Should Hedge Funds Register as Commodity Pool Operators?

July 2, 2009Articles The Hedge Fund Law Report

© 2009, The Hedge Fund Law Report

A common mistaken belief among many is that hedge funds are unregistered and unregulated investment vehicles. While certain exemptions exist under the Investment Company Act of 1940 for registration, a hedge fund that trades in commodity options and futures contracts may be required to register as a commodity pool operator (CPO).

Commodity Pools

A commodity pool is an enterprise where funds are contributed by a number of persons for the combined purpose of trading futures contracts, commodity options, or to invest in another commodity pool. A CPO is an individual or entity that operates or solicits funds for a commodity pool. While there are exemptions, hedge fund managers should be aware that depending on the size – investors and net value – sophistication of the investors and the percentage of assets invested in commodities trading, a hedge fund may have to register with the National Futures Association (NFA) and Commodities Futures Trading Commission (CFTC) as a CPO if the manager invests in futures contracts or commodity options.


Please visit to read the entire article.