

some § 4.7 CTAs, may decide to offer 

commodity pools and trading programs 

that are subject to the full suite of 

requirements under part 4 of the 

Commission’s regulations, which 

necessarily would result in increased 

costs associated with compliance. 

Conversely, it is possible that some 

CPOs and CTAs may continue to find 

the compliance relief provided by 

Commission regulation § 4.7 to 

outweigh possible gains to be had by 

accessing the non-QEP market, which 

would mitigate the potential benefit to 

non-QEPs. Additionally, the 

Commission expects there to be certain 

ministerial costs associated with system 

updates required for § 4.7 CPOs and 

CTAs to implement the increased 

thresholds, but given that the general 

requirements associated with the 

Portfolio Requirement are not changing 

in a substantive way beyond the actual 

numerical value of the thresholds, the 

Commission does not expect such costs 

to be significant. 

Section 15(a) Factors 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of the amendments to 

Commission regulation § 4.7 with 

respect to the following factors: 

protection of market participants and 

the public; efficiency, competitiveness, 

and financial integrity of markets; price 

discovery; sound risk management 

practices; and other public interest 

considerations. As discussed above, the 

Final Rule’s amendments increasing the 

financial thresholds in the Portfolio 

Requirement will, in the Commission’s 

opinion, more closely align the QEP 

definition with the original intent of the 

regulation, which is to assure that 

offerings operated pursuant to 

Commission regulation § 4.7 compliance 

exemptions are only made to persons 

with ‘‘substantial investment experience 

and thus a high degree of sophistication 

with regard to investments as well as 

financial resources to withstand the risk 

of their investments.’’ 126

a. Protection of Market Participants and 

the Public 

As stated above, the Commission 

believes that this amendment will 

benefit the commodity interest markets 

and the general public by realigning 

financial thresholds in its most 

commonly used regulations in a manner 

that accounts for the impacts of inflation 

since their original adoption and more 

accurately reflects current economic 

circumstances; the Commission expects 

that this will result in persons investing 

in commodity interest products offered 

by registered CPOs and CTAs being 

more accurately categorized as QEPs, 

and thus, more appropriately limited in 

their investment choices. Moreover, 

raising the Portfolio Requirement 

thresholds, as a practical matter, will 

likely limit the prospective investor 

population for § 4.7 pools and trading 

programs to a smaller number of 

persons. To the extent persons who 

meet the higher Portfolio Requirement 

thresholds are more financially 

sophisticated or resilient than those 

who no longer qualify, this amendment 

should result in individuals and 

entities, both QEPs and non-QEPs, being 

offered pools and trading programs that 

are regulated in a manner 

commensurate with their respective 

needs for customer protection. If the 

increased thresholds further lead to the 

creation of more commodity pools and 

trading programs subject to the full part 

4 compliance requirements by registered 

CPOs and CTAs, this too will 

potentially lead to greater transparency 

in their activities, which also protects 

persons investing in commodity interest 

products. Additionally, greater variety 

in the commodity pools and trading 

programs available to non-QEPs will 

provide more options for this 

population to consider, which may 

further enable them to make more 

appropriate investment decisions by 

choosing the offerings best suited to 

their individual risk appetite or other 

portfolio needs. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Markets 

The Final Rule’s amendments to the 

Portfolio Requirement may also affect 

the size, composition, or number of 

commodity pools and trading programs 

in the commodity interest markets, 

especially those offered solely to QEPs. 

This may, in turn, affect the flow of 

investing in commodity interests. The 

financial economics literature suggests 

that, to the extent changing the QEP 

definition reduces the flow of noncommercial funds into commodity 

interest markets, the cost to commercial 

traders using futures markets to hedge 

their risks may increase.127 Via this 

mechanism, the Final Rule’s 

amendment may have an indirect effect 

on efficiency of the futures markets with 

respect to the hedging costs of operating 

companies, commodity producers, or 

other commercial traders. 

c. Price Discovery 

The increased Portfolio Requirement 

thresholds are likely to result in fewer 

persons being considered QEPs, which 

may further result in fewer participants 

and clients in offered pools and trading 

programs operated under Commission 

regulation § 4.7. An additional indirect 

effect of the Final Rule’s amendments 

could be a change in the flow of 

investment in commodity interests by 

non-commercial traders. The financial 

economics literature has found 

ambiguous results regarding the 

relationship between increased 

investment by non-commercial traders 

in commodity interest markets and price 


khammond on DSKJM1Z7X2PROD with RULES
78808 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

128 Id. 

129Bureau of Labor Statistics, United States 

Department of Labor, Occupational Employment 

and Wage Statistics, Accountants and Auditors, 

May 2023 (published April 2024), available at 

https://www.bls.gov/oes/current/oes132011.htm. 

discovery.128 As such, it is difficult to 

ex ante predict how changes in the 

Portfolio Requirement thresholds would 

impact price discovery. 

d. Sound Risk Management Practices 

Increasing the Portfolio Requirement 

thresholds may result in registered 

CPOs and CTAs that previously only 

offered pools and trading programs to 

QEPs creating and offering pools and 

trading programs designed for persons 

that are not QEPs. Consequently, these 

non-QEP pools and trading programs 

operated by registered CPOs and CTAs 

would then be subject to the full 

complement of part 4 compliance 

requirements, which could result in 

more diligent risk management practices 

by the CPOs and CTAs. 

e. Other Public Interest Considerations 

The original Portfolio Requirement 

thresholds in the QEP definition were 

intended to ensure that only persons 

possessing an appropriate and high 

level of trading experience, acumen, and 

financial resources would be eligible to 

invest in complex commodity interest 

investments offered and operated under 

Commission regulation § 4.7. The 

Commission determined it appropriate 

to lessen the compliance burdens for 

registered CPOs and CTAs limiting their 

prospective participants and clients to 

financially sophisticated QEPs through 

the exemptions provided by 

Commission regulation § 4.7 for their 

§ 4.7 pools and trading programs. The 

1992 Portfolio Requirement thresholds 

were adopted to provide a metric by 

which CPOs and CTAs could 

approximately assess the experience 

and financial wherewithal of potential 

pool participants or advisory clients, 

ensuring that they truly possess the 

sophistication and resilience of other 

QEPs not subject to such thresholds. 

Updating these thresholds to account for 

inflation realigns the Portfolio 

Requirement with the original intent of 

the QEP definition and modernizes its 

provisions consistent with today’s 

economic circumstances. 

3. Permitting Monthly Account 

Statements Consistent With 

Commission Exemptive Letters for 

Certain § 4.7 Pools 

Consistent with longstanding 

exemptive letter relief described herein, 

the Final Rule adds a provision to 

Commission regulation § 4.7(b)(3) 

allowing CPOs of § 4.7 pools that are 

Funds of Funds to distribute account 

statements on a monthly basis, within 

45 days of the month-end, provided that 

such CPOs notify their pool 

participants. The Commission received 

no comments addressing any costs that 

§ 4.7 CPOs or CTAs may incur as a 

result of adopting this amendment. 

As discussed in the Proposal, the 

primary benefit of this amendment is to 

facilitate § 4.7 pools’ investment in 

other pools or collective investment 

vehicles without potentially violating 

the periodic reporting requirements in 

Commission regulation § 4.7. The 

Commission expects that this would 

allow CPOs of § 4.7 pools to seek higher 

returns and/or better diversification for 

their participants by investing in other 

pools or other collective investment 

vehicles, without requiring an 

exemptive letter to ensure they can meet 

their periodic reporting requirements, or 

otherwise risking chronic compliance 

violations. The Commission also 

continues to believe there is significant 

benefit to be gained by adopting this 

amendment because CPOs of § 4.7 Fund 

of Funds pools will be able to adopt an 

alternative account statement schedule 

at their convenience or immediately 

when necessary, rather than being 

required to seek an exemptive letter 

individually from the Commission and 

to potentially delay operational 

decisions or changes until such letter is 

received. Moreover, the Final Rule also 

ensures that similarly situated 

registrants are treated in a consistent 

manner by making the alternative 

schedule available to all qualifying 

CPOs and § 4.7 pools without the need 

for individual requests. 

Under the alternative schedule, as 

described above, qualifying CPOs would 

be required to prepare and distribute 

periodic account statements on a 

monthly basis, which is more frequent 

than the baseline of quarterly. This will 

result in increased administrative costs 

to CPOs that elect this alternative 

schedule associated with the monthly 

account statements, which may be 

passed on to their pool participants. 

Under the terms of the Final Rule, 

qualifying CPOs are also required to 

disclose to their pool participants their 

election to use the alternative account 

statement schedule, and this disclosure 

must be provided to their prospective 

and existing pool participants. The 

notification requirement will also result 

in costs to the CPO, and potentially the 

pool participants, which will vary in 

amount depending on whether the CPO 

chooses to incorporate the notice in an 

existing communication to pool 

participants or to create a new 

standalone disclosure. Similarly, the 

costs associated with dissemination will 

vary depending on whether the offered 

pool is still accepting new participants, 

or if it is closed, as the Commission 

does not expect § 4.7 CPOs to prepare 

disclosures for pool participants with 

respect to pool participation units 

purchased prior to the effective date of 

this Final Rule. The Commission notes 

that this alternative reporting schedule 

is voluntary, and therefore, should a 

CPO determine that the costs associated 

with more frequent statements 

outweighs the benefits associated with 

adopting the alternative schedule, it is 

not required to do so and can continue 

to provide quarterly account statements 

within 30 days of the quarter-end, as 

currently required under Commission 

regulation § 4.7 (and which will remain 

unchanged by this Final Rule). 

The Commission expects that CPOs 

will use the services of an accountant to 

prepare the monthly account statements 

permitted by the Final Rule 

amendments. The BLS states that the 

mean wage for accountants as of May 

2023, the most recent information 

available, is $43.65 per hour.129 The 

Commission has estimated that the time 

burden associated with complying with 

the alternate schedule for periodic 

account statements required under the 

Final Rule is 36 hours per CPO. If the 

CPO solely uses the services of an 

accountant to complete these tasks, the 

total cost associated with the alternative 

account statement provisions adopted 

herein is $1,571.40 per CPO. 

Section 15(a) Factors 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of the amendment to 

Commission regulation § 4.7(b)(3) with 

respect to the following factors: 

protection of market participants and 

the public; efficiency, competitiveness, 

and financial integrity of markets; price 

discovery; sound risk management 

practices; and other public interest 

considerations. As discussed above, the 

addition to Commission regulation 

§ 4.7(b)(3) of a permissible monthly 

account statement schedule will 

facilitate compliance with periodic 

reporting deadlines for CPOs of § 4.7 

Fund of Funds pools. Absent this 

change (and assuming such § 4.7 pool 

has received no exemptive letter from 

the Commission), it may otherwise be 

impractical for such § 4.7 pools to 

operate as Funds of Funds, due to the 

baseline applicable quarterly reporting 

requirements in Commission regulation 

§ 4.7. 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78809 

130 Goldstein and Yang, ‘‘Commodity 

Financialization and Information Transmission,’’ 

2022, Journal of Finance, 77, 2613–2668. 

131 Id. 

132Sirra and Tufano, ‘‘Costly Search and Mutual 

Fund Flows,’’ Journal of Finance, 1998, 53, 1589– 

1622; Del Guercio and Reuter, ‘‘Mutual Fund 

Performance and the Incentive to Generate Alpha,’’ 

Journal of Finance, 2014, 1673–1704. 133 7 U.S.C. 19(b). 

a. Protection of Market Participants and 

the Public 

As discussed above, the Final Rule 

will permit CPOs of § 4.7 Fund of Funds 

pools to adopt an alternative monthly 

account statement schedule, provided 

such statements are distributed within 

45 days of the end of each month, and 

provided that they notify their QEP pool 

participants of such reporting schedule. 

To the extent this amendment 

encourages QEPs to participate in § 4.7 

Fund of Funds pools, rather than other 

§ 4.7 pools, it may require them to 

adjust to a different account statement 

schedule, but the Commission believes, 

based on its past observation of the 

implementation of staff letters that have 

been issued addressing this issue, that 

this amendment will likely provide 

such QEPs with more complete and 

accurate account statements on a more 

frequent basis. Additionally, the Final 

Rule may facilitate the formation of § 4.7 

Fund of Funds pools by making it easier 

for their CPOs to comply with the 

applicable periodic reporting 

requirements under Commission 

regulation § 4.7; this trend may also 

serve to benefit QEP participants, in that 

the CPOs of § 4.7 Fund of Funds pools 

may be able to operate them in a manner 

that achieves exposure to a wider 

variety of underlying investment 

strategies through their investee pools, 

while continuing to remain compliant 

with their regulatory obligations. 

Finally, such CPOs will also have 

greater incentive and may possess more 

resources to monitor the behavior of 

their § 4.7 Fund of Funds pools’ 

underlying investments in other pools 

or funds, than QEPs directly investing 

therein. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Markets 

The Final Rule amending Commission 

regulation § 4.7(b)(3) may indirectly 

affect the functioning of commodity 

interest markets. To the extent that the 

Final Rule affects the behavior of CPOs 

or the size and composition of their 

§ 4.7 Fund of Funds pools, it might also 

affect the flow of investing in 

commodity interests. The financial 

economics literature suggests that 

increased investment by noncommercial traders in commodity 

interest markets will generally reduce 

the difference between futures prices 

and expected future spot prices.130 This 

effect means that, to the extent that 

offering an alternative schedule for 

periodic reporting in § 4.7 Fund of 

Funds pools increases the flow of noncommercial funds into commodity 

interest markets, it will tend to also 

reduce the cost to commercial traders of 

using the futures market to hedge their 

risks. In that sense, this Final Rule may 

have an indirect effect on efficiency of 

the futures markets in regard to the 

hedging costs of operating companies, 

commodity producers, or other 

commercial market participants. 

c. Price Discovery 

To the extent that the Final Rule 

amending Commission regulation 

§ 4.7(b)(3) affects the size or 

composition of § 4.7 pools, it might also 

affect the flow of investing in 

commodity interests. The financial 

economics literature has found 

ambiguous results regarding the 

relationship between increased 

investment by non-commercial traders 

in commodity interest markets and 

commodity price discovery.131 As such, 

it is difficult for the Commission to ex 

ante predict how the addition of an 

alternative account statement schedule 

for § 4.7 Fund of Funds pools would 

impact price discovery. 

d. Sound Risk Management Practices 

Periodic reporting requirements in the 

form of regular account statements 

provided to pool participants serve as 

an effective means for participants as 

well as CPOs to monitor pools’ risk 

management. Because the amount of 

funds a CPO manages through its 

operated pools is likely responsive to its 

past performance,132 requiring the 

provision of complete financial 

information on pool performance 

through regular account statements can 

serve to provide an incentive for sound 

risk management by such CPOs. As 

discussed above, the Final Rule 

amending Commission regulation 

§ 4.7(b)(3) may encourage the formation 

of § 4.7 Fund of Funds pools, whose 

CPOs may be better able to monitor the 

performance of underlying commodity 

pools or funds in which they invest, as 

compared to QEP participants investing 

directly therein. This also may 

positively influence CPOs’ risk 

management practices in their pools, to 

the extent their participants are other 

§ 4.7 pools. 

e. Other Public Interest Considerations 

A key practical consideration is that, 

absent exemptive letters issued by the 

Commission, the existing Commission 

regulation § 4.7(b)(3) appears to make it 

very difficult for CPOs to operate their 

§ 4.7 pools as Funds of Funds, while 

complying with applicable periodic 

reporting requirements. To the extent 

that facilitating the operation of such 

§ 4.7 pools as Funds of Funds is a 

legitimate policy goal of the 

Commission (as suggested by its routine 

granting of exemptive letters on this 

topic), changing the regulations to 

explicitly permit this alternative 

account statement schedule will be a 

more effective and direct means of 

accomplishing that objective that further 

ensures more consistent treatment of 

similarly situated registrants. 

D. Antitrust Considerations 

Section 15(b) of the CEA requires the 

Commission to take into consideration 

the public interest to be protected by the 

antitrust laws and endeavor to take the 

least anticompetitive means of 

achieving the purposes of the CEA in 

issuing any order or adopting any 

Commission rule or regulation.133 The 

Commission believes that the public 

interest to be protected by the antitrust 

laws is generally to protect competition. 

In the Proposal, the Commission 

requested comment on whether the 

NPRM implicated any other specific 

public interest to be protected by the 

antitrust laws, but received no 

comments. 

The Commission has considered the 

amendments in this Final Rule to 

determine whether they are 

anticompetitive and has not identified 

any anticompetitive effects. Because the 

Commission has not determined that the 

Final Rule is anticompetitive or has 

anticompetitive effects, the Commission 

has not identified any less 

anticompetitive means of achieving the 

purposes of the CEA. 

List of Subjects 

17 CFR Part 1 

Brokers, Commodity futures, 

Consumer protection, Reporting and 

recordkeeping requirements. 

17 CFR Part 3 

Administrative practice and 

procedure, Commodity futures, 

Consumer protection, Definitions, 

Foreign futures, Foreign options, 

Registration requirements. 

17 CFR Part 4 

Advertising, Brokers, Commodity 

futures, Commodity pool operators, 

Commodity trading advisors, Consumer 


khammond on DSKJM1Z7X2PROD with RULES
78810 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

protection, Reporting and recordkeeping 

requirements. 

17 CFR Part 30 

Consumer protection, Fraud. 

17 CFR Part 43 

Consumer protection, Reporting and 

recordkeeping requirements, Swaps. 

17 CFR Part 75 

Banks, Banking, Compensation, 

Credit, Derivatives, Federal branches 

and agencies, Federal savings 

associations, Government securities, 

Hedge funds, Insurance, Investments, 

National banks, Penalties, Proprietary 

trading, Reporting and recordkeeping 

requirements, Risk, Risk retention, 

Securities, Swap dealers, Trusts and 

trustees, Volcker rule. 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission amends 17 CFR 

chapter I as follows: 

PART 1—GENERAL REGULATIONS 

UNDER THE COMMODITY EXCHANGE 

ACT 

■ 1. The authority citation for part 1 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 

6d, 6e, 6f, 6g, 6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p, 

6r, 6s, 7, 7a–1, 7a–2, 7b, 7b–3, 8, 9, 10a, 12, 

12a, 12c, 13a, 13a–1, 16, 16a, 19, 21, 23, and 

24 (2012). 

■ 2. In § 1.35, revise paragraph 

(b)(5)(i)(D) to read as follows: 

§ 1.35 Records of commodity interest and 

related cash or forward transactions. 

* * * * * 

(b) * * * 

(5) * * * 

(i) * * * 

(D) A foreign adviser that exercises 

discretionary trading authority solely 

over the accounts of non-U.S. persons, 

as defined in § 4.7(a)(4) of this chapter; 

* * * * * 

PART 3—REGISTRATION 

■ 3. The authority citation for part 3 

continues to read as follows: 

Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a, 

2, 6a, 6b, 6b–1, 6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k, 

6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 12a, 13b, 13c, 

16a, 18, 19, 21, and 23. 

■ 4. In § 3.10, revise the introductory 

text of paragraph (c)(5)(ii) to read as 

follows: 

§ 3.10 Registration of futures commission 

merchants, retail foreign exchange dealers, 

introducing brokers, commodity trading 

advisors, commodity pool operators, swap 

dealers, major swap participants and 

leverage transaction merchants. 

* * * * * 

(c) * * * 

(5) * * * 

(ii) With respect to paragraph (c)(5)(i) 

of this section, initial capital 

contributed to a commodity pool by an 

affiliate, as defined by § 4.7(a)(1) of this 

chapter, of the pool’s commodity pool 

operator shall not be considered for 

purposes of determining whether such 

commodity pool operator is executing 

commodity interest transactions on 

behalf of a commodity pool, the 

participants of which are all foreign 

located persons; provided, that: 

* * * * * 

PART 4—COMMODITY POOL 

OPERATORS AND COMMODITY 

TRADING ADVISORS 

■ 5. The authority citation for part 4 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6(c), 6b, 6c, 6l, 

6m, 6n, 6o, 12a, and 23. 

■ 6. In § 4.7: 

■ a. Revise paragraph (a); 

■ b. Add paragraph (b)(3)(iv); and 

■ c. Revise paragraph (b)(5). 

The revisions and addition read as 

follows: 

§ 4.7 Exemption from certain part 4 

requirements for commodity pool operators 

with respect to offerings to qualified eligible 

persons and for commodity trading 

advisors with respect to advising qualified 

eligible persons. 

* * * * * 

(a) Definitions. (1) Affiliate of, or a 

person affiliated with, a specified 

person means a person that directly or 

indirectly through one or more persons, 

controls, is controlled by, or is under 

common control with the specified 

person. 

(2) Exempt account means the 

account of a qualified eligible person 

that is directed or guided by a 

commodity trading advisor pursuant to 

an effective claim for exemption under 

this section. 

(3) Exempt pool means a pool that is 

operated pursuant to an effective claim 

for exemption under this section. 

(4) Non-United States person means: 

(i) A natural person who is not a 

resident of the United States; 

(ii) A partnership, corporation or 

other entity, other than an entity 

organized principally for passive 

investment, organized under the laws of 

a foreign jurisdiction and which has its 

principal place of business in a foreign 

jurisdiction; 

(iii) An estate or trust, the income of 

which is not subject to United States 

income tax regardless of source; 

(iv) An entity organized principally 

for passive investment such as a pool, 

investment company or other similar 

entity; Provided, That units of 

participation in the entity held by 

persons who do not qualify as NonUnited States persons or otherwise as 

qualified eligible persons represent in 

the aggregate less than 10% of the 

beneficial interest in the entity, and that 

such entity was not formed principally 

for the purpose of facilitating 

investment by persons who do not 

qualify as Non-United States persons in 

a pool with respect to which the 

operator is exempt from certain 

requirements of this part by virtue of its 

participants being Non-United States 

persons; and 

(v) A pension plan for the employees, 

officers or principals of an entity 

organized and with its principal place of 

business outside the United States. 

(5) Portfolio Requirement means that 

a person: 

(i) Owns securities (including pool 

participations) of issuers not affiliated 

with such person and other investments 

with an aggregate market value of at 

least $4,000,000; 

(ii) Has had on deposit with a futures 

commission merchant, for its own 

account at any time during the sixmonth period preceding either the date 

of sale to that person of a pool 

participation in the exempt pool or the 

date that the person opens an exempt 

account with the commodity trading 

advisor, at least $400,000 in exchangespecified initial margin and option 

premiums, together with any required 

minimum security deposits for retail 

forex transactions (defined in § 5.1(m) of 

this chapter), for commodity interest 

transactions; or 

(iii) Owns a portfolio comprised of a 

combination of the funds or property 

specified in paragraphs (a)(5)(i) and (ii) 

of this section, in which the sum of the 

funds or property includable under 

paragraph (a)(5)(i) of this section, 

expressed as a percentage of the 

minimum amount required thereunder, 

and the amount of initial margin, option 

premiums, and minimum security 

deposits includable under paragraph 

(a)(5)(ii) of this section, expressed as a 

percentage of the minimum amount 

required thereunder, equals at least one 

hundred percent. An example of a 

composite portfolio acceptable under 

this paragraph (a)(5)(iii) would consist 

of $2,000,000 in securities and other 

property (50% of paragraph (a)(5)(i)) 

and $200,000 in initial margin, option 

premiums, and minimum security 

deposits (50% of paragraph (a)(5)(ii)). 

(6) Qualified eligible person means 

any person, acting for its own account 

or for the account of a qualified eligible 

person, who the commodity pool 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78811 

operator reasonably believes, at the time 

of the sale to that person of a pool 

participation in the exempt pool, or who 

the commodity trading advisor 

reasonably believes, at the time that 

person opens an exempt account, is 

included in the following list of persons 

that is divided into two categories: 

Persons who are not required to satisfy 

the Portfolio Requirement defined in 

paragraph (a)(5) of this section to be 

qualified eligible persons, and those 

persons who must satisfy the Portfolio 

Requirement in paragraph (a)(5) to be 

qualified eligible persons. 

(i) Persons who need not satisfy the 

Portfolio Requirement to be qualified 

eligible persons. (A) A futures 

commission merchant registered 

pursuant to section 4d of the Act, or a 

principal thereof; 

(B) A retail foreign exchange dealer 

registered pursuant to section 

2(c)(2)(B)(i)(II)(gg) of the Act, or a 

principal thereof; 

(C) A swap dealer registered pursuant 

to section 4s(a)(1) of the Act, or a 

principal thereof; 

(D) A broker or dealer registered 

pursuant to section 15 of the Securities 

Exchange Act of 1934, or a principal 

thereof; 

(E) A commodity pool operator 

registered pursuant to section 4m of the 

Act, or a principal thereof; Provided, 

That the pool operator: 

(1) Has been registered and active as 

such for two years; or 

(2) Operates pools which, in the 

aggregate, have total assets in excess of 

$5,000,000; 

(F) A commodity trading advisor 

registered pursuant to section 4m of the 

Act, or a principal thereof; Provided, 

That the trading advisor: 

(1) Has been registered and active as 

such for two years; or 

(2) Provides commodity interest 

trading advice to commodity accounts 

which, in the aggregate, have total assets 

in excess of $5,000,000 deposited at one 

or more futures commission merchants; 

(G) An investment adviser registered 

pursuant to section 203 of the 

Investment Advisers Act of 1940 

(‘‘Investment Advisers Act’’) or 

pursuant to the laws of any state, or a 

principal thereof; Provided, That the 

investment adviser: 

(1) Has been registered and active as 

such for two years; or 

(2) Provides securities investment 

advice to securities accounts which, in 

the aggregate, have total assets in excess 

of $5,000,000 deposited at one or more 

registered securities brokers; 

(H) A ‘‘qualified purchaser’’ as 

defined in section 2(a)(51)(A) of the 

Investment Company Act of 1940 

(‘‘Investment Company Act’’); 

(I) A ‘‘knowledgeable employee’’ as 

defined in § 270.3c–5 of this title; 

(J) With respect to an exempt pool: 

(1) The commodity pool operator, 

commodity trading advisor or 

investment adviser of the exempt pool 

offered or sold, or an affiliate of any of 

the foregoing; 

(2) A principal of the exempt pool or 

the commodity pool operator, 

commodity trading advisor or 

investment adviser of the exempt pool, 

or an affiliate of any of the foregoing; 

(3) An employee of the exempt pool 

or the commodity pool operator, 

commodity trading advisor or 

investment adviser of the exempt pool, 

or of an affiliate of any of the foregoing 

(other than an employee performing 

solely clerical, secretarial or 

administrative functions with regard to 

such person or its investments) who, in 

connection with his or her regular 

functions or duties, participates in the 

investment activities of the exempt 

pool, other commodity pools operated 

by the pool operator of the exempt pool 

or other accounts advised by the trading 

advisor or the investment adviser of the 

exempt pool, or by the affiliate; 

Provided, That such employee has been 

performing such functions and duties 

for or on behalf of the exempt pool, pool 

operator, trading advisor, investment 

adviser or affiliate, or substantially 

similar functions or duties for or on 

behalf of another person engaged in 

providing commodity interest, securities 

or other financial services, for at least 12 

months; 

(4) Any other employee of, or an agent 

engaged to perform legal, accounting, 

auditing or other financial services for, 

the exempt pool or the commodity pool 

operator, commodity trading advisor or 

investment adviser of the exempt pool, 

or any other employee of, or agent so 

engaged by, an affiliate of any of the 

foregoing (other than an employee or 

agent performing solely clerical, 

secretarial or administrative functions 

with regard to such person or its 

investments); Provided, That such 

employee or agent: 

(i) Is an accredited investor as defined 

in § 230.501(a)(5) or (6) of this title; and 

(ii) Has been employed or engaged by 

the exempt pool, commodity pool 

operator, commodity trading advisor, 

investment adviser or affiliate, or by 

another person engaged in providing 

commodity interest, securities or other 

financial services, for at least 24 

months; 

(5) The spouse, child, sibling or 

parent of a person who satisfies the 

criteria of paragraph (a)(6)(i)(J)(1), (2), 

(3), or (4) of this section; Provided, That: 

(i) An investment in the exempt pool 

by any such family member is made 

with the knowledge and at the direction 

of the person; and 

(ii) The family member is not a 

qualified eligible person for the 

purposes of paragraph (a)(6)(ii)(K) of 

this section; 

(6) Any person who acquires a 

participation in the exempt pool by gift, 

bequest or pursuant to an agreement 

relating to a legal separation or divorce 

from a person listed in paragraph 

(a)(6)(i)(J)(1), (2), (3), (4), or (5) of this 

section; 

(7) The estate of any person listed in 

paragraph (a)(6)(i)(J)(1), (2), (3), (4), or 

(5) of this section; or 

(8) A company established by any 

person listed in paragraph (a)(6)(i)(J)(1), 

(2), (3), (4), or (5) of this section 

exclusively for the benefit of (or owned 

exclusively by) that person and any 

person listed in paragraph (a)(6)(i)(J)(6) 

or (7) of this section; 

(K) With respect to an exempt 

account: 

(1) An affiliate of the commodity 

trading advisor of the exempt account; 

(2) A principal of the commodity 

trading advisor of the exempt account or 

of an affiliate of the commodity trading 

advisor; 

(3) An employee of the commodity 

trading advisor of the exempt account or 

of an affiliate of the trading advisor 

(other than an employee performing 

solely clerical, secretarial or 

administrative functions with regard to 

such person or its investments) who, in 

connection with his or her regular 

functions or duties, participates in the 

investment activities of the trading 

advisor or the affiliate; Provided, That 

such employee has been performing 

such functions and duties for or on 

behalf of the trading advisor or the 

affiliate, or substantially similar 

functions or duties for or on behalf of 

another person engaged in providing 

commodity interest, securities or other 

financial services, for at least 12 

months; 

(4) Any other employee of, or an agent 

engaged to perform legal, accounting, 

auditing or other financial services for, 

the commodity trading advisor of the 

exempt account or any other employee 

of, or agent so engaged by, an affiliate 

of the trading advisor (other than an 

employee or agent performing solely 

clerical, secretarial or administrative 

functions with regard to such person or 

its investments); Provided, That such 

employee or agent: 

(i) Is an accredited investor as defined 

in § 230.501(a)(5) or (6) of this title; and 


khammond on DSKJM1Z7X2PROD with RULES
78812 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

(ii) Has been employed or engaged by 

the commodity trading advisor or the 

affiliate, or by another person engaged 

in providing commodity interest, 

securities or other financial services, for 

at least 24 months; 

(5) The spouse, child, sibling or 

parent of the commodity trading advisor 

of the exempt account or of a person 

who satisfies the criteria of paragraph 

(a)(6)(i)(K)(1), (2), (3), or (4) of this 

section; Provided, That: 

(i) The establishment of an exempt 

account by any such family member is 

made with the knowledge and at the 

direction of the person; and 

(ii) The family member is not a 

qualified eligible person for the 

purposes of paragraph (a)(6)(ii)(K) of 

this section; 

(6) Any person who acquires an 

interest in an exempt account by gift, 

bequest or pursuant to an agreement 

relating to a legal separation or divorce 

from a person listed in paragraph 

(a)(6)(i)(K)(1), (2), (3), (4), or (5) of this 

section; 

(7) The estate of any person listed in 

paragraph (a)(6)(i)(K)(1), (2), (3), (4), or 

(5) of this section; or 

(8) A company established by any 

person listed in paragraph (a)(6)(i)(K)(1), 

(2), (3), (4), or (5) of this section 

exclusively for the benefit of (or owned 

exclusively by) that person and any 

person listed in paragraph (a)(6)(i)(K)(6) 

or (7) of this section; 

(L) A trust; Provided, That: 

(1) The trust was not formed for the 

specific purpose of either participating 

in the exempt pool or opening an 

exempt account; and 

(2) The trustee or other person 

authorized to make investment 

decisions with respect to the trust, and 

each settlor or other person who has 

contributed assets to the trust, is a 

qualified eligible person; 

(M) An organization described in 

section 501(c)(3) of the Internal Revenue 

Code (the ‘‘IRC’’); Provided, That the 

trustee or other person authorized to 

make investment decisions with respect 

to the organization, and the person who 

has established the organization, is a 

qualified eligible person; 

(N) A Non-United States person; 

(O) An entity in which all of the unit 

owners or participants, other than the 

commodity trading advisor claiming 

relief under this section, are qualified 

eligible persons; 

(P) An exempt pool; or 

(Q) Notwithstanding paragraph 

(a)(6)(ii) of this section, an entity as to 

which a notice of eligibility has been 

filed pursuant to § 4.5 which is operated 

in accordance with such rule and in 

which all unit owners or participants, 

other than the commodity trading 

advisor claiming relief under this 

section, are qualified eligible persons. 

(ii) Persons who must satisfy the 

Portfolio Requirement to be qualified 

eligible persons. With respect to the 

persons listed in paragraphs (a)(6)(ii)(A) 

through (L) of this section, the 

commodity pool operator must 

reasonably believe, at the time of the 

sale to such person of a participation in 

the exempt pool, or the commodity 

trading advisor must reasonably believe, 

at the time such person opens an 

exempt account, that such person 

satisfies the Portfolio Requirement in 

paragraph (a)(5) of this section: 

(A) An investment company 

registered under the Investment 

Company Act or a business 

development company as defined in 

section 2(a)(48) of such Act not formed 

for the specific purpose of either 

investing in the exempt pool or opening 

an exempt account; 

(B) A bank as defined in section 

3(a)(2) of the Securities Act of 1933 (the 

‘‘Securities Act’’) or any savings and 

loan association or other institution as 

defined in section 3(a)(5)(A) of the 

Securities Act acting for its own account 

or for the account of a qualified eligible 

person; 

(C) An insurance company as defined 

in section 2(13) of the Securities Act 

acting for its own account or for the 

account of a qualified eligible person; 

(D) A plan established and 

maintained by a state, its political 

subdivisions, or any agency or 

instrumentality of a state or its political 

subdivisions, for the benefit of its 

employees, if such plan has total assets 

in excess of $5,000,000; 

(E) An employee benefit plan within 

the meaning of the Employee 

Retirement Income Security Act of 1974; 

Provided, That the investment decision 

is made by a plan fiduciary, as defined 

in section 3(21) of such Act, which is a 

bank, savings and loan association, 

insurance company, or registered 

investment adviser; or that the 

employee benefit plan has total assets in 

excess of $5,000,000; or, if the plan is 

self-directed, that investment decisions 

are made solely by persons that are 

qualified eligible persons; 

(F) A private business development 

company as defined in section 

202(a)(22) of the Investment Advisers 

Act; 

(G) An organization described in 

section 501(c)(3) of the IRC, with total 

assets in excess of $5,000,000; 

(H) A corporation, Massachusetts or 

similar business trust, or partnership, 

limited liability company or similar 

business venture, other than a pool, 

which has total assets in excess of 

$5,000,000, and is not formed for the 

specific purpose of either participating 

in the exempt pool or opening an 

exempt account; 

(I) A natural person whose individual 

net worth, or joint net worth with that 

person’s spouse, at the time of either his 

purchase in the exempt pool or his 

opening of an exempt account would 

qualify him as an accredited investor as 

defined in § 230.501(a)(5) of this title; 

(J) A natural person who would 

qualify as an accredited investor as 

defined in § 230.501(a)(6) of this title; 

(K) A pool, trust, insurance company 

separate account or bank collective 

trust, with total assets in excess of 

$5,000,000, not formed for the specific 

purpose of either participating in the 

exempt pool or opening an exempt 

account, and whose participation in the 

exempt pool or investment in the 

exempt account is directed by a 

qualified eligible person; or 

(L) Except as provided for the 

governmental entities referenced in 

paragraph (a)(6)(ii)(D) of this section, if 

otherwise authorized by law to engage 

in such transactions, a governmental 

entity (including the United States, a 

state, or a foreign government) or 

political subdivision thereof, or a 

multinational or supranational entity or 

an instrumentality, agency, or 

department of any of the foregoing. 

(7) United States means the United 

States, its states, territories or 

possessions, or an enclave of the United 

States government, its agencies or 

instrumentalities. 

(b) * * * 

(3) * * * 

(iv) Where the exempt pool is 

invested in one or more other pools or 

funds operated by third parties, the 

commodity pool operator may choose 

instead to prepare and distribute to its 

pool participants statements signed and 

affirmed in accordance with § 4.22(h) on 

a monthly basis within 45 days of the 

month-end; Provided, that the 

statements otherwise meet the 

conditions of paragraphs (b)(3)(i) and 

(ii) of this section, and that the 

commodity pool operator notifies its 

pool participants of this alternate 

distribution schedule in the exempt 

pool’s offering memorandum distributed 

prior to the initial investment, or upon 

its adoption of this reporting schedule, 

for then existing pool participants. 

* * * * * 

(5) Recordkeeping relief. Exemption 

from the specific requirements of § 4.23; 

Provided, That the commodity pool 

operator must maintain the offering 

memoranda and reports referred to in 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78813 

paragraphs (b)(3) and (4) of this section, 

and all other books and records 

prepared in connection with its 

activities as the pool operator of the 

exempt pool (including, without 

limitation, records relating to the 

qualifications of qualified eligible 

persons and substantiating any 

performance representations). Books 

and records that are not maintained at 

the pool operator’s main business office 

shall be maintained by one or more of 

the following: the pool’s administrator, 

distributor, or custodian, or a bank or 

registered broker or dealer acting in a 

similar capacity with respect to the 

pool. Such books and records must be 

made available to any representative of 

the Commission, the National Futures 

Association and the United States 

Department of Justice in accordance 

with the provisions of § 1.31 of this 

chapter. 

* * * * * 

■ 7. In § 4.14, revise paragraph 

(a)(8)(i)(C)(2) to read as follows: 

§ 4.14 Exemption from registration as a 

commodity trading advisor. 

* * * * * 

(a) * * * 

(8) * * * 

(i) * * * 

(C) * * * 

(2) With the exception of the pool’s 

operator, advisor, and their principals, 

solely ‘‘Non-United States persons,’’ as 

that term is defined in § 4.7(a)(4), will 

contribute funds or other capital to, and 

will own beneficial interests in, the 

pool; Provided, That units of 

participation in the pool held by 

persons who do not qualify as NonUnited States persons or otherwise 

qualified eligible persons represent in 

the aggregate less than 10 percent of the 

beneficial interest of the pool; 

* * * * * 

■ 8. In § 4.21, revise paragraph (a)(2) to 

read as follows: 

§ 4.21 Required delivery of pool 

Disclosure Document. 

(a) * * * 

(2) For the purpose of the Disclosure 

Document delivery requirement in this 

part, including any offering 

memorandum delivered pursuant to 

§ 4.7(b)(2)(i) or § 4.12(b)(2)(i), the term 

‘‘prospective pool participant’’ does not 

include a commodity pool operated by 

a pool operator that is the same as, or 

that controls, is controlled by, or is 

under common control with, the pool 

operator of the offered pool. 

* * * * * 

■ 9. In § 4.22: 

■ a. Revise paragraph (a)(4), the 

introductory text of paragraph (c)(7), 

paragraph (c)(8), the introductory text of 

paragraph (d)(1), the introductory text of 

paragraph (d)(2)(i), the introductory text 

of paragraph (f)(2), and paragraph 

(f)(2)(iv)(B); and 

■ b. Remove paragraph (f)(2)(iv)(D). 

The revisions read as follows: 

§ 4.22 Reporting to pool participants. 

(a) * * * 

(4) For the purpose of the Account 

Statement delivery requirement in this 

part, including any Account Statement 

distributed pursuant to § 4.7(b)(3) or 

§ 4.12(b)(2)(ii), the term ‘‘participant’’ 

does not include a commodity pool 

operated by a pool operator that is the 

same as, or that controls, is controlled 

by, or is under common control with, 

the pool operator of a pool in which the 

commodity pool has invested. 

* * * * * 

(c) * * * 

(7) For a pool that has ceased 

operation prior to, or as of, the end of 

the fiscal year, the commodity pool 

operator may provide the following, 

within 90 days of the permanent 

cessation of trading, in lieu of the 

annual report that would otherwise be 

required by this paragraph (c) or 

§ 4.7(b)(4): 

* * * * * 

(8) For the purpose of the Annual 

Report distribution requirement in this 

part, including any annual report 

distributed pursuant to § 4.7(b)(4) or 

§ 4.12(b)(2)(iii), the term ‘‘participant’’ 

does not include a commodity pool 

operated by a pool operator that is the 

same as, or that controls, is controlled 

by, or is under common control with, 

the pool operator of a pool in which the 

commodity pool has invested; Provided, 

That the Annual Report of such 

investing pool contains financial 

statements that include such 

information as the Commission may 

specify concerning the operations of the 

pool in which the commodity pool has 

invested. 

(d)(1) Subject to the provisions of 

paragraphs (d)(2) and (g)(2) of this 

section, the financial statements in the 

Annual Report required by this section 

or by § 4.7(b)(4) must be presented and 

computed in accordance with United 

States generally accepted accounting 

principles consistently applied and 

must be audited by an independent 

public accountant; Provided, however, 

and subject to the exception in 

paragraph (c)(7)(iii)(B) of this section, 

that the requirement that the Annual 

Report be audited by an independent 

public accountant does not apply for 

any fiscal year during which the only 

participants in the pool are one or more 

of the pool operator, the pool’s 

commodity trading advisor, any person 

controlling, controlled by, or under 

common control with the pool operator 

or trading advisor, and any principal of 

the foregoing; and Provided further, that 

the commodity pool operator obtains a 

written waiver from each such pool 

participant of their right to receive an 

audited Annual Report for such fiscal 

year, maintains such waivers in 

accordance with § 4.23, and makes such 

waivers available to the Commission or 

National Futures Association upon 

request. The requirements of § 1.16(g) of 

this chapter shall apply with respect to 

the engagement of such independent 

public accountants, except that any 

related notifications to be made may be 

made solely to the National Futures 

Association, and the certification must 

be in accordance with § 1.16 of this 

chapter, except that the following 

requirements of § 1.16 shall not apply: 

* * * * * 

(2)(i) Where a pool is organized in a 

jurisdiction other than the United 

States, the financial statements in the 

Annual Report required by this section 

or by § 4.7(b)(4) may be presented and 

computed in accordance with the 

generally accepted accounting 

principles, standards or practices 

followed in such other jurisdiction; 

Provided, That: 

* * * * * 

(f) * * * 

(2) In the event a commodity pool 

operator finds that it cannot obtain 

information necessary to prepare annual 

financial statements for a pool that it 

operates within the time specified in 

paragraph (c) of this section or 

§ 4.7(b)(4)(i), as a result of the pool 

investing in another collective 

investment vehicle, it may claim an 

extension of time under the following 

conditions: 

* * * * * 

(iv) * * * 

(B) For all reports prepared under 

paragraph (c) of this section and for 

reports prepared under § 4.7(b)(4)(i) that 

are audited by an independent public 

accountant, the commodity pool 

operator has been informed by the 

independent public accountant engaged 

to audit the commodity pool’s financial 

statements that specified information 

required to complete the pool’s Annual 

Report is necessary in order for the 

accountant to render an opinion on the 

commodity pool’s financial statements. 

The notice must include the name, main 

business address, main telephone 

number, and contact person of the 

accountant; and 

* * * * * 


khammond on DSKJM1Z7X2PROD with RULES
78814 Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 

1This statement will refer to the Commodity 

Futures Trading Commission as the ‘‘Commission’’, 

‘‘CFTC’’, or ‘‘Agency.’’ All web pages cited herein 

were last visited on September 11, 2024. 

2 Dissenting Statement of Commissioner Summer 

K. Mersinger On Proposal to Narrow Historical 

Exemptions for Qualified Eligible Persons in Rule 

4.7, Oct. 2, 2023, available at: https://www.cftc.gov/ 

PressRoom/SpeechesTestimony/mersingerstatement

100223. 

3See Final Rule, Section II. B. 3. 

PART 30—FOREIGN FUTURES AND 

FOREIGN OPTIONS TRANSACTIONS 

■ 10. The authority citation for part 30 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6, 6c, and 12a, 

unless otherwise noted. 

■ 11. In § 30.6, revise paragraph (b)(1)(i) 

to read as follows: 

§ 30.6 Disclosure. 

* * * * * 

(b) * * * 

(1) * * * 

(i) A commodity pool operator 

registered or required to be registered 

under this part, or exempt from 

registration pursuant to § 30.5, may not, 

directly or indirectly, engage in any of 

the activities described in § 30.4(c) 

unless the pool operator, at or before the 

time it engages in such activities, first 

provides each prospective qualified 

eligible person with the Risk Disclosure 

Statement set forth in § 4.24(b)(2) of this 

chapter and the statement in 

§ 4.7(b)(2)(i) of this chapter; 

* * * * * 

PART 43—REAL-TIME PUBLIC 

REPORTING 

■ 12. The authority citation for part 43 

continues to read as follows: 

Authority: 7 U.S.C. 2(a), 12a(5) and 24a, 

as amended by Pub. L. 111–203, 124 Stat. 

1376 (2010). 

■ 13. In § 43.6, revise paragraphs 

(i)(6)(i)(B) and (j)(1)(ii) to read as 

follows: 

§ 43.6 Block trades and large notional offfacility swaps. 

* * * * * 

(i) * * * 

(6) * * * 

(i) * * * 

(B) Is an investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(6)(i)(G) of this 

chapter; or 

* * * * * 

(j) * * * 

(1) * * * 

(ii) An investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(6)(i)(G) of this 

chapter, or 

* * * * * 

PART 75—PROPRIETARY TRADING 

AND CERTAIN INTEREST IN AND 

RELATIONSHIPS WITH COVERED 

FUNDS 

■ 14. The authority citation for part 75 

continues to read as follows: 

Authority: 12 U.S.C. 1851. 

■ 15. In § 75.10, revise paragraphs 

(b)(1)(ii)(B)(2) and (3) to read as follows: 

§ 75.10 Prohibition on acquiring or 

retaining an ownership interest in and 

having certain relationships with a covered 

fund. 

* * * * * 

(b) * * * 

(1) * * * 

(ii) * * * 

(B) * * * 

(2) Substantially all participation 

units of the commodity pool are owned 

by qualified eligible persons defined 

under § 4.7(a)(6)(i) and (ii) of this 

chapter; and 

(3) Participation units of the 

commodity pool have not been publicly 

offered to persons who are not qualified 

eligible persons defined under 

§ 4.7(a)(6)(i) and (ii) of this chapter; or 

* * * * * 

Issued in Washington, DC, on September 

18, 2024, by the Commission. 

Robert Sidman, 

Deputy Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Commodity Pool 

Operators, Commodity Trading 

Advisors, and Commodity Pools 

Operated: Updating the ‘Qualified 

Eligible Person’ Definition; Adding 

Minimum Disclosure Requirements for 

Pools and Trading Programs; 

Permitting Monthly Account Statements 

for Funds of Funds; Technical 

Amendments—Commission Voting 

Summary and Commissioners’ 

Statements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Behnam, 

Commissioners Johnson, Goldsmith Romero, 

Mersinger, and Pham voted in the 

affirmative. No Commissioner voted in the 

negative. 

Appendix 2—Supporting Statement of 

Commissioner Summer K. Mersinger 

Today, the Commission 1 achieved balance 

in adopting the amendments to Regulation 

4.7 and for that reason I can support this final 

rule. I would like to thank the staff in the 

Market Participants Division for their hard 

work on this rulemaking effort and for their 

consideration of my suggestions and 

comments throughout this process. 

But the balance achieved in this final rule 

was sorely missing in the original 

amendment proposal, as well as in recent 

drafts of this final rule presented to the 

Commission. As I identified in my prior 

dissent, the proposed amendment to 

Regulation 4.7 was flawed in applying a new 

minimum disclosure regime on sophisticated 

investors who had always been exempt from 

such disclosures.2

This flawed proposal led to a unanimous 

comment file, without a single commenter 

supporting the Commission’s new minimum 

disclosure regime. The proposal was a 

textbook example of overregulation. 

Thankfully, the Commission avoided the 

temptation to overregulate under this rule, 

dropping the minimum disclosure regime 

from the final rule adopted today. 

I am pleased that I can support this final 

rule. However, we should always remember 

that we do not regulate in a vacuum. We 

must work with market participants to 

carefully calibrate all rulemaking efforts. 

Additionally, we must harmonize our 

regulations, not only with the interests of our 

market participants, but with other 

regulators, including self-regulatory 

organizations. 

While I am relieved that the final rule 

reflects a balanced approach and aims to 

achieve the overarching goal without 

overregulation, I remain concerned about the 

adopting release’s mention of possible future 

efforts to expand Regulation 4.7 after this 

amendment.3 I urge the Commission to avoid 

such future expansions, unless the 

Commission finds concrete evidence 

establishing a need for modifications and 

only after robust discussions with industry. 

Additionally, I must caution the 

Commission from making the same mistake 

on other pending rulemaking proposals 

where feedback from commenters reflects a 

similar imbalance in the Agency’s approach. 

We must seek balance and compromise in 

our regulations, not only because we are 

legally obligated to do so, but also because 

it is the right thing to do. 

Appendix 3—Statement of 

Commissioner Caroline D. Pham 

I am pleased that the Commission is taking 

additional time to understand how to best 

protect market participants and to consider 

the various disclosure proposals submitted 

by the public in connection with the 

amendments to Regulation 4.7. As a market 

regulator with material impact on the risk 

management of the savings of millions of 

Americans, it is imperative that the 

Commission takes its time when considering 

new requirements to ensure that we get it 

right. 

This is especially the case when the 

unintended consequences of our rules could 

create new obstacles to market participation 

that draw a distinction between the ‘‘have-alot’s’’ and the ‘‘have-not-enough’s’’. 

Ultimately, using regulation to pick winners 

and losers that increases the wealth gap not 


khammond on DSKJM1Z7X2PROD with RULES
Federal Register / Vol. 89, No. 187 / Thursday, September 26, 2024 / Rules and Regulations 78815 

only betrays the American public’s 

expectation of Washington to create and 

maintain fair markets, but it also undermines 

financial inclusion. The government must 

keep the people’s trust that we will help 

every American achieve economic mobility 

for them and their families—not construct 

artificial barriers to the American Dream. 

For those reasons, I applaud the 

Commission taking the time for careful 

consideration of the public comments and 

further study including data. I thank 

Chairman Behnam and the Market 

Participants Division for working with me on 

this important rulemaking. 

[FR Doc. 2024–21682 Filed 9–25–24; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF THE TREASURY 

Office of Foreign Assets Control 

31 CFR Part 583 

Publication of Global Magnitsky 

Sanctions Regulations Web General 

License 8. 

AGENCY: Office of Foreign Assets 

Control, Treasury. 

ACTION: Publication of web general 

license. 

SUMMARY: The Department of the 

Treasury’s Office of Foreign Assets 

Control (OFAC) is publishing one 

general license (GL) issued pursuant to 

the Global Magnitsky Sanctions 

Regulations: GL 8, which was 

previously made available on OFAC’s 

website. 

DATES: GL 8 was issued on September 

12, 2024. See SUPPLEMENTARY

INFORMATION for additional relevant 

dates. 

FOR FURTHER INFORMATION CONTACT: 

OFAC: Assistant Director for Licensing, 

202–622–2480; Assistant Director for 

Regulatory Affairs, 202–622–4855; or 

Assistant Director for Compliance, 202– 

622–2490. 

SUPPLEMENTARY INFORMATION: 

Electronic Availability 

This document and additional 

information concerning OFAC are 

available on OFAC’s website: https://

ofac.treasury.gov. 

Background 

On September 12, 2024, OFAC issued 

GL 8 to authorize certain transactions 

otherwise prohibited by the Global 

Magnitsky Sanctions Regulations 

(GMSR), 31 CFR part 583. GL 8 was 

made available on OFAC’s website 

(https://ofac.treasury.gov) when it was 

issued. The text of GL 8 is provided 

below. 

OFFICE OF FOREIGN ASSETS 

CONTROL 

Global Magnitsky Sanctions 

Regulations 

31 CFR part 583 

GENERAL LICENSE NO. 8 

Authorizing Transactions Involving 

Certain Entities Owned by Ly Yong 

Phat or L.Y.P. Group Co., LTD 

(a) Except as provided in paragraph 

(b) of this general license, all 

transactions prohibited by the Global 

Magnitsky Sanctions Regulations, 31 

CFR part 583 (GMSR), involving any 

entity that is blocked solely due to a 

property interest of Ly Yong Phat (Ly) 

or L.Y.P. Group Co., LTD (L.Y.P. Group) 

or any entity in which Ly or L.Y.P. 

Group owns, directly or indirectly, a 50 

percent or greater interest, are 

authorized, provided that such entity is 

not identified on the Office of Foreign 

Assets Control’s List of Specially 

Designated Nationals and Blocked 

Persons. 

(b) This general license does not 

authorize any transactions otherwise 

prohibited by the GMSR, including 

transactions involving any person 

blocked pursuant to the GMSR other 

than the blocked persons described in 

paragraph (a) of this general license, 

unless separately authorized. 

Lisa M. Palluconi, Acting Director, 

Office of Foreign Assets Control 

Dated: September 12, 2024. 

Lisa M. Palluconi, 

Acting Director, Office of Foreign Assets 

Control. 

[FR Doc. 2024–21925 Filed 9–25–24; 8:45 am] 

BILLING CODE 4810–AL–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket Number USCG–2024–0376] 

RIN 1625–AA08 

Special Local Regulation; San Jacinto 

River, Houston, TX 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is amending 

its regulations for annual marine events 

in the Sector Houston-Galveston area of 

responsibility. This rulemaking 

establishes a special local regulation to 

provide for the safety of life on certain 

waters of the San Jacinto River, in 

Houston, TX and will be enforced 

annually during a high-speed boat race 

on the first or second Saturday in 

March. This regulation prohibits nonregistered participants from being 

within the specified zones unless 

authorized by the Captain of the Port 

Houston-Galveston or designated 

representative. 

DATES: This rule is effective October 28, 

2024. 

ADDRESSES: To view documents 

mentioned in this preamble as being 

available in the docket, go to https://

www.regulations.gov, type USCG–2024– 

0376 in the search box and click 

‘‘Search.’’ Next, in the Document Type 

column, select ‘‘Supporting & Related 

Material.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have questions about this 

rulemaking, call or email Lieutenant 

Junior Grade Jack Brunswick, Sector 

Houston-Galveston Waterways 

Management Division, U.S. Coast 

Guard; telephone 713–398–5823, email 

houstonwwm@uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

COTP Captain of the Port HoustonGalveston 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of proposed rulemaking 

§ Section 

U.S.C. United States Code 

II. Background Information and 

Regulatory History 

On April 28, 2024, an organization 

notified the Coast Guard that it will be 

conducting an annual high-speed boat 

race from 8 a.m. to 6 p.m. on the first 

or second Saturday in March in the 

navigable waters of San Jacinto River, 

Houston, TX. The Captain of the Port 

Houston-Galveston (COTP) has 

determined that potential hazards 

associated with the power boat race will 

be a safety concern for anyone within 

the Pre-Stage Zone, Approach Zone, 

Course Run Zone, and Shut-Down Zone 

before, during, and after the scheduled 

event. In response, on June 24, 2024, the 

Coast Guard published a notice of 

proposed rulemaking (NPRM) titled 

Special Local Regulation; San Jacinto 

River, Houston, TX (89 FR 52410). 

There we stated why we issued the 

NPRM and invited comments on our 

proposed regulatory action related to 

this boat race. During the comment 

period that ended July 28, 2024, we 

received one comment. 


khammond on DSKJM1Z7X2PROD with RULES