The U.S. Commodity Futures Trading Commission’s (“CFTC”) Market Participants Division (the “Division”) issued No-Action Letter No. 25-50 (the “No-Action Letter”) on December 19, 2025, effectively temporarily reinstating former CFTC Regulation 4.13(a)(4) (the “QEP Exemption”), which was rescinded by the CFTC in 2012.  The No-Action relief is available until the CFTC promulgates rules addressing the reinstatement of the QEP Exemption.  This No-Action Letter affords options to reduce compliance burdens for a private fund manager that is a registered investment adviser with the Securities and Exchange Commission (“SEC”) that currently is also either registered as a commodity pool operator (“CPO”) with the CFTC or relies on CFTC Regulation 4.13(a)(3) with respect to its commodity interest trading for private funds. 

Background

Prior to its rescission in 2012, the QEP Exemption generally allowed investment advisers registered with the SEC to avoid CPO registration if the private funds they managed that traded in commodity interest positions, such as futures, only had investors who were “qualified eligible persons” (“QEPs”). QEPs generally include highly sophisticated individual and institutional investors, including “qualified purchasers” as defined in the Investment Company Act of 1940.  Following the 2012 recission of the QEP Exemption, private fund investment advisers that relied on the QEP Exemption either had to switch to reliance on CFTC Regulation 4.13(a)(3) (the “4.13 Exemption”), which imposes de minimis limitations on the amount of commodity interest trading that a private fund may conduct, or register as a CPO with the CFTC and become a member of the National Futures Association. While a registered CPO can seek exemptions from certain recordkeeping, reporting, and disclosure requirements under CFTC Regulation 4.7 if investors are all QEPs, this still requires registering with the CFTC and becoming a member of the National Futures Association, subject to the applicable rules and regulations.

No-Action Letter Reliance Requirements

To rely on the No-Action Letter, an investment adviser that (i) fails to register as a CPO, or (ii) withdraws from CPO registration, must meet the following requirements:

  1. The investment adviser is required to be registered with the CFTC as a CPO for its commodity pool operations or relies upon an existing exemption from such CPO registration in CFTC Regulation 4.13;
  2. The investment adviser is registered with the SEC;
  3. The interests of the pool operated by the investment adviser are exempt from Securities Act of 1933 (the “Securities Act”) registration and sold without marketing to the public in the United States or are offered pursuant to Rule 506(c) as promulgated under the Securities Act;
  4. The investment adviser reasonably believes that each pool participant meets the QEP definition under CFTC Regulation 4.7(a)(6);
  5. The investment adviser files a Form PF with respect to the pool(s) covered by the No-Action Letter;
  6. The investment adviser files a notice email documenting reliance on the No-Action Letter with the CFTC.

In the No-Action Letter, the CFTC also confirmed that a CPO de-registering solely based on the No-Action Letter is not required to make a redemption offer to the fund investors (otherwise required pursuant to CFTC Regulation 4.13(e)(2)).  However, a manager switching to reliance on the No-Action Letter should consider any investor notification requirements in accordance with the private fund’s governing documents and consider appropriate notification or updating of offering, marketing, due diligence questionnaires, and similar materials under the disclosure standards pursuant to the Investment Advisers Act of 1940.

Potential Benefits of No-Action Letter Reliance

An SEC-registered private fund manager that currently manages a private fund that relies on Section 3(c)(7) of the Investment Company Act (because its investors are “qualified purchasers,” which meet the QEP definition) and that currently relies on the 4.13 Exemption could, if it meets all the No-Action Letter requirements, switch to reliance on the No-Action Letter. This has two potential benefits:  First, it could expand the amount of commodity interest trading beyond the 4.13 Exemption limitations while remaining exempt from CPO registration.  Second, even if the private fund will remain within the 4.13 Exemption limitations, it would eliminate the need to monitor and test for those limitations (and the need for such testing in the manager’s compliance policies and procedures).

An SEC-registered private fund manager whose commodity interest trading for a private fund exceeds the 4.13 Exemption limitations and therefore is currently registered as a CPO with the CFTC could withdraw its CPO registration and rely on the No-Action Letter. This can greatly reduce compliance costs as it would no longer need to maintain the CFTC registration and membership with the National Futures Association or have a full separate set of policies and procedures for CFTC compliance.

Potential Risks of Reliance on the No-Action Letter

Any final rule adopted by the CFTC could differ from the prior QEP Exemption and the No-Action Letter, imposing different conditions or a narrower scope.  It could also fail to adopt a rule, in which case the No-Action Letter would remain in effect unless the CFTC decides to rescind the No-Action Letter.  For managers that switch to the No-Action Letter reliance from reliance on the 4.13 Exemption, this may simply involve switching back to the 4.13 Exemption reliance and reinstituting the monitoring of the trading limitations, while it would pose a larger risk in terms of time and expense for a manager that would potentially be required to re-register fully with the CFTC as a CPO because it could not adhere to the trading limitations.

Conclusion

The No-Action Letter offers meaningful relief for SEC-registered advisers with QEP-only funds that meet the No-Action Letter criteria. Managers currently relying on 4.13 Exemption can gain flexibility and simplify their exemption compliance, and managers who are also currently registered CPOs can substantially reduce the burden and cost associated with maintaining the CPO registration.  However, the temporary nature of this relief and meeting its requirements requires informed consideration with experienced counsel.  

Contacts:

Burke McDavid  I  214.745.5490  I  bmcdavid@winstead.com

Andrew Rosell   I  817.420.8261  I  arosell@winstead.com

Jacob Spicer I 817.420.8234 I jspicer@winstead.com