The Commodity Futures Trading Commission has proposed significant restrictions on the current exemptions from CFTC registration utilized by many public and private funds that invest in commodities.  For registered funds, the CFTC has proposed restricting the Section 4.5 exemption to funds that use commodity futures or options “solely for bona fide hedging purposes” and so long as total margin and premium payments do not exceed 5% of the fund’s liquidation value.  For private funds, the CFTC has proposed reinstating the certified financial statement requirement for funds relying on Section 4.7.  Perhaps most significantly, the CFTC proposes rescinding the exemption from registration for funds offered solely to qualified eligible persons and accredited investors.

OUR TAKE: Registration would significantly increase a fund’s compliance obligations including disclosure, financial statements, compliance program, and supervision.

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/federalregister012611b.pdf