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Exclusive: SFOs win regulatory relief from US commodities watchdog

By Bruce Love

American single family offices trading commodities are no longer required to register as Commodity Trading Advisors (CTAs), CampdenFB.com has learned.

The relief comes after a successful campaign by the Private Investor Coalition (PIC) for an exemption for single family offices.

PIC, a nationwide coalition of family offices, lobbied the US Commodity Futures Trading Commission (CFTC) for an exemption under certain provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Under the law, individuals or firms which are paid to advise on the value or advisability of buying or selling futures contracts, options on futures, retail off-exchange forex contracts or swaps, must register with the CFTC and follow strict guidelines.

“The regulation is meant to monitor retail and institutional brokers and advisers, but it also applied unduly to single family offices,” said Jake Seher, Washington DC-based representative for PIC. “We have been focused on obtaining this exemption for the past two years and are pleased that the commission recognizes the unique status of family offices.”

Earlier this month Gary Barnett, director of the CFTC's division of swap dealer and intermediary oversight, wrote to PIC, granting family offices “no-action relief” from registration as a CTA.

“This is good news for all single family offices, whether they currently trade commodity derivatives or not,” said Seher. “But this is not self executing; you must notify the commission that you fit this category of exemption.”

To claim the relief, SFOs must write to the CFTC. Seher said PIC is currently drafting an example letter and will shortly publish the sample on their website.

“A single family office that has any portfolio exposure to futures, options on futures, off-exchange forex contracts, or swaps, whether those positions are managed internally by the single family office or outsourced to an outside manager should consult legal counsel to determine CTA No-Action compliance,” PIC wrote in a brief to members seen by CampdenFB.com.

“This is another example of why it's important for single family offices to understand what's going on in Washington and be part of the discussion,” said Seher. “There are many legislative and regulatory issues that you may not realise affect your office and your family's investments.”

The CFTC's current rules for the registration and compliance requirements for commodity pool operators and CTAs came into effect in February of 2012 as part of the regulator's implementation of Dodd-Frank. These rules eliminated the registration exemption which family offices had hitherto relied on to avoid registration.

Family office exemption from commodity pool registration came in November 2012 after lobbying from PIC, but the CTA registration requirement remained. 

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