Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

Commodity Futures Trading Commission

Office of Public Affairs

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

cftc.gov

October 2, 2023

Fact Sheet and Q&A – Notice of Proposed Rulemaking to Amend Requirements for 

Commodity Pool Operators, Commodity Trading Advisors, and Commodity Pools 

Operated under Regulation 4.7: Updating the ‘Qualified Eligible Person’ Definition; 

Adding Minimum Disclosure Requirements for Pools and Trading Programs; Permitting 

Monthly Account Statements for Funds of Funds; and Technical Amendments 

The Commodity Futures Trading Commission (“Commission” or “CFTC”) is proposing to amend Regulation 4.7, 

a provision that provides exemptions from certain compliance requirements for commodity pool operators 

(“CPOs”) with respect to offerings to qualified eligible persons (“QEPs”) and for commodity trading advisors 

(“CTAs”) with respect to advising QEPs.

Background

The Commission adopted Regulation 4.7 in 1992. Since its adoption, the number of CPOs and CTAs operating pursuant to 

Regulation 4.7 and offering their pools and trading programs to QEPs has become, by far, the most popular registration status

for CPOs and CTAs. In fact, the Commission has observed that the number of CPOs and CTAs relying upon Regulation 4.7 

significantly outnumbers the number of CPOs and CTAs fully registered with the Commission, and the Commission expects 

that gap to continue to grow. With that in mind, the Commission is seeking to update various aspects of Regulation 4.7 to 

modernize the rule and reflect its current use.

In total, the Commission is seeking comment on four proposed amendments that would include the following:

1. Increases to the ‘Portfolio Requirement’ monetary thresholds in CFTC Regulation 4.7(a)(1)(v) to account for the effects 

of inflation over the last three decades;

2. New minimum disclosure requirements for CPOs and CTAs operating pools and trading programs under CFTC 

Regulation 4.7; 

3. Amendments designed to codify routinely issued exemptive letter relief allowing CPOs of Funds of Funds operated 

under CFTC Regulation 4.7 to choose to distribute monthly account statements within 45 days of the month-end; and

4. Technical amendments to CFTC 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.

Rationale

The Commission is seeking to update and modernize the requirements under Regulation 4.7. First, the Commission proposes 

to update the monetary thresholds outlined in the Portfolio Requirement to account for the effects of inflation that have 

occurred since the thresholds were adopted in 1992. The Commission believes updating the Portfolio Requirement is 

overdue, and that the proposed increases would realign the thresholds with the Commission’s original intent in the QEP 

definition. 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

Second, the Commission wishes to narrow the existing complete relief from any disclosure requirements for CPOs and CTAs 

under Regulation 4.7 by proposing to require the provision of certain minimum disclosures to CPOs’ and CTAs’ prospective 

and actual QEP pool participants and advisory clients. The Commission preliminarily believes that requiring CPOs and CTAs 

to provide a baseline level of information to QEPs would alleviate concerns that have grown with the significant 

developments in derivatives markets, and increasingly complex products within those markets, over the last three decades. 

Additionally, the Commission is concerned that, without requiring basic disclosures, QEPs may have diminished power and 

leverage over time to demand a level of information necessary to make informed investment decisions from CPOs and CTAs 

offering 4.7 pools and trading programs.

Third, the Commission is proposing to codify in Regulation 4.7 routinely issued exemptive relief that it has granted to CPOs 

of Funds of Funds operated under Regulation 4.7 with respect to periodic reporting. Due to the popularity and regularity of 

this oft-requested and issued letter relief, the Commission believes adding the alternative account statement schedule to 

Regulation 4.7, thereby making it available to all CPOs of Funds of Funds without an individual request, is appropriate at this 

time. 

Finally, the Commission is proposing technical amendments to certain aspects of Regulation 4.7 to improve its readability and

overall utility.

Proposed Rulemaking Q & A

1. What is the goal of the proposed rulemaking?

The Commodity Futures Trading Commission is proposing amendments to Regulation 4.7 to update and modernize that 

provision for CPO offerings to QEPs and CTAs with respect to advising QEPs. 

2. What are the changes being made?

The Commission is seeking comment on four proposed amendments that would include the following:

A. Increases to the ‘Portfolio Requirement’ monetary thresholds in CFTC Regulation 4.7(a)(1)(v) to account for the 

effects of inflation over the last three decades;

B. New minimum disclosure requirements for CPOs and CTAs operating pools and trading programs under CFTC 

Regulation 4.7; 

C. Amendments designed to codify routinely issued exemptive letter relief allowing CPOs of Funds of Funds operated

under CFTC Regulation 4.7 to choose to distribute monthly account statements within 45 days of the month-end; and

D. Technical amendments to CFTC 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. 

3. Who will be affected by these changes?

These changes will affect CPOs and CTAs operating commodity pools and trading programs pursuant to Regulation 4.7.

4. Why are the changes being made?

Generally, many aspects of Regulation 4.7 have not been updated since its adoption in 1992. The Commission is seeking 

to update and modernize the requirements to reflect developments in derivatives markets over the last 30 years. Given 

the increasing popularity of the Regulation 4.7 exemption, and the overwhelming number Regulation 4.7 CPOs and CTAs 

compared to fully registered CPOs and CTAs, the Commission deems it necessary to revisit certain key aspects of 

Regulation 4.7. 

5. What questions are being asked of the public for comment?

The Commission seeks comment on all aspects of the proposed amendments including, but not limited to, the following: 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

• The proposed increases to the Portfolio Requirement in the QEP definition.

• Are CPI-U and the CPI-W indexes the most appropriate for considering the impact of inflation on the 

thresholds within the Portfolio Requirement, and if they are not, what other suggested indexes or methods 

should the Commission consider using to assess inflationary effects?

• Whether there is 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 are 

adopted? 

• How much time would CPOs and CTAs need to determine that their existing QEP pool participants and 

clients would continue to satisfy the increased Portfolio Requirement? 

• Should the Commission increase or decrease the types of information included in Proposed Regulations 4.7 

(b)(2) and (c)(1)? In particular, should additional disclosure requirements listed in Regulations 4.24 and 4.34 

be included for CPOs and CTAs, respectively? If so, what disclosures? 

• The Commission is seeking specific data or information regarding: 

(i) the current number of CPOs and CTAs utilizing Regulation 4.7 that provide the proposed minimum 

disclosures to their QEP participants and clients; 

(ii) the level of disclosure currently provided by CPOs and CTAs to their QEP participants and clients;

(iii) if disclosures are provided, the general format, tenor, and manner used in both structuring and 

delivering the disclosures; and 

(iv) the context and timing of when any such disclosures are provided (e.g., whether during solicitation or 

otherwise during the course of the investment relationship).

• What specific challenges would CPOs and CTAs face in complying with the disclosure requirements in 

Proposed Regulations 4.7 (b)(2) and (c)(1)? 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? 

• Do the proposed amendments to Regulation 4.7(b)(3) create a mechanism equivalent to the exemptive letters 

currently issued by the Commission, and is the alternate account statement distribution schedule and notice 

requirement clear?

• Whether the Commission should consider any other technical amendments for improving Regulation 4.7.