CFTC Addresses the Use of Rule 506 By Commodity Pool Operators


Securities Law Blog

The Commodity Futures Trading Commission (the “CFTC”) recently issued an Exemptive Relief letter No. 14-116 allowing certain operators of commodity pools (Commodity Pool Operators) to rely upon Rule 506 for certain securities offerings.  Exemptive Relief was issued in response to amendments made by the Securities and Exchange Commission (“SEC”), pursuant to the JOBS Act, which adds a new registration exemption to Rule 506 of Regulation D and amend Rule 144A.  

The CFTC Exemptive Relief letter was issued more than a year after the SEC adopted Rule 506(c) allowing general solicitation and advertising in private placements under the JOBS Act.

Commodity pools are funds that trade in futures contracts, options on futures contracts, retail off-exchange forex contracts and/or swaps, or invest in another commodity pool.  Generally, fund managers must register as commodity pool operators if they operate or solicit investor funds.  Registration requires associated persons to take the Series 3 exam, and become members of the National Futures Association.

Exemptive Relief is available to commodity pool operations that are exempt from registration under the CFTC Regulation 4.13(a)(13) or which are registered but exempt from certain disclosure requirements under Regulation 4.7(b).  Previously, such Commodity Pool Operators were prohibited from engaging in any form of general solicitation or advertising.

Under Exemptive Letter No. 14-116Now, Commodity Pool Operators must submit a claim to the CFTC’s Division of Swap Dealer and Intermediary Oversight claiming reliance upon Rule 506(c).

A claim submitted by a Commodity Pool Operator will be effective upon filing, so long as the claim is materially complete and accurate. The claim must:

a. State the name, business address, and main business telephone number of the Commodity Pool Operator claiming the relief;

b. State the name of the pool(s) for which the claim is being filed;

c. State whether the Commodity Pool Operator claiming relief is a 506(c) Issuer or is using one or more 144A Resellers;

d. Specify whether the Commodity Pool Operator intends to rely on the exemptive relief pursuant to Regulation 4.7(b) or 4.13(a)(3), with respect to the listed pool(s);

i. If relying on Regulation 4.7(b), represent that the Commodity Pool Operator meets the conditions of the exemption, other than that provision’s requirements that the offering be exempt pursuant to section 4(a)(2) of the Securities Act and be offered solely to Qualified Eligible Persons, such that the Commodity Pool Operator meets the remaining conditions and is still required to sell the participations of its pool to Qualified Eligible persons;

ii. If relying on Regulation 4.13(a)(3), represent that the CPO meets the conditions of the exemption, other than that provision’s prohibition against marketing to the public;

e. Be signed by the Commodity Pool Operator; and

f. Be filed with the Division via email using the email address [email protected] and stating “JOBS Act Marketing Relief” in the subject line of such email.

Fund managers acting as Commodity Pool Operators should carefully consider the benefits of engaging in a Rule 506(c) offering using general solicitation and/or advertising in light of the increased compliance costs and technical requirements of the Rule. For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates 
Brenda Hamilton, Going Public Lawyer
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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