The Commodity Futures Trading Commission (CFTC) has proposed bringing back Regulation 4.13(a)(4), the exemption it scrapped in 2012, but only for advisers registered with the Securities and Exchange Commission (SEC). Exempt reporting advisers, family offices and state-registered advisers stay outside it, while the UK and EU are also resetting the size thresholds that decide which fund managers need full oversight.

The CFTC’s notice of proposed rulemaking (RIN 3038-AF78, 91 FR 54264), published on August 21, 2026, would exempt SEC-registered investment advisers (RIAs) from commodity pool operator (CPO) registration for pools limited to sophisticated investors. It would also double the small pool threshold in Regulation 4.13(a)(2) from $400,000 to $800,000. Comments close on October 5, 2026. This analysis covers what the rule text changes compared with the staff relief it replaces, where the US now stands next to the UK and EU, and what advisers, introducing brokers and compliance teams should check before the comment window closes.

Methodology and sources for this analysis

This analysis relies on primary documents. The main ones are the CFTC proposal as printed in the Federal Register (FR Doc. 2026-17079), CFTC Staff Letters 25-50 and 26-06, and the current text of 17 CFR 4.13. For comparison, it also uses the FCA’s CP26/28 consultation paper and Article 3(2) of the Alternative Investment Fund Managers Directive (AIFMD, Directive 2011/61/EU). The enforcement example comes from the CFTC’s consent order against John Fortini, filed on April 9, 2026. Law firm commentary comes from a K&L Gates client alert dated August 27, 2026. The time window runs from the 2003 adoption of the original exemption to September 17, 2026. The jurisdictions covered are the United States (CFTC and SEC), the United Kingdom and the European Union. The CFTC says it cannot estimate how many CPOs would use the exemption, so deregistration counts are speculation.

What proposed Regulation 4.13(a)(4) actually says

Section 4m(1) of the Commodity Exchange Act (CEA) requires anyone who meets the CPO or commodity trading advisor (CTA) definition to register, unless an exemption applies. Since 2012, private fund managers with more than incidental futures or swaps exposure have mostly had two choices. One is the de minimis exemption in Regulation 4.13(a)(3), which caps initial margin at 5% of liquidation value or net notional at 100%. The other is to register and use Regulation 4.7, the “registration lite” route for pools offered only to qualified eligible persons (QEPs).

The proposal adds a third route with four conditions. First, the operator must be an RIA. Second, pool interests must be exempt from Securities Act registration and not marketed to the US public, except for pools offered under Rule 506(c). Third, investors must be limited to “Eligible Participants.” Fourth, the RIA must file Form PF for the pool, but only where it is already required to file. The proposal also restores the cross-reference in Regulation 4.14(a)(8), so advisers giving trading advice only to these exempt pools would not need CTA registration either.

Proposed Regulation 4.13(a)(4) is a CFTC exemption from commodity pool operator registration. It covers SEC-registered investment advisers operating privately offered pools whose investors meet a two-part sophistication test. Natural persons qualify only if they are qualified eligible persons listed in 17 CFR 4.7(a)(6)(i), meaning people who do not need the $4,000,000 portfolio test. Legal entities qualify if they are qualified eligible persons or accredited investors under Rule 501(a)(1)-(3), (a)(7) or (a)(8). The pool must be exempt from Securities Act registration and cannot be marketed to the US public, except under Rule 506(c). The operator must file Form PF where SEC rules require it. Each claim is filed with the National Futures Association (NFA) and affirmed every year. Operators must also make statutory disqualification representations and keep the records required by Regulation 4.13(c). If adopted, the exemption would replace the no-action position in CFTC Staff Letter 25-50, dated December 19, 2025.

That test for individuals is where the rule departs from the staff letter. Letter 25-50 accepted any QEP. The proposal returns to the 2003 wording. A wealthy individual who counts as a QEP only because of the portfolio test would not be eligible, while a qualified purchaser or knowledgeable employee would be. The CFTC explains the difference by saying non-natural person QEPs “require less customer protection or intervention from CFTC regulations.”

The proposal also adds a redemption right. Under Regulation 4.13(e)(2), a registered CPO moving an existing pool into exempt status must offer investors the chance to redeem. Letter 25-50 waived that requirement, and the proposal would bring it back. The CFTC says it does not intend to impose the requirement on pools already relying on the letter, and it asks whether a separate, later effective date would fix the conflict.

Jurisdiction / Regulator	Effective date	Scope	Key requirement	Penalty / sanction
US (CFTC), proposed Reg. 4.13(a)(4)	Proposed; comments close October 5, 2026 (Letter 25-50 relief in place since December 19, 2025)	SEC-registered advisers only; ERAs, family offices and state-registered advisers excluded	Individuals limited to 4.7(a)(6)(i) QEPs; Form PF where required; annual NFA affirmation	Operating unregistered outside an exemption breaches CEA section 4m(1); injunctions, disgorgement and registration bans (e.g. $1,347,867.56 disgorgement, Fortini, April 2026)
US (CFTC), Reg. 4.13(a)(2) small pool exemption	Threshold set in 2003; $800,000 proposed on August 21, 2026	Any operator of pools with 15 or fewer participants	Total gross capital contributions of no more than $400,000 across all pools (proposed $800,000)	CEA anti-fraud provisions still apply to exempt operators
US (SEC), Advisers Act Rule 203(m)-1 and Form PF	Private fund adviser exemption since 2011; Form PF threshold change proposed April 20, 2026	Private fund advisers; ERAs file Form ADV but are not registered	Rule 203(m)-1 exemption below $150 million in US private fund assets; Form PF threshold proposed at $1 billion, up from $150 million	Advisers Act section 203(e) censure, suspension or revocation of registration
EU (national authorities under AIFMD)	Article 3(2), transposition deadline July 22, 2013	Alternative investment fund managers (AIFMs)	Registration-only regime at or below €100 million AuM including leverage, or €500 million for unleveraged funds with a five-year lock-up	Member-state administrative sanctions under Article 48 AIFMD
UK (FCA and HM Treasury), CP26/28	Consultation chapters close October 22, 2026; new regime envisaged for 2028	UK authorised and registered AIFMs; 661 sub-threshold firms in 2025	Three tiers by NAV: small below £750 million, medium £750 million to £5 billion, large above £5 billion	FSMA Part XIV disciplinary powers, including fines and public censure

Sources: Federal Register 91 FR 54264; 17 CFR 4.13; CFTC Releases 9216-26 and 9213-26; AIFMD Article 3; FCA CP26/28. Last updated: September 17, 2026.

How three jurisdictions calibrate private fund oversight

All three jurisdictions ask the same question: which fund managers are already supervised closely enough, or are small enough, to justify lighter rules? They answer it in different ways.

The US answer depends on who else supervises the manager. The CFTC’s proposal does not look at fund size at all. It asks whether the SEC already registers the adviser. According to the CFTC, SEC oversight through the Investment Advisers Act and Form PF is “significant and appropriately tailored.” That makes the CFTC exemption depend on SEC policy, which is moving too. If the April 2026 Form PF proposal is adopted, filing would start at $1 billion rather than $150 million. The CFTC’s “where required” wording means an RIA below that level could still claim the exemption without filing Form PF for the pool. In that case, the CFTC would receive no pool-level Form PF data for that pool.

The UK answer is based on size and is being recalibrated for inflation. CP26/28 moves from leveraged assets under management to net asset value and sets three tiers. The FCA says the retained EU thresholds had become outdated, noting that “firm size thresholds have not reflected inflation or growth in the market.” Its impact analysis shows the choice it made. Adjusting the €500 million sub-threshold for inflation would give about £640 million, but the FCA chose £750 million as a “tolerable increase.” The CFTC did something similar with the small pool figure: inflation gives $735,097, and the proposal rounds up to $800,000.

The EU has not changed the numbers: Article 3(2) of AIFMD still uses its 2011 thresholds, and managers below them only register with their national authority.

Regulatory arbitrage in private fund registration is the chance for a manager to pick its supervisor based on how it is structured, not on the risk it runs. Under the CFTC’s proposed Regulation 4.13(a)(4), a manager’s legal status decides the outcome, not its commodity exposure. A $2 billion fund adviser that trades futures heavily and is registered with the SEC could leave CFTC registration altogether. An exempt reporting adviser running a much smaller futures fund could not use the exemption. It would still need the de minimis limits in Regulation 4.13(a)(3), which cap initial margin at 5% of liquidation value, or it would need to register. The UK’s CP26/28 instead sorts all managers by net asset value into tiers below £750 million, from £750 million to £5 billion, and above £5 billion, then scales the rules. The EU’s AIFMD Article 3(2) sorts managers by assets under management at €100 million or €500 million. Only the US approach depends on a second regulator’s registration list.

“By continuing to address overly burdensome and duplicative rules for its registrants, the CFTC is delivering on its mandate to promote U.S. market competitiveness.”

— Michael S. Selig, Chairman, Commodity Futures Trading Commission (CFTC Release 9284-26)

The case for this approach is that the 2012 rescission made SEC-supervised managers file duplicate reports for investors who never needed CPO disclosure documents. The case against is that the 2012 Commission, working under the Dodd-Frank Act, decided it needed direct visibility of pools trading commodity interests. The new proposal replaces that direct visibility with data the SEC collects and is now proposing to reduce. The SEC-CFTC memorandum of understanding adds, as TIS reported, no enforceable duty on either agency to share it.

Enforcement context: exemptions never covered fraud

Registration exemptions remove paperwork, not liability. The CFTC’s own proposal notes that the small pool exemption leaves operators “subject to the anti-fraud and other provisions of the CEA.” The clearest recent example involves an unregistered pool feeding an offshore FX and gold platform.

On September 30, 2024, the CFTC sued Traders Domain FX Ltd., a St. Vincent and the Grenadines company, along with its co-founders and several US promoters, in the Southern District of Florida (Case No. 1:24-cv-23745). According to the CFTC’s October 15, 2024 release, more than 2,000 customers deposited at least $283 million. The money was solicited for leveraged XAU/USD trading through pooled and individual accounts. TIS covered the filing at the time.

The April 2026 consent order against John Fortini, a former vice president at Algo Capital LLC, sets out the registration findings. The order says Algo Capital “has never been registered” with the CFTC, and that Fortini “acted as an unregistered AP of Algo Capital, an unregistered CPO.” It also says he kept sending customers to Traders Domain after the firm was added to the CFTC’s Registration Deficient (RED) List. The April 15, 2026 release reports $1,347,867.56 in disgorgement and permanent trading and registration bans. The case against the remaining defendants continues.

The lesson for the new exemption is that its conditions are what count. An RIA that files a Regulation 4.13(a)(4) notice but lets in an individual QEP who qualifies only through the portfolio test, or markets the pool publicly outside Rule 506(c), cannot rely on the exemption. It would then be operating as an unregistered CPO, just like the defendants in these cases.

What this means for advisers, brokers and compliance teams

SEC-registered advisers relying on Letter 25-50. Compare your current investor lists with the proposed test for individuals. Any individual admitted only through the portfolio test would fail the proposed rule. Firms that filed Form PF only to meet the staff letter’s condition should consider whether the “where required” wording changes that obligation. They should also comment on how the redemption right would apply to pools they move into the exemption in future.

Exempt reporting advisers and family offices. The proposal does nothing for you. K&L Gates notes that commenters may ask the CFTC to extend the exemption to “all investment advisers that file Form ADV with the SEC.” If that does not happen, your options remain the de minimis limits, Regulation 4.7 registration or, for very small vehicles, the higher small pool threshold.

Operators of small pools and prop-style vehicles. Operators with 15 or fewer participants and $400,000 to $800,000 in total contributions across all their pools could deregister if the rule is adopted. The limit is aggregate, not per pool. Contributions from the operator, its CTA and their principals can still be excluded under Regulation 4.13(a)(2)(iii).

Futures commission merchants and introducing brokers. When onboarding pool accounts, a claimed Regulation 4.13(a)(4) exemption should be checked in NFA’s system in the same way as a registration. The Traders Domain record shows that a counterparty’s registration status is a warning sign regulators expect staff to act on.

Fund-of-funds and delegated CPO structures. K&L Gates warns that managers relying on CFTC Letter 12-38 may lose that relief if underlying funds move from registered to exempt operators. The firm also notes that position-limit aggregation under Regulation 150.4(b)(1) refers to operators exempt “under Regulation 4.13” without qualification. Delegation under Letter 14-126 would still work for eligible pools, but only where the CPO itself qualifies for the exemption.

“Although the proposal would restore a regulatory exemption that has been unavailable since 2012, it does not simply reinstate former Regulation 4.13(a)(4). Instead, it incorporates several important features of the recent no-action relief and leaves certain issues unresolved.”

— Sarah V. Riddell, Pablo J. Man and Stewart J. Atkins, lawyers at K&L Gates (K&L Gates alert, August 27, 2026)

What’s next: the forward view

The comment period closes on October 5, 2026. After that, the Commission will need to settle three open questions. The first is whether to widen eligibility to exempt reporting advisers, which would break with the SEC-registration logic behind the proposal. The second is whether to use a separate effective date to protect pools already relying on Letter 25-50 from the redemption requirement. The third is how the exemption interacts with fund-of-funds relief and position-limit aggregation.

The outcome also depends on the SEC. Compliance with the 2024 Form PF amendments has been pushed back again, from October 1, 2026 to July 1, 2027, under a joint final rule published on September 3, 2026. The April 2026 proposal to raise the filing threshold to $1 billion is still pending. If both agencies adopt their rules, the SEC’s Form PF threshold will effectively decide how much pool-level data the CFTC keeps.

The proposal sits alongside the proposal to drop the SEF order-book requirement and the conflicts and affiliations proposal in the CFTC’s deregulatory agenda. The voting record lists only the Chairman, so a future Commission with more members could revisit any final rule.

In the UK, the FCA’s CP26/28 consultation chapters close on October 22, 2026. A second consultation paper and HM Treasury’s statutory instrument will follow, with the new regime planned for 2028. The EU has no public plan to update the Article 3(2) figures. For readers comparing these regimes, TIS’s earlier piece on why registered does not mean regulated still applies: an exemption notice is a filing, not a licence.

FAQ

What is the CFTC’s proposed RIA-QEP exemption?

It is a proposed exemption from commodity pool operator registration in Regulation 4.13(a)(4). It would cover SEC-registered investment advisers running privately offered pools limited to Eligible Participants. The proposal was published on August 21, 2026 at 91 FR 54264. It would put CFTC Staff Letter 25-50 into rule text, with changes to investor eligibility, Form PF filing and redemption rights. Operators would still file a notice with the National Futures Association, affirm it every year and remain subject to the CEA’s anti-fraud provisions.

Can exempt reporting advisers use the new exemption?

No. The proposed exemption is limited to advisers registered with the SEC under the Investment Advisers Act. Exempt reporting advisers, family offices and state-registered advisers cannot use it. The original 2003 version of Regulation 4.13(a)(4) was not tied to SEC registration, so this is a narrower rule. Those managers still need the de minimis exemption in Regulation 4.13(a)(3), the small pool exemption or CPO registration. Commenters can ask the CFTC to widen eligibility before October 5, 2026.

How does the proposal differ from Staff Letter 25-50?

There are four main differences. Individual investors must be QEPs who do not rely on the portfolio test. Legal entities can qualify as accredited investors under specified parts of Rule 501(a). Form PF is required only where SEC rules require it, while the staff letter required it in every case. Registered CPOs moving pools into the exemption would have to offer a redemption right, which the letter waived. The proposal also restores CTA relief under Regulation 4.14(a)(8) for advisers to eligible pools, which the letter did not fully cover.

What changes for small commodity pools?

Regulation 4.13(a)(2) currently exempts operators whose pools each have 15 or fewer participants and whose total gross capital contributions across all pools are no more than $400,000. The proposal would raise that total to $800,000 and keep the participant cap. The CFTC based the change on consumer price inflation since 2003, calculating that $400,000 then equals $735,097 in July 2026, and rounded up to $800,000. Contributions from the operator, its advisers and their principals can still be excluded.

How does the UK approach compare?

The FCA’s CP26/28, published on July 14, 2026, sorts alternative investment fund managers by net asset value into three tiers. Small firms are below £750 million, medium firms are between £750 million and £5 billion, and large firms are above £5 billion. The FCA estimated that the legacy €500 million threshold would be about £640 million after inflation and set the line higher. Unlike the CFTC proposal, the UK regime does not depend on registration with another regulator. The new regime is planned for 2028.

Featured image: CFTC headquarters, Lafayette Centre, Washington, DC. Photo by Dclemens1971 via Wikimedia Commons, CC BY 4.0, cropped.

This article is informational analysis only and does not constitute legal, regulatory, tax, or investment advice. Regulatory frameworks change frequently and interpretation depends on facts and circumstances; primary documents and official regulator guidance always supersede summaries. Firms should consult qualified legal counsel and their relevant supervisory authority before taking any action based on the analysis above.