CFTC Proposes to Reinstate CPO Registration Exemption for SEC-Registered Investment Advisers and Increase Small Pool Exemption Threshold

At a Glance

• On August 18, 2026, the CFTC published a notice of proposed rulemaking proposing amendments to its Part 4 regulations governing CPOs and CTAs.
• The proposal would create a new CPO registration exemption for SEC-registered investment advisers and restore a related CTA registration exemption.
• The proposal would also double the small pool exemption’s gross capital contributions threshold to $800,000.

On August 18, 2026, the Commodity Futures Trading Commission (CFTC) published a notice of proposed rulemaking proposing amendments to its Part 4 regulations governing commodity pool operators (CPOs) and commodity trading advisors (CTAs). The proposal would create a new CPO registration exemption for SEC-registered investment advisers (RIAs) operating commodity pools limited to sophisticated investors (Proposed Regulation 4.13(a)(4)); restore a related CTA registration exemption; and double the small pool exemption’s gross capital contributions threshold from $400,000 to $800,000. Comments are due 45 days after Federal Register publication.

Background

The CFTC adopted a qualified eligible persons (QEP)-based CPO registration exemption — former Regulation 4.13(a)(4) — in 2003 and rescinded it in 2012. In December 2025, the Market Participants Division (MPD) issued Staff Letter 25-50, providing a no-action position effectively reinstating the exemption for qualifying RIA-CPOs. The proposal would codify that no-action position as a formal regulation, providing greater durability and legal certainty.

Proposed Regulation 4.13(a)(4): The RIA-QEP Exemption

Who Is Eligible?

Only CPOs that are SEC-registered investment advisers are eligible. State-registered and exempt reporting advisers do not qualify.

Pool Eligibility Conditions

A commodity pool qualifies as an eligible pool under the following conditions.

Private Offering

Pool interests must be exempt from Securities Act registration. Marketing to the public in the US is prohibited, except under Rule 506(c) (general solicitation is permitted if all purchasers are verified accredited investors) — a JOBS Act-aligned modernization from the 2003 exemption.

Participant Limitations

Participants must be eligible participants:

• Natural persons must be QEPs under 17 CFR 4.7(a)(6)(i) — those not required to satisfy the portfolio requirement (e.g., registered intermediary principals, qualified purchasers, knowledgeable employees, non-US persons).
• Nonnatural persons must be either QEPs or accredited investors under Rule 501(a)(1)-(3), (a)(7), or (a)(8).

This is a slight tweak from Letter 25-50, which only required all participants to be QEPs without distinguishing natural from nonnatural persons. The proposal restores the original 2003 participant standard.

Form PF Reporting

The RIA-CPO must file Form PF for each eligible pool, if required to do so. A pending joint CFTC/SEC proposal would raise Form PF thresholds, potentially reducing the number of fund managers required to file.

Exemption Mechanics

Claimants must:

• File an electronic exemption notice with the National Futures Association (NFA) for each qualifying pool through the NFA website.
• Affirm the exemption annually on the NFA website.
• Comply with limited recordkeeping under Rule 4.13(c).
• Notify prospective participants of the pool’s exempt status (this is usually done with a disclaimer on the cover page of the pool’s offering documents).
• Where transitioning a pool from registered to exempt status (and not previously relying on Letter 25-50 for that pool), offer existing investors a right of redemption.

Letter 25-50 Transition

The final rule, if adopted, would supersede Letter 25-50. However, RIA-CPOs currently relying on Letter 25-50 generally would not need to offer a redemption right for pools already relying on the letter. The commission is considering a later effective date for the Regulation 4.13(e)(2) conforming amendment to ease this transition.

Pool-by-Pool Basis

An RIA-CPO may claim the exemption for some pools while remaining registered (or claiming a different exemption) for others.

CTA Registration Exemption (Proposed Regulation 4.14(a)(8))

The proposal would also amend 17 CFR 4.14(a)(8)(i)(D) to restore a cross-reference to Rule 4.13(a)(4), exempting from CTA registration investment advisers whose commodity trading advice is directed solely to CPOs claiming the new exemption. This restores the integrated CPO/CTA exemption framework as it existed before 2012.

Small Pool Exemption: Threshold Increase (Proposed Regulation 4.13(a)(2))

The gross capital contributions threshold would double from $400,000 to $800,000, reflecting cumulative inflation since the last adjustment in 2003. The 15-participant limit and existing exclusions (contributions from the CPO, CTA, their principals, and certain family members) remain unchanged.

Practical Implications for Fund Managers

1. Reduced Dual Registration Burden

   RIAs with futures or swaps in fund portfolios may deregister as CPOs (and often as CTAs), eliminating Form CPO-PQR reporting, disclosure document requirements, and NFA membership dues — while remaining fully SEC-regulated.

2. Participant Eligibility Assessment

   Managers should evaluate whether their investor bases meet the eligible participant standard, particularly for natural person investors who must satisfy the higher QEP threshold (without the portfolio requirement), not merely accredited investor status.  Practically speaking, investment funds that rely on Section 3(c)(7) to be exempt from investment company registration would meet this requirement.

3. Letter 25-50 Transition Planning

   Managers relying on Letter 25-50 should monitor the rulemaking timeline and assess whether the proposed participant standard (which differentiates natural from nonnatural persons) requires changes to subscription processes.

4. Small Pool Operators

   The $800,000 threshold provides additional headroom for investment clubs, family-related pools, and emerging managers to operate without CPO registration.

5. CPO Delegation Arrangements

   Managers using delegation structures under Staff Letter 14-126 should note that both delegating and designated CPOs could claim the new exemption directly, potentially eliminating the need for a separate delegation no-action position.

Comment Period

Comments are due 45 days after publication in the Federal Register, which is pending.

Conclusion

The proposal represents a significant step toward reducing overlapping CFTC and SEC regulation of RIA-CPOs, consistent with the commission’s “minimum effective dose” philosophy. Fund managers operating commodity pools for sophisticated investors should evaluate the benefits of claiming the new exemption and plan for the transition from Letter 25-50.

For More Information

For further information, you may contact the authors. Faegre Drinker's team will continue to monitor the rulemaking and its potential impact.