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ARTICLE · 17 OCTOBER 2012

CFTC Issues Guidance Concluding That Equity REITS Are Not Commodity Pools

Goodwin Procter LLP
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In the Guidance, the CFTC discusses the history of the definition of "pool," and in particular, the CFTC’s interpretation of the phrase "operated for the purpose of trading."

United StatesReal Estate and Construction
Brian Baum
Brian Baum
Monique Boucher
Monique Boucher
Laura McIntyre
Laura McIntyre

In response to a September 4, 2012 letter from the National Association of Real Estate Investment Trusts (the "NAREIT Request Letter"), the CFTC's Division of Swap Dealer and Intermediary Oversight issued interpretative guidance on October 11, 2012 (the "Guidance") stating that real estate investment trusts ("REITs") that satisfy the following criteria are not "commodity pools" as that term is defined in Section 1a(10) of the Commodity Exchange Act (the "CEA") and CFTC Regulation 4.10(d):

  • The REIT primarily derives its income from the ownership and management of real estate and uses derivatives only to hedge interest rate or currency risk;
  • The REIT complies with the requirements of a REIT election under the Internal Revenue Code (including the 75% test and the 95% test); and

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