No-Action Relief from CPO Registration for Business Development Company Operators

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5949
Facsimile: (202) 418-5547 gbarnett@cftc.gov
Division of Swap Dealer and
Intermediary Oversight
Gary Barnett
Director
CFTC Letter No. 12-40
No-Action
December 4, 2012
Division of Swap Dealer and Intermediary Oversight Re: No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Business Development Companies This is in response to correspondence (the “Correspondence”) received by the Division of Swap Dealer and Intermediary Oversight (“Division”) of the Commodity Futures Trading Commission (“CFTC” or the “Commission”) requesting clarification regarding CFTC Regulation 4.5 1 as applied to business development companies (“BDCs”). 2 BDCs are entities created by, and subject to regulation under, the Investment Company Act of 1940 as amended (“ICA”). As a technical matter, a BDC is not “an investment company registered as such under the ICA” (“RIC”) as specified in CFTC Regulation 4.5, but instead is an entity exempt from registration under the ICA by virtue of the filing of an election to be treated as a BDC under Section 54 of the ICA. Therefore, because BDCs are not technically RICs, CFTC Regulation 4.5(a)(1) and (b)(1) as drafted do not apply to BDCs. The Correspondence received by the Division made the following representations regarding the operation of BDCs. The Correspondence stated that BDCs are regulated like, and may employ swaps, futures contracts, or options on futures in substantially the same manner as, RICs. Further, the Correspondence also stated that BDCs qualify as “investment companies” under Section 3 of the ICA. According to the Correspondence, many BDCs have external advisers and, like advisers to RICs, such external advisers to BDCs must register with the Securities and Exchange Commission (“SEC”) as investment advisers under the Investment Advisers Act of 1940 as amended. Moreover, the Correspondence asserts that BDCs, like RICs, are subject to periodic examination by the SEC. Additionally, the Correspondence stated that