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Commodity Pool Operators: Eased Marketing Restrictions Opens Doors to Capital Raising


9/15/14

Synopsis
 
This week, the U.S. Commodity Futures Trading Commission (CFTC) announced its plan to ease marketing restrictions on privately-offered funds. This action by the CFTC is intended to align the Commission’s rules with provisions in the Jumpstart Our Business Startups Act (“the JOBS Act”), specifically, lifting the ban on general solicitation or advertising by privately-offered funds. The CFTC’s decision to relax the rules on advertising to the public will enable privately-offered funds to take full advantage of the new rule contained in the JOBS Act, as separate CFTC restrictions had previously restricted funds from doing so.
 
Issue
 
In 2012, the JOBS Act was enacted with the intent to improve access to funding for emerging companies, thereby increasing job creation and expanding economic growth. To that end, the law eased securities regulations, including lifting the 80-year-old ban on hedge funds and other private funds to raise capital through general solicitation to the public.
 
Relief from the CFTC’s restrictions is, however, contingent upon meeting certain conditions including:

  1. Funds must rely on the new rules of the Securities and Exchange Commission (SEC); and
  2. Firms that desire to take advantage of the relief must file a notice with the CFTC, at which time the relief will be effective immediately and remain in effect until further notice by the CFTC.
     

To view the complete exemptive letter issued by the CFTC, click here.
 
What Does CohnReznick Think?

The JOBS Act relaxation of the general solicitation rules for commodity pool operators (CPOs) made strides to allow the public to understand the alternative investment community. Although the CPOs are now allowed to advertise and publish certain information, there are still procedures the managers must perform to take advantage of these rules. These procedures should be fully understood prior to providing information to the general public. The CFTC alignment is a positive movement by the regulators to allow CPOs a consistent regulatory platform across their investment management strategies.

Contact

For more information, please contact Jay Levy, Partner, Financial Services Industry Practice Leader, at 646-254-7412.
 
To learn more about CohnReznick’s Financial Services Industry Practice, visit our webpage.


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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