RegAlert2021-03-23 | CFTC Staff Letter 21-06Added · Updated
CFTC Staff Letter 21-06: No-action relief from CPO and CTA registration for Royalty Pharma plc regarding interest rate swaps
The Market Participants Division grants no-action relief from Commodity Pool Operator and Commodity Trading Advisor registration requirements to RP Management, LLC and the directors of Royalty Pharma plc for engaging in interest rate swaps. This relief applies specifically to swaps used to hedge interest rate risks associated with floating rate debt financing the acquisition of biopharmaceutical royalties, provided the activity remains secondary to the primary business and does not introduce risks other than counterparty credit. The Division will not recommend enforcement action against these entities if they adhere to conditions including maintaining risk levels consistent with Commission regulation 4.13(a)(3), avoiding speculation, and implementing reasonable risk management policies.
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Amanda Olear
Acting Director
Jai R. Massari
Davis Polk & Wardwell LLP
901 15th St NW,
Washington, DC 20005
RE: No-action Relief from Registration as a CPO and/or a CTA for the Directors and the Manager of the Company, Royalty Pharma plc Dear Ms. Massari:
This letter is in response to your letter dated January 13, 2021, to the Market Participants Division (the “Division”), formerly known as the Division of Swap Dealer and Intermediary Oversight, of the Commodity Futures Trading Commission (the “Commission”), as well as additional extensive conversations with staff over several months. You request on behalf of the Royalty Pharma plc (collectively with its subsidiaries, the “Company”), RP Management, LLC (the “Manager”), or any member of the Company’s board of directors (the “Directors”), confirmation that the Division would not recommend enforcement action against the Manager or Directors for failure to register as a commodity pool operator (“CPO”) or against the Manager for failure to register as a commodity trading advisor (“CTA”) with respect to their activities managing the Company. Based upon the representations in your letter, we understand the relevant facts to be as follows. The Company acquires biopharmaceutical royalty interests, which obligate others to pay royalties to the Company that are directly based on the sales price of certain biopharmaceutical products. 1 The Company finances its biopharmaceutical royalty investment activities through Pharmaceutical royalties are typically created when an owner of intellectual property, often a research institution or small biotech company, licenses that intellectual property to a licensee, typically a small biotech or large pharma company, in exchange for the right to receive a percentage of the net sales of biopharmaceutical products based on that intellectual property. The Company purchases biopharmaceutical royalties from licensors and, as a result, licensees generally become obligated to make their royalty payments to the Company rather than to the original licensor. Market Participants Division CFTC Letter No. 21-06 No-Action March 23, 2021
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Source: Commodity Futures Trading Commission — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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