The Commodity Futures Trading Commission on Tuesday issued a final rule that allows commodity pool operators dually registered with both it and the Securities and Exchange Commission to rely on the latter's disclosure, reporting, and recordkeeping compliance requirements.

The rule also amends the CFTC's regulations to allow CPOs to use third-party service providers to maintain their books and records. CPOs and commodity trading advisors will also be allowed to update their disclosure documents once every 12 months, as opposed to the current nine-month basis.

In February of 2012, the CFTC removed established exemptions for registered investment companies (RICs) once they exceed established thresholds for commodity investments. RICs can utilize futures, options and swaps only for “bona fide hedging,” unless the initial margins and premium for non-hedging activities do not exceed 5 percent of the fund's liquidation value. Otherwise, they must register with the CFTC as commodity pool operators and adhere to new reporting, disclosure, and recordkeeping requirements. As CPOs, they must become members of the National Futures Association, a self-regulatory organization, and meet its additional compliance rules and licensing examinations.

Concurrent to that modification, the Commission issued a proposed rule that would harmonize its new requirements with those already enforced upon CPOs by the SEC. Many of the public comments regarding that proposal cited the potential for duplicative, inconsistent, and conflicting disclosure and reporting requirements if there were separate compliance obligations imposed by the CFTC and SEC. The final rule is intended to eliminate most conflicts.

The effort to harmonize rules between the two regulators follows a recent court decision that upheld the CFTC's efforts to oversee mutual fund companies that invest in commodities.

In June, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of the CFTC, upholding an earlier ruling in federal district court. In its decision, the court rejected arguments by the Investment Company Institute and the U.S. Chamber of Commerce that the CFTC's rulemaking should be invalidated because it would impose an unnecessary cost and compliance burden on entities already overseen by the SEC. The groups had argued that the CFTC's rulemaking was “arbitrary and capricious,” and thereby violated the Administrative Procedure Act, when it moved away from more generous exemption requirements that had existed since 2003.

The three-judge panel also rejected claims that the CFTC, by engaging in a multi-step rulemaking process, with some regulations becoming final only after harmonization with those of the SEC, made it impossible to determine the costs and benefits of its rule.