IAA Supports CFTC CPO Exemption Proposal, Recommends Improvements
October 5, 2026
Christopher Kirkpatrick
Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street NW
Washington, DC 20581
Re: Commodity Pool Operators and Commodity Trading Advisors: Reduction of Duplicative Regulation Through Intermediary Registration Exemptions; Expansion of the Exemption for Small Commodity Pools; RIN 3038-AF78
Dear Mr. Kirkpatrick:
The Investment Adviser Association (IAA)[1] appreciates the opportunity to comment on the Commodity Futures Trading Commission’s (CFTC or Commission) proposed amendments to its commodity pool operator (CPO) and commodity trading advisor (CTA) registration requirements.[2] The Proposal would, among other things, add an exemption under Regulation 4.13(a)(4) from CPO registration (Exemption) for certain investment advisers registered with the Securities and Exchange Commission (SEC) that operate privately offered commodity pools limited to specified sophisticated investors, together with a related exemption from CTA registration.
The Proposal would generally codify the relief provided by the CFTC’s Market Participants Division in Staff Letter No. 25-50 (Letter 25-50), which was intended as interim relief pending Commission rulemaking.[3] We strongly support replacing that staff relief with a durable Commission rule.
As the Commission recognizes, SEC-registered investment advisers (RIAs) are already subject to a comprehensive federal regulatory framework under the Investment Advisers Act of 1940 (Advisers Act), including an overarching fiduciary duty, disclosure and reporting requirements, SEC examination and enforcement authority and, for certain private fund advisers, Form PF reporting. The Commission has preliminarily concluded that a CPO registration exemption is appropriate for qualifying RIAs because they are already subject to “robust SEC oversight and regulation.”[4] We agree with the Commission that allowing these RIAs to rely on the SEC’s regulatory framework will reduce overlapping regulation.[5] We therefore strongly support the Proposal.
We recommend the following targeted changes to ensure that the final rule fully accomplishes this objective:
- Relying Advisers. Confirm that an SEC relying adviser reported under an umbrella registration on the filing adviser’s Form ADV is eligible for the Exemption and retain the proposed Form PF condition and CTA exemption for advisers to 4.13(a)(4) pools.
- Redemption Requirement. Eliminate the requirement that a registered CPO transitioning an otherwise qualifying pool to exempt status under Regulation 4.13(a)(4) provide investors a special opportunity to redeem solely because of that change in regulatory status.
- QEP Standard. Permit any natural-person participant who qualifies as a qualified eligible person (QEP) under Regulation 4.7(a)(6) to invest in a qualifying pool, rather than limiting natural persons to the QEP categories in Regulation 4.7(a)(6)(i).
These changes would make the Exemption more workable while preserving the important protections provided by SEC regulation of the RIA and the CFTC’s existing standards for sophisticated pool participants.
1. The Commission Should Confirm Relying Adviser Eligibility and Retain the Proposed Form PF Condition and CTA Exemption for Advisers to 4.13(a)(4) Pools
Proposed Regulation 4.13(a)(4) requires the person claiming the Exemption to be registered with the SEC as an investment adviser under the Advisers Act. The Commission should expressly confirm that this condition includes a relying adviser included in an SEC umbrella registration.
Under the SEC’s umbrella-registration framework, a filing adviser files a single Form ADV on behalf of itself and one or more relying advisers that collectively conduct a single advisory business. Each relying adviser must itself be eligible for SEC registration. Its advisory activities are subject to the Advisers Act and SEC examination, and it is subject to the filing adviser’s supervision and control. The filing adviser and relying advisers also operate under a single code of ethics and a single set of compliance policies and procedures administered by a single chief compliance officer.[6]
Accordingly, permitting a relying adviser to use the Exemption is fully consistent with the Commission’s rationale for limiting the Exemption to RIAs. The Commission explains that the RIA condition is intended to ensure that a CPO relying on the Exemption remains subject to a robust federal regulatory regime and significant SEC oversight.[7] A relying adviser operating under a qualifying umbrella registration is subject to that regulatory framework.
Express confirmation is important because, as a technical matter, the filing adviser files the single Form ADV through which the relying adviser is registered. Without clarification, the language of proposed Regulation 4.13(a)(4)(ii) could create unnecessary uncertainty over whether a relying adviser itself satisfies the condition. The final rule or adopting release should make clear that it does.
We also support two related aspects of the Proposal. First, the condition requiring an RIA to file Form PF if it is otherwise required to do so under Form PF and applicable securities regulations appropriately accommodates future changes to the scope of Form PF reporting.[8] Second, we support the corresponding amendment to Regulation 4.14(a)(8), which would restore the cross-reference to Regulation 4.13(a)(4) and make the CTA registration exemption available for qualifying advice to pools operated under the reinstated exemption.[9] Requiring a CTA to remain registered as a CTA solely for advice to a pool for which the adviser appropriately qualifies for the Exemption would perpetuate the regulatory duplication the Proposal is intended to address.
2. The Commission Should Eliminate the Redemption Requirement for Pools Whose CPOs are Transitioning to the Exemption
The Commission should not require a registered CPO transitioning an otherwise qualifying pool to exempt status under Regulation 4.13(a)(4) to provide investors with a special redemption opportunity solely because the CPO is changing its regulatory status.
Letter 25-50 appropriately does not impose such a requirement. It expressly provides no-action relief from Regulation 4.13(e)(2) for CPOs relying on the letter.[10] The Proposal, however, would restore the cross-reference to paragraph (a)(4) in Regulation 4.13(e)(2). Under the proposed rule text, therefore, a registered CPO electing to operate an existing pool under Regulation 4.13(a)(4) would have to give each existing participant a right to redeem its interest.[11]
The Commission recognizes this change from Letter 25-50 and thus proposes to protect pools that have already relied on Letter 25-50 from the redemption requirement. The Commission asks whether a separate, later effective date for Regulation 4.13(e)(2) would appropriately address the issue for registered CPOs that would be transitioning from registered CPO status to operation under the Exemption.[12] We recommend a simpler and more durable solution: exclude pools whose CPOs transition to Regulation 4.13(a)(4) from the redemption requirement altogether.
A CPO’s transition from registered to exempt status under Regulation 4.13(a)(4) does not, by itself, change the pool’s investment strategy, portfolio, governance, or contractual liquidity terms. The adviser remains subject to SEC regulation, and the pool must continue to satisfy the eligibility conditions established by the CFTC. There is therefore no inherent change in the investment that warrants inserting a new redemption right into the contractual relationship between the pool and its investors.
This is especially important for private funds. Liquidity rights, including lockups, gates, and other redemption restrictions, are established in the fund’s governing and offering documents and form part of the terms on which investors choose to invest. Requiring an extraordinary redemption opportunity solely because the CPO changes its CFTC registration status could override those agreed terms and, depending on the fund and its portfolio, require the fund to generate liquidity that is inconsistent with its investment strategy or otherwise disadvantages investors who remain in the fund.
Nor is there a reason to distinguish for this purpose between a pool whose CPO relied on Letter 25-50 before the Exemption is finalized and another existing or future pool that later becomes eligible for operation under Regulation 4.13(a)(4). The same principle applies in each case; a change in the CPO’s regulatory status, without a corresponding change in the pool or its investment terms, should not itself create a special redemption right.
We therefore recommend that the Commission revise proposed Regulation 4.13(e)(2)(iii) so that it does not apply when a CPO transitions operation of a pool to exempt status under Regulation 4.13(a)(4). If the Commission does not eliminate the requirement entirely, it should, at a minimum, protect all pools in existence on the effective date of the final rule, rather than limiting relief to pools that previously relied on Letter 25-50. That approach would avoid disturbing liquidity terms that were established before the final rule. Our strong preference, however, is to eliminate the redemption requirement for Regulation 4.13(a)(4) pools altogether.
3. The Commission Should Apply the Existing QEP Standard Consistently to Natural-Person Investors
The Proposal would narrow the types of natural-person QEPs who may invest in a pool operated under the Exemption. Under Letter 25-50, a natural person may participate if the person qualifies as a QEP under any part of Regulation 4.7(a)(6). The Proposal would instead permit only natural persons who qualify under paragraph (i) of that definition. It would continue to permit non-natural persons to qualify under either paragraph (i) or paragraph (ii), as well as under specified accredited-investor categories.[13]
We recommend that the Commission retain the simpler standard in Letter 25-50 and permit any natural person who qualifies as a QEP under Regulation 4.7(a)(6) to participate in a pool relying on the Exemption. There is no need to create a narrower QEP standard for natural persons solely for purposes of this Exemption.
Limiting natural persons to paragraph (i) would exclude individuals who qualify as QEPs through a separate path under paragraph (ii) of Regulation 4.7(a)(6). Persons in the categories listed in paragraph (i) qualify as QEPs without having to meet an additional Portfolio Requirement. These include, among others, certain registered financial professionals, qualified purchasers, knowledgeable employees, and non-U.S. persons.[14] Paragraph (ii) provides another path to QEP status. Persons in the categories listed in paragraph (ii) qualify as QEPs only if they also satisfy the Portfolio Requirement, an additional financial test that the Commission uses to distinguish retail participants from persons with sufficient investment sophistication and financial resources.[15]
For example, paragraph (ii) includes certain natural persons who qualify as accredited investors. To be a QEP under paragraph (ii), such individuals must also satisfy the Portfolio Requirement, which generally requires at least $4 million in specified investments, at least $400,000 in specified margin, premiums, and security deposits, or a prescribed combination of the two.[16] Thus, an individual who meets the applicable accredited-investor test and the Portfolio Requirement is a QEP under the Commission’s existing rules.
The Proposal would nevertheless prevent that individual from participating in a pool operated under the Exemption unless the individual separately qualifies under paragraph (i). The Commission explains that it is proposing this distinction because it believes the paragraph (i) QEP categories reflect a higher level of sophistication, resilience, and experience and because the distinction was part of the original Regulation 4.13(a)(4) exemption. The Commission acknowledges, however, that this is a “recalibration” from Letter 25-50, which permits all QEPs to participate without distinguishing between natural and non-natural persons.[17]
We do not believe this additional restriction is necessary. The Commission already determined which investors should be treated as QEPs under Regulation 4.7 and, as recently as 2024, updated the Portfolio Requirement applicable to paragraph (ii) QEPs. In doing so, the Commission explained that the Portfolio Requirement is intended to identify persons with sufficient financial experience, sophistication, and resources to participate in commodity interest markets without the full protections otherwise provided under Part 4.[18] An individual who satisfies both the applicable paragraph (ii) category and that heightened financial requirement is therefore a QEP under the Commission’s existing regulatory framework.
The proposed distinction could also materially limit the usefulness of the Exemption. Because every natural-person participant would have to qualify under paragraph (i), a single investor who is a QEP under paragraph (ii), but not paragraph (i), could prevent an otherwise eligible pool from being operated under the Exemption. An adviser currently relying on Letter 25-50 could therefore have to reassess its existing investors and potentially forgo the Exemption even though every investor satisfies the Commission’s existing QEP definition.
The Commission’s own cost-benefit analysis recognizes the potential costs of materially changing the eligibility conditions in Letter 25-50 and preliminarily concludes that restrictions beyond minor adjustments could significantly limit the utility of the Exemption without providing material additional regulatory or customer-protection benefits.[19]
We therefore recommend that proposed Regulation 4.13(a)(4) permit a natural person to participate if the RIA-CPO reasonably believes that the person is a QEP under either paragraph (i) or paragraph (ii) of Regulation 4.7(a)(6), consistent with Letter 25-50.[20]
Conclusion
The IAA strongly supports the Commission’s proposal to reinstate the Exemption under Regulation 4.13(a)(4) and replace the interim relief in Letter 25-50 with a durable Commission rule. The Proposal appropriately recognizes that requiring an SEC-registered investment adviser to maintain overlapping CFTC registration solely because it operates a qualifying commodity pool can impose duplicative regulation without a corresponding regulatory benefit.
We recommend the targeted changes discussed above, however, to make the Exemption significantly more workable while remaining consistent with its underlying rationale. These changes would preserve the protections provided by SEC oversight of the adviser and the CFTC’s sophisticated-investor standards, while avoiding unnecessary barriers to using the Exemption.
***
Thank you for your consideration of our comments on this important issue. Please do not hesitate to contact the undersigned at (202) 293-4222 if we can be of further assistance.
Respectfully,
Gail C. Bernstein
General Counsel and Head of Public Policy
Monique Botkin
Associate General Counsel
cc:
Honorable Michael Selig, Chairman
DJ Hennes, Director, Market Participants Division
[1] The IAA is the leading organization dedicated to advancing the interests of fiduciary investment advisers. For nearly 90 years, the IAA has been advocating for advisers before Congress and U.S. and global regulators, promoting best practices and providing education and resources to empower advisers to effectively serve their clients, the capital markets, and the U.S. economy. Our members range from global asset managers to the medium- and small-sized firms that make up the majority of our industry. Together, the IAA’s member firms manage more than $57 trillion in assets for a wide variety of individual and institutional clients, including pension plans, trusts, mutual funds, private funds, endowments, foundations, and corporations. For more information, please visit www.investmentadviser.org and see the IAA’s Investment Adviser Industry Snapshot (Snapshot).
[2] Commodity Pool Operators and Commodity Trading Advisors: Reduction of Duplicative Regulation Through Intermediary Registration Exemptions; Expansion of the Exemption for Small Commodity Pools, 91 Fed. Reg. 54264 (Aug. 21, 2026) (Proposal), available here. Many IAA members advise pools exempt under Regulations 4.5 and 4.13(a)(3). We also look forward to providing comments on the CFTC’s anticipated proposal on CPO Exemptions for Mutual Funds under Regulation 4.5, which is included in the recent Regulatory Flexibility agenda. We agree with the reasoning on this point set forth in the letter from the Investment Company Institute (ICI). See ICI Letter on the Proposal.
[3] Proposal at 54267-68. The Commission reissued the content of Letter 25-50 on February 26, 2026, in Letter 26-06, to include an additional no-action position provided in Letter 14-126 related to CPO delegation arrangements. Id at 54268.
[4] Id. at 54269.
[5] The IAA has long called on the Commission to reduce the overlapping regulatory burdens on CPOs and CTAs registered as investment advisers with the SEC. See, e.g., Letter from the IAA to CFTC re: Commodity Pool Operators and Commodity Trading Advisors: Amendments to Compliance Obligations, Proposed Rule, RIN 3038-AD30 (Apr. 12, 2011), available here; Letter from the IAA to CFTC re: Registration and Compliance Requirements for Commodity Pool Operators and Commodity Trading Advisors, RIN 3038-AE76 (Dec. 17, 2018), available here.
[6] SEC Form ADV, General Instruction 5.
[7] Proposal at 54269.
[8] Id. at 54270, n.54 and proposed Regulation 4.13(a)(4)(iv).
[9] Id. at 54271. We also encourage the CFTC to revisit Regulation 3.10 to clarify that CTAs can use that exemption on an account-by-account basis and “stack” with other exemptions, as we requested on the CFTC’s 2020 proposal. See IAA, Joint Trades Letter to the CFTC Re: Proposed Amendments to Commission Regulation 3.10(c): Exemption From Registration for Certain Foreign Persons Acting as Commodity Pool Operators of Offshore Commodity Pools [RIN 3038-AE46]; Exemption From Registration for Certain Foreign Persons [RIN 3038-AE46] (Aug. 11, 2020), available here. When adopting the Regulation 3.10 amendments, the CFTC did not disagree with industry groups’ characterization of its past positions on the “stacking” of exemptions as permissible, but it declined at that time to provide that relief for non-U.S. CTAs, comparable to what it then adopted for non-U.S. CPOs, because it had not solicited comments on that question. See Exemption From Registration for Certain Foreign Intermediaries, 85 Fed. Reg. 78718, 78732-33, n. 201 (Dec. 7, 2020), available here.
[10] See Proposal at 54268, n.36 and accompanying text.
[11] Proposed Regulation 4.13(e)(2)(iii), id. at 54280.
[12] Proposal at 54271.
[13] Proposal at 54269-70. The Commission describes the proposed participant condition and acknowledges that it differs from Letter 25-50.
[14] Regulation 4.7(a)(6)(i); see also Proposal at 54266, n.21.
[15] Regulation 4.7(a)(6)(ii); see also Commodity Pool Operators, Commodity Trading Advisors, and Commodity Pools Operated: Updating the ‘Qualified Eligible Person’ Definition, 89 Fed. Reg. 78793, 78799 (Sept. 26, 2024), available here.
[16] Regulation 4.7(a)(5); Proposal at 54266, n.22.
[17] Proposal at 54269-70.
[18] 89 Fed. Reg. at 78799. In 2024, the Commission stated that the Portfolio Requirement provides objective criteria to distinguish retail participants from persons with a high degree of investment sophistication and sufficient financial resources to withstand investment risk.
[19] Proposal at 54278.
[20] We do not object to the Proposal separately permitting non-natural persons to qualify under the specified accredited-investor categories.