The Commodity Futures Trading Commission (“CFTC”) recently adopted amendments to Rule 4.5 under the Commodity Exchange Act (“CEA”) that will greatly narrow that rule’s exclusion for operators of registered investment companies (“Registered Funds” or “Funds”) from regulation as commodity pool operators (“CPOs”). Amended Rule 4.5 will require the operators of Registered Funds to either limit such Funds’ use of commodity futures, options, leverage contracts, retail forex contracts, and swaps (together, “commodity interests”) or submit to dual regulation by the CFTC and the Securities and Exchange Commission (“SEC”). Registered Funds that currently invest in commodity interests will need to evaluate and make significant changes to their investment and compliance programs before the amendments to Rule 4.5 take effect.

For persons relying on the Rule 4.5 exclusion as of the effective date of the rule amendments, which will generally be 60 days after publication in the Federal Register (“Effective Date”), likely in April 2012, the requirement to register under amended Rule 4.5 will be effective on the later of: (i) December 31, 2012; or (ii) within 60 days after the CFTC adopts final rules defining “swap” and establishes margin requirements for such instruments. However, based upon discussions with CFTC  staff, any Registered Fund that does not have a Rule 4.5 notice on file prior to the Effective Date willbe required to register at that time if it cannot come within the rule’s new trading limits.

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