On September 9, 2014, the Division of Swap Dealer and Intermediary Oversight of the Commodity Futures Trading Commission (CFTC) issued an exemptive letter  (the JOBS Act Exemptive Letter) for private fund managers relying on exemptions from registration as commodity pool operators (CPOs) with the CFTC. This relief harmonizes the CFTC’s CPO exemptions with the 2013 final rules issued by the Securities and Exchange Commission (SEC) relating to offerings exempt from registration under the Securities Act of 1933 (Securities Act) as required by the Jumpstart Our Business Startups Act of 2012 (JOBS Act).
As discussed more fully in a previous Investment Management Alert, the SEC’s 2013 JOBS Act rules eliminated the prohibition on general solicitations and advertising for certain (but not all) offerings made under Rule 506 of Regulation D (Reg D) of the Securities Act and Rule 144A of the Securities Act. Hedge funds and other private funds generally rely on the private offering exemption in Rule 506 to sell the interests in the funds. The SEC’s JOBS Act rulemaking created a new Section 506(c) of Rule 506 that gives private fund managers the option to advertise their funds so long as they abide by the additional terms of Section 506(c).