CFTC restores temporary exemption for private fund advisers offering solely to qualified eligible persons

The Commodity Futures Trading Commission’s Market Participants Division has restored, on an interim basis, exemption-like relief for certain SEC‑registered investment advisers managing private funds whose interests are offered only to qualified eligible persons (QEPs). According to a Morgan Lewis LawFlash, the CFTC issued No‑Action Letter 25‑50 in December 2025, instructing staff not to recommend enforcement against advisers that decline to register, or withdraw from registration, as commodity pool operators (CPOs) (and, by extension, as commodity trading advisers (CTAs)) where the manager satisfies prescribed conditions.

The action effectively revives the policy that existed under CFTC Regulation 4.13(a)(4) before the Commission rescinded that QEP exemption in 2012. Industry briefings from Goodwin, Cohen & Gresser, Shartsis Friese, Alston & Bird, Bryan Cave Leighton Paisner and others concur that the December 19, 2025 letter restores the practical ability of SEC‑registered investment advisers (RIAs) to avoid dual registration for pools offered solely to institutional and other sophisticated investors encompassed by the QEP definition.

Scope and eligibility
Under the no‑action position, an adviser must be an RIA and either be required to register as a CPO or be relying on another CFTC registration exemption. The pools must be offered only to QEPs, the adviser must reasonably believe at the time of investment (or at the time relief is claimed) that all participants qualify as QEPs, and the offering must be exempt from SEC registration and not publicly marketed in the United States except as permitted under SEC Rule 506(c). The adviser must file Form PF with the SEC and ensure the CFTC receives a copy, and must comply with CFTC Rules 4.13(b) and 4.13(c) concerning notice filings, books, records and responses to special calls. These conditions are set out in the Morgan Lewis analysis and repeated across the industry summaries.

The letter also allows qualifying managers to claim relief from CTA registration for the relevant pools consistent with CFTC Regulation 4.14(a)(5). Importantly, the Market Participants Division declined to impose the mandatory redemption‑right requirement found in CFTC Regulation 4.13(e), accepting industry arguments that such a rule would be inconsistent with typical negotiated liquidity and redemption terms in private funds.

Policy rationale and market impact
The CFTC staff’s decision mirrors the original rationale for the QEP approach: QEPs are presumed to possess the sophistication necessary to evaluate risks without prescriptive CFTC investor protections, and removing duplicative registration can reduce regulatory friction. According to industry commentary, the Managed Funds Association argued that the relief would not meaningfully reduce the CFTC’s access to market data because other reporting regimes, large trader reporting, position limits and swap reporting, remain in force.

Several legal firms note the relief is temporary and that the CFTC may pursue formal rulemaking to reinstate the QEP Exemption permanently. Commentaries from Alston & Bird and others emphasise that managers which previously structured funds to rely on the de minimis trading exemption under Regulation 4.13(a)(3) may now prefer the clarity of the no‑action position rather than monitor trading thresholds.

Outstanding questions and cautions
Practitioners and fund managers have flagged residual uncertainties. Alston & Bird and other advisers highlight a potential wrinkle concerning eligible contract participant (ECP) status under the Commodity Exchange Act. Because a pool’s ECP character can turn on whether it is “formed and operated by a person subject to regulation under” the Act, some managers worry that foregoing CPO registration could complicate pools’ ability to transact in certain off‑exchange commodity interests. The no‑action letter does not squarely resolve that statutory question, leaving room for operational and legal analysis before managers change long‑standing practices.

Regulatory coordination and historical context
Industry materials note that the move aligns with prior recommendations to harmonise oversight of similar funds between the SEC and the CFTC. The Morgan Lewis piece and several firm summaries reference a 2017 US Department of the Treasury report that criticised the 2012 rescission as increasing burdens without clear investor‑protection benefits. The CFTC’s staff action therefore represents a partial re‑alignment toward the pre‑2012 approach, while preserving data collection through existing reporting channels.

Practical next steps for managers
Across the legal commentaries, advisers are counselled to undertake careful eligibility reviews before relying on the no‑action relief. Firms must ensure they meet the Form PF filing requirement, maintain the necessary books and records, implement reliable investor‑qualification processes, and consider implications for ECP status and client documentation. Given the letter’s interim nature, managers should also monitor any CFTC rulemaking and consider whether to seek additional assurances or interpretive guidance.

The no‑action letter marks a notable reduction in parallel registration obligations for a subset of private fund managers, restoring an approach that treats QEP‑only offerings as warranting lighter CFTC oversight. Industry observers stress that while the relief eases certain compliance burdens, managers should proceed cautiously and document eligibility carefully, because broader regulatory and statutory issues remain unresolved.