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Securitization Vehicles and Commodity Pool Regulation: Who’s Caught in the New Net?

Author: Josh Sterling .; Charles Sweet .; William R.B. Springer.

Source: Volume 27, Number 01, September/October 2013 , pp.37-46(10)

Journal of Taxation and Regulation of Financial Institutions

Abstract:

The Dodd-Frank Act expanded the Commodity Futures Trading Commission’s (CFTC) jurisdiction with respect to commodity pools to include entities trading in swaps. As a result, commodity pool regulations potentially applied to any securitization transaction that utilized swaps, even if such swaps were a minimal part of the securitization or were entered into solely for hedging purposes. While recent CFTC interpretative guidance offers some exemptive relief from commodity pool status, securitization vehicles that cannot satisfy the terms of such relief will be in a bind. These firms will either need to determine how best to amend securitization transactions to comply with the applicable commodity pool regulations—or fall within the CFTC’s exemptive guidance. The authors summarize commodity pool regulation, outline the available exemptions, and address problems that remain.

Keywords: commodity pool operator; CPO registration; swaps; exemptive relief; CFTC No-Action Letter No. 12-15; CFTC Interpretation Letter No. 12-14; CFTC Interpreation and No-Action Letter No. 12-45; CFTC No-Action Letter No. 13-07

Affiliations: 1: Bingham McCutchen LLP; 2: Bingham McCutchen LLP; 3: Bingham McCutchen LLP.