U.S. District Court Rebuffs ICI Challenge to CFTC Rule 4.5 Amendments

Financial Services Alert – Compliments of EACC New York Founding Member Pepper Hamilton LLP

On December 12, 2012, the U.S. District Court for the District of Columbia released its decision in Investment Company Institute v. U.S. Commodity Futures Trading Commission rebuffing the Investment Company Institute (ICI)’s and U.S. Chamber of Commerce (Chamber)’s efforts to overturn recently adopted Commodity Futures Trading Commission (CFTC) amendments to CFTC Rules 4.5 (exclusion from definition of commodity pool operator) (CPO) and 4.27 (CPO and CTA reporting requirements) (the Amended Rules).

The Amended Rules substantially narrowed certain CPO registration and reporting exclusions available to registered investment companies (RICs) and their investment advisers (Advisers).

The Amended Rules were adopted in response to the aftermath of the 2008 financial crisis and at the behest of the National Futures Association (NFA), which had asserted that certain mutual funds were effectively operating commodity pools beyond the regulatory reach of the CFTC. Rule 4.5, as amended, reinstated the requirements for a RIC to qualify for exclusion from the definition of CPO to pre-2003 standards, and added further requirements, including a ban on advertising.

Read more