Statement of Commissioner Rostin Behnam Regarding Amendments to Registration and Compliance Requirements for CPOs and CTAs: Prohibiting Exemptions under Regulation 4.13 on Behalf of Persons Subject to Certain Statutory Disqualifications
June 04, 2020
I support today’s adoption of a final rule (the “Final Rule”) requiring any person that files with the CFTC a notice claiming an exemption from registration as a commodity pool operator (“CPO”) under Regulation 4.13 of the Commodity Exchange Act (“CEA” or the “Act”) to affirmatively represent that neither the claimant nor any of the CPO’s principals has in its background any statutory disqualifications listed in section 8a(2) of the CEA, which are required to be disclosed as a part of a CPO registration application with the Commission. Beyond closing a regulatory gap that allows certain persons that would generally fail to meet the CEA’s basic conduct requirements to nevertheless claim an exemption from CPO registration, the Final Rule invigorates the Commission’s stance as an active regulator with respect to the most diverse registration category within our jurisdiction. As I have said before, CPOs (and commodity trading advisors or “CTAs”) are often identifiable by variable organizational structures, investment focus, participation, and solicitation, as well as complexity in how they are regulated within our authority. These factors demand that when we act, we do so with a laser focus on customer protections. I am pleased that this Final Rule aggressively advances customer protection in a tangible way.
I believe it is fully within our statutory duty to provide, at the very least, a foundational level of security on which customers, regardless of their experience and aptitude, can rely when parsing and considering what can seem like an endless amount of important information and fine print. Today’s Final Rule provides that footing for exempt commodity pool participants by generally prohibiting persons who have, or whose principals have, in their backgrounds any of the statutory disqualifications listed in CEA section 8a(2)—which are generally egregious, recent in time, and based upon a previous finding or order by the Commission, a court, or another governmental body—from soliciting and accepting funds for participation in commodity pools, even if they are exempt.
I am pleased that the Final Rule and its preamble address the significant number of responsive public comments, especially those seeking clarity on process and procedure. Last fall, when the Commission finalized several amendments to Part 4 of the regulations addressing various registration and compliance requirements for CPOs and CTAs, I commended, among other things, its decision to not move forward at that time on the part of the proposal that led to today’s Final Rule. That decision has led to a more thoughtful consideration of the comments received, the practicalities of the proposal, and the Commission’s need to fulfill its regulatory goals while remaining true to the Act. To that end, I appreciate that the Final Rule preserves the Commission’s direct and delegated authorities under CEA section 8a(2) and Regulation 4.12(a) to ultimately evaluate fitness for registration—or exemption, as the facts may dictate.
I wish to thank the staff in the Division of Swap Dealer and Intermediary Oversight for their tremendous efforts working with the National Futures Association in bringing this critical rule to finalization. Thank you for your consideration of my comments and for working with my team toward ensuring that we leave no doubt as to the regulatory intent and effect of today’s Final Rule. Thank you.
 Rostin Behnam, Statement of Concurrence by CFTC Commissioner Rostin Behnam: Amendments to Registration and Compliance Requirements for Commodity Pool Operators and Commodity Trading Advisors, Nov. 25, 2019, https://www.cftc.gov/PressRoom/SpeechesTestimony/behnamstatement112519.