CFTC Proposes Significant Disclosure Requirements with which CPOs and CTAs Operating under CFTC Rule 4.7 Will Have to Grapple

The Commodity Futures Trading Commission (Commission or CFTC) voted to announce proposed rule changes on October 2, 2023, that would significantly change the disclosure requirements applicable to registered commodity pool operators (CPOs) of private funds  and registered commodity trading advisors (CTAs) to sophisticated clients.

Of the most significant impact, the proposal would require CPOs that operate private funds under the operational exemption in CFTC Rule 4.7(b) to deliver to prospective pool participants disclosure documents containing many of the substantive disclosure that have historically only applied to “retail” commodity pools. The changes would have a similar effect on brochures provided to clients receiving CTA advice under CFTC Rule 4.7(c).  These disclosures would need to cover information about a pool or advisory program’s trading strategies, principal risk factors, fees and expenses, associated conflicts of interest and past performance over certain time periods. These new requirements would entail different disclosures than the U.S. Securities and Exchange Commission (SEC) and other regulators require of—in many cases—the same asset managers.