Commodities Futures Trading Commission on September 12 issued final changes to Rule 4.7 “qualified eligible person” (QEP) applicable to private funds and managed accounts.
Under the prior definition of a QEP, certain persons (including natural persons who are accredited investors, among others) must meet one of two compliance thresholds or a combination of the two in a private fund. The newly adopted Portfolio Requirement doubles the amounts of the two thresholds: The Securities Test will be set at $4 million and the Initial Margin and Premium Test will be set at $400,000 for commodity pooled private fund offerings and managed accounts trading in commodities
Commodities Futures Trading Commission on September 12 issued final changes to Rule 4.7 “qualified eligible person” (QEP) applicable to private funds and managed accounts.
The CFTC will continue to allow a person to meet the Portfolio Requirement by a combination of the two tests adding up to 100%.
The CFTC will continue to allow a person to meet the Portfolio Requirement by a combination of the two tests adding up to 100%. To qualify as a 4.7 Exempt CPO/CTA, all investors that invest in a fund or managed account will be required after the effective date to meet the higher QEP threshold. Exempt CPOs/CTAs should update their subscription agreements, management agreements and/or compliance manual and risk management to reflect the new Portfolio Requirement and consider implications of the increased standard for their investor base. CPOs or CTAs will not be required to redeem an existing QEP investor or terminate an existing client’s relationship if such investor or client does not meet the new Portfolio Requirement but a new start up fund will be required to comply to take advantage of the exemption which avoids a certain regulatory review by the Commission.
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