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All Letters

Date
All Letters
01/10/1997
97-02 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets permitted a registered CPO to claim relief under Rule 4.7(a), notwithstanding the presence of a non-QEP in its pool. The non-QEP is an active participant in the pool's management, a portfolio manager for all of the CPO's limited partnerships, a registered AP and an accredited investor. The relief is subject to the conditions that the non-QEP consents in writing to being treated as a QEP and has access to the pool's books and records.
01/15/1997
97-03 PDF Image; Section 4(m)(1), Rule 4.31; No-Action
The Division of Trading and Markets provided relief to a Canadian person from the CPO registration requirements of section 4(m)(l) of the Commodity Exchange Act in connection with its operation of an off-shore pool. Participants in the pool would not be offered to any United States persons as defined in Rule 4.7(a). In addition, the Division granted an exemption from the disclosure document requirements of Rule 4.31 for the CTA of the foreign pool since the CTA and the operator of the pool are affiliated subsidiaries.
02/06/1997
97-04 PDF Image; Rules 4.26(a)(2), 4.22(a) and 4.22(c); No-Action
In connection with the solicitation of former limited partners of a commodity pool, the Division of Trading and Markets granted a registered CPO's request for relief from the prohibition in Rule 4.26(a)(2) against using a Disclosure Document that is dated more than nine months prior to the date of its use. The CPO represented that the commodity pool had not traded for 10 months, all former limited partners had redeemed their interests in the pool and there were no material changes to the Disclosure Document. The Division also granted the CPO's request for relief from providing the Account Statements required by Rule 4.22(a) and Annual Report required by Rule 4.22(c) for the 10-month period during which the pool suspended trading.
02/12/1997
97-05 PDF Image; Rule 4.14(a)(8), Section 4m(1); Exemption
The Division of Trading and Markets permitted a registered investment adviser to rely on an exemption from CTA registration provided by Rule 4.14(a)(8), despite the fact that the entity for which advice was being provided, an offshore fund having no U.S. investors, was not a qualify entity under Rule 4.5. The adviser provided commodity trading advice which was "solely incidental" to its business of providing securities advice, agreed to employ only those strategies which were consistent with the eligibility status under Rule 4.5(c)(2), and did not otherwise hold itself out as a CTA.
02/14/1997
97-06 PDF Image; Rule 4.7 - Section 4m(1); No-Action
The Division of Trading and Markets took a "no-action" position permitting an employee investment trust formed as an investment vehicle for employees and officers (and their families) of a registered CPO and its affiliates to be treated as a QEP/QEC (notwithstanding that not all of its participants are QEPs) in the context of the investment trust's participation in Rule 4.7 pools operated by the CPO and advised by the CPO and its affiliates. The Division also took a "no-action" position such that the trustees of the investment trust need not register as CPOs.
02/05/1997
97-07 PDF Image; Rule 4.10(d); Interpretation
The Division of Trading and Markets confirmed that a limited partnership, formed for the purpose of investing in land rule estate, was not a commodity pool within the meaning and intent of Rule 4.10(d) where interests in the limited partnership were held by an individual and a family partnership solely consisting of immediate family members of the individual.
01/28/1997
97-08 PDF Image; Rule 4.7; No-Action
The Division of Trading and Markets would not recommend that the Commission bring an enforcement action against a commodity pool operator (CPO) based upon the CPO's operation of a partnership as a Rule 4.7 exempt pool notwithstanding the presence in the partnership of non-qualified eligible participant (QEP) partners where all the non-QEP partners had been members^ of the partnership for at least three years and all were accredited investors, members of the general partners' families or a trust created for the benefit of a partner's families or a trust created for the benefit of a general partner's family. The Division also would not recommend that an enforcement action be brought based upon the CPO's investment of more than ten percent of the partnership's assets in Rule 4.7 exempt pools. Relief was conditioned upon each non-QEP limited partner consenting to being treated as a QEP.
02/06/1997
97-09 PDF Image; Rule 4.31; Exemption
The Division of Trading and Markets granted an exemption to a commodity trading advisor (CTA) from the requirement that the CTA prepare and deliver a Disclosure Document pursuant to Rule 4.31. The CTA was selected to be the investment advisor for a foreign fund which accepted investments only from non-United States persons. In an issue of first impression, although some of the CTA's clients were United States persons, they were all qualified eligible clients for whom the CTA claimed relief from Rule 4.31. The Division exempted the CTA from compliance with Rule 4.31 solely with respect to its contemplated services on behalf of the fund.
02/27/1997
97-10 PDF Image; Rule 4.26(b); No-Action
The Division of Trading and Markets took a "no-action" position relieving CPOs of certain publicly offered commodity pools from the requirement in Rule 4.26(b) to deliver a copy of the pool's most recent Annual Report at the same time as the Disclosure Document is delivered to a prospective participant. The relief was conditioned upon: (l) inclusion in the monthly Account Statement delivered within the Disclosure Document of any material information required to be contained in the Annual Report; (2) disclosed availability of net asset value per unit from the CPO or broker; (3) availability of a paper copy of the most recent Annual Report upon request; (4) delivery of the most recent Annual Report within 21 days of participant's purchase of units; and (5) right to redeem at least as frequently as monthly.
07/14/1997
97-100 PDF Image; Section 4m(1) - CTA Registration; No-Action
The Division of Trading and Market provided a CTA registration no-action position for the sole investment manager of a series trust where: the investment manager is a registered investment adviser; the series trust is not offered or sold, directly or indirectly, to any United States person nor does the series trust accept capital contributions from any United States sources; all meetings and activities of the series trust's shareholders and officers are conducted outside of the United States; the investment manager intends to furnish commodity interest trading advice to the series trust pursuant to the criteria of Commission Rule 4.5(c)(2) and in a manner solely incidental to its provision of securities advice; and, the investment manager will not hold itself out to the public as a CTA.
03/11/1997
97-11 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets would not recommend that the Commission take any enforcement action against a commodity pool operator (CPO) based upon the CPO's failure to register as a CPO in connection with its position as a co-general partner of a partnership. The relief was conditioned upon the CPO not exercising discretion, supervision or control over, or taking part in (a) the solicitation, acceptance or receipt of funds or property to be used for purchasing interests in the partnership, or (b) the investment, use or other disposition of funds or property of the partnership, and receipt by the Division of a copy of the joint and several liability acknowledgments executed by the co-general partners.
03/07/1997
97-12 PDF Image; Section 4m(1) and Rule 4.7(a); No-Action
The Division of Trading and Markets would not recommend that the Commission take any enforcement action against a commodity pool operator (CPO) based upon the CPO's failure to register as a CPO in connection with the offering of a variable annuity contract where the CPO was a mutual life insurance company subject to regulation under state insurance law, the contract was offered by a registered broker-dealer subsidiary of the CPO, the contract was offered only to a select group of investors with extensive business and finance education and experience, investment in commodity interests was limited to investment in other funds, and a registered CPO acted as Investment Manager and was delegated responsibility of the preparation and distribution of annual reports and of books and records. The Division also would not recommend that any enforcement action be brought: (1) against the registered CPO based upon the CPO's operation of a partnership as Rule 4.7(a) exempt pool notwithstanding the presence in the partnership of non-qualified eligible participant (QEP) partners; or (2) against the registered CPO and the CPO of any Rule 4.7 exempt pool in which the subaccount invested based upon the investment of more than ten percent of the subaccount's assets in Rule 4.7 exempt pools.
03/24/1997
97-15 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets provided relief under Rule 4.7(a) to a registered CPO, notwithstanding the presence of a non-QEP in its pool, where the non-QEP is an employee of the CPO who performs as a trader and analyst for the pool. The non-QEP has ready access to information pertinent to an investment in the pool and agrees to being treated as QEP.
03/21/1997
97-16 PDF Image; Rule 4.7(a); No-Action
A charitable foundation may be treated as a QEP with respect to a Pool where the charitable foundation's investment decisions are made by an individual who: (1) established and is the sole source of funding of the charitable foundation; (2) is registered as an associated person of the Pool's commodity pool operator; and (3) is a QEP with a net worth exceeding twenty-five million dollars and more than twenty-five years of investment experience.
03/21/1997
97-17; Rule 4.7(a); Exemption
The Division of Trading and Markets provided relief under Rule 4.7(a) to a registered CPO, notwithstanding the presence of two non-QEPs in its pool, where one non-QEP is a member of the CPO and affiliated CTA and the other non-QEP is an employee of an affiliated CTA. Each non-QEP has ready access to information pertinent to an investment in the pool and agrees to be treated as QEP.
03/24/1997
97-18 PDF Image; Rules 4.21, 4.22(a) and (b), 4.24, 4.25, 4.26; Exemption
The Division of Trading and Markets permitted a registered CPO/CTA to continue to claim relief under Rules 4.21, 4.22(a) and (b), 4.24, 4.25, 4.26 from certain disclosure and monthly reporting requirements despite the acceptance of additional limited partners (New Limited Partners) as investors in a commodity pool that invests primarily in U.S. securities. The CPO/CTA will: (1) provide each New Limited Partner with the pool's Limited Partnership Agreement, Private Placement Memorandum, quarterly financial statements and audited annual financial statements; (2) notify each New Limited Partner that the pool is operated pursuant to exemptive relief granted by the Division; (3) explain the nature and purpose of such exemption; (4) obtain from each New Limited Partner has written acknowledgment that he does not object to the pool's operation pursuant to exemptive relief; and (5) cause any New Limited Partner who ceases to be an employee of the CPO or the pool's co-investment manager to redeem or transfer his interests in the pool. In addition, all limited partners will have access to the pool's books and records.
03/27/1997
97-19 PDF Image; Rules 4.23 and 4.33; Exemption
The Division of Trading and Markets provided exemptive relief to a registered CPO and CTA from the books and records location requirements of Rules 4.23 and 4.33 such that the CPO/CTA may maintain its books and records at the main business office of an affiliated company that was established primarily to provide operational support to the CPO/CTA.
03/21/1997
97-20 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets would not recommend that the Commission bring an enforcement action against a commodity pool operator (CPO) in connection with its operation of a pool as an exempt pool pursuant to Rule 4.7(a) solely based upon the CPO continuing to permit the investment in the pool of several non-QEP investors. The non-QEP investors included six employees of a management company that rendered services to the pool, an accredited investor who served as general counsel for the pool and management company for the past two and one-half years, and three trusts funded by a billionaire and prominent investor for the benefit of his children and whose trustee was an attorney with over twenty-five years of experience in advising clients in corporate, securities and investment omatters. Relief was conditioned upon each non-QEP investor consenting to being treated as a QEP.
03/21/1997
97-21 PDF Image; Rule 4.7; No-Action
The Division of Trading and Markets would not recommend that the Commission take any enforcement action based solely upon the failure to comply with Rule 4.7 against the General Partner of a pool if it claimed relief pursuant to Rules 4.7(a) and 4.7(b), notwithstanding investment in the pool by four select investors. Each select investor had vast work experience in the financial services industry, held one or more graduate degrees and had complete access to information relating to the pool through their employment. The Division also would not recommend that the Commission take any enforcement action based solely upon the failure to comply with Rule 4.7 against the General Partner or the CPO of any Rule 4.7(a) exempt commodity pool in which the pool invested, if the pool invested more than ten percent of the fair market value of its assets in Rule 4.7(a) exempt pools.
03/21/1997
97-22 PDF Image; Section 4k(3); No-Action
The vice president of a CTA not registered as an AP worked in the same office as a registered AP of the CTA. In response to a request for relief, the Division of Trading and Markets determined not to recommend that the Commission take enforcement action against the CTA or its vice president pursuant to Section 4k(3) of the Act based solely upon the failure of the vice president to register as an AP in connection with his activities on behalf of the CTA. The relief was subject to the conditions that the CTA's registered AP working in the same office as the vice president become president of the CTA and remain in charge of all futures-related activity of the company, no employee or agent of the CTA engage in, or supervise any AP engaged in, the solicitation of any client or potential client on behalf of the CTA, and the vice president remain listed as a principal of the CTA.
02/27/1997
97-23 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets permitted a registered CPO to continue to claim relief under Rule 4.7(a), notwithstanding the admission of a non-QEP individual into the Pool. The non-QEP had been a Managing Director of the Pool's Analytical Arbitrage Operations for over a year and a half, was previously employed as a trading strategist and, in that capacity, was responsible for developing new trading strategies for a $100 million proprietary fund, was fully familiar with the investment activities of the Pool and had access to its books and records.
04/01/1997
97-24 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets permitted a registered CPO to continue to claim relief under Rule 4.7(a), notwithstanding the admission of a non-QEP Trust into the Pool. The sole beneficiary of the Trust is the grandniece of the beneficial owner of the managing general partner of the Pool and the sole trustee of the Trust in a nephew of the beneficial owner of the managing general partner, a QEP and a registered CPO with over twelve years of investment experience. In addition, the Division permitted the registered CPO of the Pool to claim relief from the restriction in Rule 4.7(a)(1)(ii)(B)(2)(xi) which would otherwise have prevented the Pool, which itself qualified as a QEP but had non-QEP investors, from investing more than ten percent of its assets in other Rule 4.7 exempt pools.
03/27/1997
97-25 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets granted relief from registration as a CPO to one general partner of a "fund or funds," for which a claim for exemption pursuant to Rule 4.12(b) will be filed with the Commission where, among other things: (1) a registration CPO would be added as a second general partner; (2) the registered CPO and no-actioned CPO were affiliated; (3) the no-actioned CPO agreed to limit its activities: and (4) both CPOs agreed to assume joint and several liability for any violations of the Act or Commission regulations committed by the other as a general partner and CPO of the Fund.
03/26/1997
97-26 PDF Image; Section 4m(1); Interpretation
In response to an inquiry concerning whether an individual could claim an exemption from CTA registration under Section 4m(1), the Division of Trading and Markets stated the two conditions were required in order to claim the exemption. First, during the course of the preceding twelve months, the person has not furnished commodity interest trading advice to more than fifteen persons, and secondly, the individual does not hold himself out to the public as a CTA.
04/18/1997
97-27 PDF Image; Rules 4.21-4.26; No-Action
The Division of Trading and Markets granted no-action relief to a registered CPO and CTA from the disclosure, reporting and recordkeeping requirements of Rules 4.21-4.2 6 in connection with the CPO's operation of a commodity pool. The pool is compromised of immediate family members and close personal friends of the CPO/CTA. In addition, each limited partner of the pool shall have ready access to the books and records of the pool.
03/26/1997
97-28 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets permitted a registered CPO/CTA to continue to claim relief under Rule 4.7(a), notwithstanding the presence of additional non-QEPs in its pool. The non-QEPs all have significant investment experience, and most are investment managers for an affiliate of the CPO/CTA that serves as co-investment manager to the pool and is itself registered as a CPO/CTA. The relief is subject to the conditions that each non-QEP: (l) consents in writing to being treated as a QEP; (2) has access to the pool's books and records; and (3) redeems or transfers his interests in the pool if he is no longer employed or listed as a principal of the CPO/CTA or its affiliate, if he was so employed or listed upon his investment in the pool.
03/21/1997
97-29 PDF Image; Rule 4.10(d)(1) & Rule 4.7(a)(1)(ii)(B)(2)(viii); Interpretation
The Division of Trading and Markets found that a partnership consisting of a husband and wife, custodial accounts for their children, and trusts established for the benefit of the husband or wife and their descendants was not a commodity pool within the meaning and intent of Rule 4.10(d)(1) and, consequently, that the General Partner was not a CPO thereof. Because the partnership qualified for treatment as a QEP under Rule 4.7(a)(1)(ii)(B)(2)(viii), the Division did not address the request for relief from the ten percent restriction imposed on the assets of a Rule 4.7(a) exempt pool that may be used to purchase units in other Rule 4.7(a) exempt pools where not all the investors in the investor fund will be QEPs.
04/21/1997
97-30 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets gave "no-action" relief from CPO registration requirements to the general partner of a registered securities broker-dealer and member of the Chicago Board Option Exchange (CBOE), where the limited partners of the broker-dealer were a registered floor broker, a trust for the benefit of the floor broker's father, two former CBOE members and a registered floor trader. Relief was conditioned upon: (1) the broker-dealer will remain registered as such; (2) no solicitation of additional limited partners of the broker-dealers will be conducted and no new limited partners or investors will be admitted to the broker-dealer or its general partner; and (3) the broker-dealer's trading of commodity interests will be restricted to hedging and risk management in connection with its CBOE option positions.
04/21/1997
97-31 PDF Image; Section 4m(1); No-Action
In response to a request by a registered CTA, the Division of Trading and Markets gave "no-action" relief to the CPOs of pools advised by the CTA, permitting each such CPO to identify by name and title in pool Disclosure Documents certain of the CTA's principals without providing such principals' business backgrounds as required by Rule 4.24(f). The CTA had represented that the marketing, accounting administrative and trading functions performed by the specified principals are insignificant to the pool participants (for whom such functions are performed, if at all, by the CPO or its agents). The CPOs would still be required to disclose the business backgrounds of the CTA's sole shareholder and all of its directors, senior officers and investment policy committee members.
04/23/1997
97-32 PDF Image; Rule 4.7(a)(1)(ii)(B)(2) (xi); No-Action
The Division of Trading and Markets would not recommend that the Commission take any enforcement action for failure to comply with Rule 4.7(a) against a commodity pool operator (CPO) based upon the CPO's investment of more than ten percent of the assets of any pool subject to the ten percent limitation (the Investor Pool) in a 4.7 exempt pool operated by the same CPO (the Investee Pool) . Relief from the ten percent limitation on investment in Rule 4.7(a) exempt pools was granted only for investment in Investee Pools that have the same general partner and CPO as the Investor Pools. Relief was conditioned upon all investors and prospective investors in the Investor Pool receiving the same disclosures and reports required under Part 4 and the CPO complying with the same recordkeeping requirements applicable under Part 4 as if the Investee Pools were non-exempt pools.
03/18/1997
97-33 PDF Image; Part 34 - Regulation of Hybrid Instruments; No-Action
The CFTC's Off-Exchange Task Force has issued a no-action letter recommending that the Commission not take enforcement action against certain individuals for engaging in the offer and sale of certain trust securities that are linked to the prices of individual equities. The Task Force has determined that such securities are not inconsistent with the Commission's statutory interpretation on Hybrid Instruments.
03/18/1997
97-34 PDF Image; Part 34 - Regulation of Hybrid Instruments; No-Action
The CFTC's Off-Exchange Task Force has issued a no-action letter recommending that the Commission not take enforcement action against certain individuals for engaging in the offer and sale of certain trust securities that are linked to the prices of individual equities. The Task Force has determined that such securities are not inconsistent with the Commission's statutory interpretation on Hybrid Instruments.
04/21/1997
97-35 PDF Image; Rule 4.22; Exemption
The Division of Trading and Markets granted a commodity pool operator a permanent extension of time in which to comply with the quarterly report requirements of Commission Rule 4.7(a)(2)(ii) in connection with the operation of two commodity pools. Each commodity pool was organized as a fund of funds and relief was conditioned on investors being informed of the extension of time granted to the commodity pool operator.
04/21/1997
97-36 PDF Image; Rule 4.22; Exemption
The Division of Trading and Markets granted a commodity pool operator a permanent extension of time in which to comply with the annual report requirements of Commission Rule 4.7(a)(2)(ii) in connection with the operation of four commodity pools. Each commodity pool was organized as a fund of funds and relief was conditioned on investors being informed of the extension of time granted to the commodity pool operator.
04/29/1997
97-37 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took companion "no-action" positions concerning the acquisition by two bank holding company subsidiaries of, respectively, the general partner interest in a group of investment partnerships (one of which (A) participates in commodity pools), and registered investment adviser affiliated with the outgoing general partner of the investment partnerships. The subsidiary acquiring the general partner interests (a newly-formed corporation) was relieved from registering as a CPO and the subsidiary acquiring the investment adviser (a national bank) was relieved from registering as a CTA. Relief was conditioned upon: (1) compliance by the bank holding company and its subsidiaries with commitments made to the Federal Reserve Board in connection with the acquisition transaction, and with operating restrictions set forth in the relief request; (2) notification of the Division concerning the name of any additional investment partnership(s) when selected; (3) no participation in commodity pools by investment partnerships that do not presently so invest, absent further relief or registration of the general partner subsidiary as a CPO; (4) each pool which "A" participates is operated by a registered CPO and advised by a registered CTA; and (5) the holding company and acquiring subsidiaries submit to special calls.
03/26/1997
97-38 PDF Image; Act Section 4d; Rules 1.20 et seq.; Interpretation
The Division advised that neither the Commodity Exchange Act nor the Commission's rules promulgated thereunder would be violated if a registered investment adviser (RIA) provided cash management services to futures commission merchants (FCMs) with respect to segregated customer funds (provided that the RIA will have limited power of attorney or comparable limited discretion, and provided that each FCM client will maintain appropriate internal controls). Such services would include purchase and sale of instruments permitted by Rule 1.25, execution of reverse repurchase agreements and consummation of reverse repurchase transactions. The RIA would not handle customer funds, securities purchased with such funds, or proceeds of sales of such securities. Each individual FCM's customer funds would be separately accounted for, and the RIA's compensation would be paid directly by its client FCM, without use of customer funds. The Division stated it did not believe that the described activities would require the RIA to register with the Commission in any capacity.
05/28/1997
97-39 PDF Image; Rule 4.10(d)(1); No-Action
The Division of Trading and Markets granted "no-action" relief in the case of a limited liability company (the Company) registered as a broker-dealer and as a Chicago Board Options Exchange member. The members of the Company's management committee were not required to register as CPOs and the Company's traders were not required to register as CTAs. The Division's no-action positions were conditioned upon: (1) restriction of membership eligibility in the Company to its traders and its managers having supervisory or financial decision-making authority; (2) commodity interest trading on behalf of the Company is restricted to S&P 500 futures contracts and options on S&P 500 futures; (3) written representations that members' interests do not represent indirect investments by others; (4) submission to special calls by the Division; and (5) floor broker registration for each Company member trading commodity interests and executing commodity interest transactions.
06/02/1997
97-40 PDF Image; Section 4(m)(1) - CPO Registration; No-Action
The Division of Trading and Markets took a CPO registration no-action position against a co-general partner and CPO of a pool where the person was the sole shareholder and would be registered as an associated person and listed as a principal of the other general partner and CPO.
06/06/1997
97-41 PDF Image; Rule 4.7 (a)(1)(ii)(B)(2)(xi); No-Action
The Division of Trading and Markets provided relief under Rule 4.7(a) to registered CPOs which operate Rule 4.7(a) exempt pools in order that they may accept an investment of more than ten percent of the fair market value of the assets of an insurance company separate account which itself qualifies as a QEP but has among its investors several non-QEP irrevocable trusts. Each non-QEP trust: (1) was established primarily for estate planning purposes; and (2) has as its grantor and its investment decision-maker a QEP.
05/28/1997
97-42 PDF Image; Rule 4.31; Exemption
The Division of Trading and Markets exempted a registered CTA from compliance with Rule 4.31 in that it was not required to provide a disclosure document to an offshore fund for which it had discretionary authority to trade commodity interests. The registered CTA had only one client, which was the offshore fund.
06/09/1997
97-43 PDF Image; Rule 4.14(a)(6); Interpretation
The Division of Trading and Markets addressed the availability of the Rule 4.14(a)(6) exemption from registration as a commodity trading advisor (CTA) to introducing brokers (IBs) which manage customers accounts based upon commodity trading signals generated by systems developed by third parties (Third Party Advisors). The Division confirmed that when IBs enter into such arrangements, the registration status of the Third Party Advisor is a relevant factor to be considered in applying Rule 4.14(a)(6), but warned that if the Third Party Advisor is not registered as a CTA (but should be so registered), it may not be necessary to reach a determination under Rule 4.14(a)(6) since the IB may be violating the Commodity Exchange Act by aiding and abetting the Third Party Advisor in a violation of the CFTC's CTA registration requirements.
06/09/1997
97-44 PDF Image; 1a(14) and 4d(l) of the Act; No-Action
No-action relief was granted from the requirement to register as an IB to a company selling a database of leads to registrants under the Commodity Exchange Act. The Company compiled a database of 5,000 individuals who had invested in publicly offered commodity pools and privately placed hedge funds from publicly available partnership filings in various county government recorder offices throughout the country. The only data added by the Company to the county records were telephone numbers obtained from a computerized telephone directory. Due to changes in partnership registration and recording requirements, no new names had been added to the database since 1992. The Company has no contact with the general public nor does it advertise for new leads or purchase any additional leads from other sources.
05/05/1997
97-45 PDF Image; Section 4(b) and 4(d) (2) of the Act; Commission Rules 1.20, 1.41(a)(3), 30.7(c); No-Action
The Division of Trading and Markets provided "no-action" relief with respect to an FCM's failure to obtain and retain an acknowledgment letter from a clearing organization concerning the treatment of customer funds and the secured amount deposited by the FCM with the clearing organization. This relief is subject to the condition that the clearing organization depository of such funds has adopted and submitted for Commission approval rules which provide for the segregation (as customer funds or the secured amount, as appropriate, in accordance with all relevant provisions of the Commodity Exchange Act and the Commission's rules and orders promulgated thereunder) of all funds held on behalf of customers.
06/12/1997
97-46 PDF Image; Rule 1.17(c)(5)(iii); No-Action
The Division of Trading and Markets modified CFTC Interpretive Letter No. 95-65, (1994-1996 Transfer Binder) Comm. Fut. L. Rep. (CCH) 26, 495 (July 26, 1995), to provide further no-action relief concerning the charge for short option value positions carried for customers by FCMs. This relief will now (1) be available generally for any customer account rather than only for the account of floor broker or floor trader (provided the FCM's liability to that customer does not exceed five percent of the FCM's total liability to all customers), and (2) require demonstration by an FCM that positions in issue are risk reducing only when applying for relief and thereafter upon request, rather than at every month-end. However, an FCM's DSRO must make sure a request (1) if the credit against the short option value charge is materially altered, and (2) as part of any full scope financial audit, which must be conducted every other year.
06/16/1997
97-47 PDF Image; Section 4d(2) of the Act; Rule 190.10(c); No-Action
The Division of Trading & Markets Financial and Segregation Interpretation No. 12 provides, among other things, that an FCM may not hold in a customer segregated account foreign currency deposited by a foreign-domiciled customer in connection with trading on U.S. markets unless the customer signs a subordination agreement as set forth in the Interpretation. The Division issued a no-action position concerning an FCM's failure to obtain such a subordination agreement, subject to the conditions that the FCM (1) continue to have no U.S. customers, and (2) provide notice to customers that in the event of the FCM's bankruptcy, all property available for customers will be subject to pro rata distribution.
05/16/1997
97-48 PDF Image; Section 4m(1) of the Act; Advisory 18-96; No-Action
The Division took a CPO registration no-action position with respect to the foreign operator (Operator) of a foreign fund where, among other things: (1) an affiliate of the Operator is a registered CPO and will serve as the CPO of the fund; (2) the Operator is jointly owned by an affiliate of the CPO and a foreign firm; (3) the fund's Board of Directors will consist of two U.S. persons who are registered as APs and listed principals of the CPO; (4) the CPO will be responsible for hiring and firing the fund's CTA and selecting and changing the fund's FCM; (5) within thirty days the CPO and the Operator provide the Division with signed and dated acknowledgments therein each agrees to be jointly and severally liable with the other for any violations of the Act and the Commission's regulations issued thereunder applicable to CPOs in connection with the operation of the Fund. In addition, the Division confirmed that a notice pursuant to Advisory 18-96 may be filed on behalf of a fund notwithstanding the ownership therein of the fund's CTA, a U.S. person.
06/20/1997
97-49 PDF Image; Section 4(m)(l), Rule 4.14(a)(6); No-Action
The Division of Trading and Markets was unable to conclude a registered introducing broker (IB) could claim relief from registration as a commodity trading advisor (CTA) pursuant to Rule 4.14(a)(6) in connection with commentaries on the cash and futures agricultural markets which it provided through various media. The Division took this position in part because the IB charged a separate quarterly fee for some of the commentary services and offered the services generally to the public. Nevertheless, the Division took a CTA registration no-action position so that the IB would not be required to register as a CTA. The Division reasoned that since the IB did not exercise discretionary trading authority over any customer accounts, was already registered with the Commission and was a NFA member, the IB was already subject to most all regulatory requirements that would be applicable to it if it also registered as a CTA. The relief was conditioned on the IB's maintaining all applicable records under Rule 4.33 that would have been required of it if it remained registered as a CTA.
06/23/1997
97-50 PDF Image; Section 4m(1) of the Act; No-Action
The Division of Trading and Markets granted CPO registration "no-action" relief to the managing general partner of a general partnership that trades commodity futures contracts, where the investors are family members or business associates.
06/24/1997
97-51 PDF Image; Rule 4.22(d); Exemption
The Division of Trading and Markets granted the CPO of a commodity pool relief from the requirement of Rule 4.22(d) that the financial statements in the Annual Report that a registered CPO must prepare and distribute be certified by an independent public accountant. The CPO, who previously had claimed the exemption from CPO registration in Rule 4.13(a)(2), is the president and sole principal of a corporation that subsequently registered as a CPO. The commodity pool consists of eight limited partners who are all family members of the CPO and who receive detailed unaudited monthly reports and annual tax returns for the pool.
06/24/1997
97-52 PDF Image; Rules 4.10(d)(1) & 4.7(a)(1)(ii)(B)(2)(viii); Interpretation
The Division confirmed that a limited partnership (the Partnership) formed solely to serve the investment purposes of the family of a QEP in which the limited partners of the Partnership will be members of the family and trusts established for the benefit of members of the family is not a commodity pool within the meaning and intent of Rule 4.10(d)(1) and, consequently, that the general partner of the Partnership is not a CPO thereof. In addition, the Division confirmed that the Partnership will qualify as a QEP pursuant to Rule 4.7(a)(1)(ii)(B)(2)(viii) because the Partnership will have total assets in excess of $5 million, will not be formed for the specific purpose of investing in a Rule 4.7(a) exempt pool and the Partnership is not a pool.
06/24/1997
97-53 PDF Image; Section 4m(1); Rule 4.7(a); No-Action
The Division of Trading and Markets took a "no-action" position relieving a state-regulated insurance company and two trust companies from CPO and CTA registration requirements in connection with an estate planning device consisting of insurance contracts held in trust, the premium payments for which are invested in an insurance company separate account, a subaccount (the "LP Subaccount") of which may invest in commodity pools. The Division further gave "no-action" relief to a registered CPO affiliated with one of the trust companies, permitting such CPO to claim exemption under Rule 4.7(a) with respect to the LP Subaccount, notwithstanding that the trusts contributing funds to the LP Subaccount are not QEPs. Finally, the Division gave "no-action" relief to such CPO and the operator of any Rule 4.7 exempt pool in which the LP Subaccount invests from compliance with the ten percent investment limitation in Rule 4.7(a)(1)(ii)(B)(2)(xi).
06/10/1997
97-54 PDF Image; ?4m(1), 4.7(a); No-Action
The Division of Trading and Markets took a no-action position regarding CPO registration relief for the sole general partner of two U.S. funds to be operated as Rule 4.7(a) pools where the CTA for both funds will also serve as the funds' CPO, the general partner and the CPO/CTA are affiliated companies, the general partner will limit its activities with regard to the two funds, and the CPO/CTA and the general partner accepted joint and several liability with each other for any violation of the Act or Commission regulations thereunder applicable to CPOs in connection with the two funds. In addition, the Division took a no-action position such that the CPO/CTA for the two U.S. funds, which also served as the CPO for an offshore fund organized as a Rule 4.7(a) pool, could claim exempt status under Rule 4.7(a) for all three funds despite the participation of eight non-QEP individuals in the three funds, where the eight non-QEPs are high level employees and sophisticated investors, and where the Division previously had deemed seven of them to be QEPs in connection with their investment in other funds not the subject of this letter.
06/23/1997
97-55 PDF Image; Rule 4.7(a)(2)(iv); Exemption
The Division of Trading and Markets exempted a CPO from the requirements of Rule 4.7(a) (2) (iv) to maintain the original books and records for a pool at its main business office in the United States (U.S.) based upon the conditions that: (1) the CPO maintain duplicates of the pool's books and records at its main business office; and (2) within 72 hours after a request by a duly qualified representative of the Commission, the National Futures Association or the Department of Justice, the CPO make available originals of the pool's books and records to the representative at a place located in the U.S. as specified by the representative. The CPO maintained the pool's original books and records offshore to comply with the requirements of Irish law, under which the pool had been formed.
06/26/1997
97-56 PDF Image; ?4m(1); No-Action
The Division of Trading and Markets granted CPO registration "no-action" relief to the sole general partner of a limited partnership that will trade commodity interests for speculative purposes. The partnership has four limited partners: two U.S. citizens, a corporation organized under the laws of France, and a family trust. The four limited partners have all had long-standing business and/or personal relationships with the general partners, and each of the limited partners (in the case of the trust, the trustee) is a "qualified eligible participant" as defined in Rule 4.7(a). The aggregate subscribed capital of the Partnership will be $275,000.
07/02/1997
97-57 PDF Image; Rule 4.7(a); No-Action
The Division will not recommend that the Commission take any enforcement action against a registered CPO based solely upon: (1) its operation of a fund as an exempt pool under Rule 4.7(a) notwithstanding the participation in the fund by a principal of the fund's CTA who does not qualify as a QEP; or (2) its investment of more than ten percent of the fair markets value of the fund's assets in Rule 4.7(a) exempt pools. In addition, the Division will not recommend the Commission take any enforcement action against the CPO of any Rule 4.7(a) exempt pool in which the fund is or becomes a participant based solely upon the fund's investment of more than ten percent of the fair market value of its assets in the Rule 4.7(a) exempt pool.
05/08/1997
97-58 PDF Image; Rule 4.7(a), 4m(1); No-Action
The Division of Trading and Markets (T&M) permitted an employee limited partnership (EE L.P. II) to be treated as a QEP for the purpose of investing in a pool operated by an affiliate of the employees' employer. T&M also issued CPO and CTA registration "no-action" relief to the operator/advisor of EE L.P. II, based upon, among other things, representations that participants in EE L.P. II would be restricted to senior management officials who were "accredited investors."
07/02/1997
97-59; Rule 4.7(a)(2)(iv)&(b)(2)(ii); Exemption
The Division of Trading and Markets exempted a registered CPO and CTA from the location requirements of Rule 4.7(a)(2)(iv) and (b)(2)(ii) permitting it to maintain the original books and records specified by those rules at the main business office of the entity that performs administrative services for the CPO/CTA. The exemption is subject to the conditions that the registered CPO/CTA: (1) maintains copies of the books and records at its office; and (2) remains responsible for the maintenance of all required books and records, and for assuring their availability to the Commission, the National Futures Association and any other agency authorized to inspect such books and records.
07/01/1997
97-60 PDF Image; ?4m(1), 4.7(a); No-Action
The Division of Trading and Markets took a no-action position regarding CPO registration relief for the sole general partner of two U.S. funds to be operated as Rule 4.7(a) pools where the CTA for both funds will also serve as the fund's CPO, the general partner and the CPO/CTA are affiliated companies, the general partner will limit its activities with regard to the two funds, and the CPO/CTA and the general partner accepted joint and several liability with each other for any violation of the Act or Commission regulations thereunder applicable to CPOs in connection with the two funds. In addition, the Division took a no-action position such that the CPO/CTA for the two U.S. funds, which also served as the CPO for an offshore fund organized as a Rule 4.7(a) pool, could claim exempt status under Rule 4.7(a) for all three funds despite the participation of six non-QEP individuals in the three funds, where the six non-QEPs are high level employees and sophisticated investors.
07/01/1997
97-61; Rule 4.7(a); Exemption
The Division of Trading and Markets permitted a registered CPO to claim relief under Rule 4.7(a) with respect to Class B units of a limited liability company (LLC), notwithstanding the presence in the LLC of non QEP unitholders; the LLC may invest in exempt pools without regard to the ten percent limitation of Rule 4.7(a).
07/15/1997
97-62 PDF Image; Rule 4.21, Rule 4.23(a); Exemption
The Division of Trading and Markets (Division) granted an exemption from Rule 4.21 to the CPO and general partner of a commodity pool "master" fund with respect to delivering a Disclosure Document to prospective participants in the master fund. These prospective participants were two commodity pool "feeder" funds of which the CPO and general partner was also the CPO and general partner of the master fund. The Division also granted an exemption from Rule 4.23(a) concerning the location of the original books and records of the master fund.
07/15/1997
97-63 PDF Image; Section 4m(1) of the Act; Interpretation
The Division of Trading and Markets confirmed that a news wire service which wished to provide a listing of daily estimated rates of return and information on the net asset values of publicly offered pools would be excluded from the definition of a commodity trading advisor and would not appear to be otherwise violating the Commodity Exchange Act or Commission rules in publishing the listing. The news service represented that it would offer the listing in a manner that was solely incidental to its general financial reporting services. The information contained in the listing would be calculated by the pools' commodity pool operators (CPOs) and any calculations would be done in a manner consistent with Commission rules. Only data from pools operated by registered CPOs would be used. The Division emphasized that the CPOs remained subject to all applicable regulations and could be subject to enforcement action if they submitted false or misleading information to the news service. The news service also affirmed that it would print certain disclaimers in connection with the listing, including statements that the information contained therein may be estimated and was not independently verified.
07/15/1997
97-64 PDF Image; Rule 4.7, 4.31, 4.33; Interpretation
The Division of Trading and Markets addressed the applicability of Rules 4.7, 4.31, and 4.3 3 to a registered commodity trading advisor (CTA) located in Germany that wished to expand its client base to include qualified eligible clients in the United States. The Division explained the relief from the disclosure and recordkeeping requirements of Rules 4.31 and 4.33 made available to qualifying CTAs by Commission Rule 4.7(b). Regarding a question concerning the sufficiency of the CTA's recordkeeping arrangements for a particular client, the Division noted that Rule 4.33 requires that a registered CTA maintain at its main business office the books and records specified in the rule, but explained that the Division had granted relief from the location requirement of Rule 4.33 where a CTA has demonstrated a need to maintain its books and records at a location other than its main business office.
07/31/1997
97-65 PDF Image; ?4m(a); No-Action
General partner of a Cayman Islands limited partnership to be operated as a Rule 4.7(a) pool not required to register as a CPO where the general partner is a wholly owned subsidiary of a registered CPO, who requested, and the Division deemed, to be the CPO of the pool. The general partner agreed to limit its activities with regard to the pool, no principal of the general partner was subject to a statutory disqualification under the Commodity Exchange Act, and the registered CPO and the general partner accepted joint and several liability with each other for any violation of the Act or Commission regulations thereunder applicable to CPOs in connection with the operation of the pool.
07/09/1997
97-66 PDF Image; Rules 4.7(a)(2)(iv) and (b)(2)(ii); Exemption
A registered CPO and CTA was exempted from the books and records location requirements of Rules 4.7(a)(2)(iv) and (b)(2)(ii) such that the CPO/CTA may maintain the books and records of a pool containing United States persons as investors at the offshore offices of the pool's administrator. This relief is subject to the condition, among others, that the CPO/CTA will cooperate in any information sharing arrangements between the country where the books and records are to be kept and the United States.
08/06/1997
97-67 PDF Image; Rule 4.7(a); No-Action
A register CPO could continue to claim relief under Rule 4.7(a), notwithstanding the admission of a non-QEP trust into the Pool. The trust had been created by the will of a QEP, the sole trustee and the individual responsible for making investment decisions for the trust was the grantor's widow and a QEP, and the sole income recipient for fifteen years was a QEP. In addition, although not all participants in the Pool were QEPs, the CPO could invest more than ten percent of the fair market value of the Pool's assets in other pools for which the CPOs thereof had claimed relief pursuant to Rule 4.7(a).
08/06/1997
97-68 PDF Image; Rule 4.31; Exemption
The Division of Trading and Markets confirmed that a registered commodity trading advisor could continue to claim relief from the disclosure document requirement of Rule 4.31 in connection with providing commodity interest trading advice to an offshore fund which would have as participants non-United States persons as well as qualified eligible clients.
08/21/1997
97-69 PDF Image; Rules 4.7(a)(2)(ii) and (iii); Exemption
The CPO of a commodity pool was exempted from preparing and distributing the quarterly statements and Annual Reports required under Rules 4.7(a)(2)(ii) and (iii) in connection with a commodity pool whose sole limited partner is the Individual Retirement Account (IRA) of an attorney who is a senior partner at a law firm that provides counsel to the CPO.
08/19/1997
97-70 PDF Image; Rules 4.21, 4.22 and 4.23(a)(10) and (a)(11); Exemption
The CPO of a commodity pool was exempted from the disclosure, reporting and recordkeeping requirements of Rules 4.21, 4.22 and 4.23(a)(10) and (a)(11) in connection with a commodity pool whose interests will be offered exclusively to members of the CPO's immediate family and his wife's immediate family. Limited partners receive detailed unaudited monthly reports and annual tax returns for the pool.
08/29/1997
97-71 PDF Image; Section 2(a); No-Action
No-Action letter allowing the Singapore International Monetary Exchange's futures contract based on the Morgan Stanley Capital International Taiwan Stock Index to be offered or sold in the United States.
08/28/1997
97-72 PDF Image; Rule 4.7(a); No-Action
A registered CPO could continue to claim under Rule 4.7(a), notwithstanding the Pool's admission of a non-QEP joint account, which was owned by a husband and wife. The husband was the sole proprietor of a registered CTA that served as the Pool's CTA, and his wife was an accredited investor and attorney who had practiced corporate and rule estate law and who had assisted her husband in forming the CTA.
08/20/1997
97-73 PDF Image; Section 4m(1) of the Act; Rule 4.23(a); No-Action
Directors of "X", a commodity pool, not required to register as CPOs in connection with their operation of X where, among other things: (1) X's investment manager is registered as a CPO; (2) X's participants are QEPs; (3) the Directors are all "non-United States" persons who either (a) own or have family members who own interests in X or (b) is an officer and director of a participant of X; (4) the Directors delegate to the investment manager the sole responsibility for the operation of X and the solicitation of investors for X; and (5) the Directors and the investment manager are jointly and severally liable for any violations of the Act or the Commission's regulations thereunder. The Division also granted the investment manager relief from the requirements of Rule 4.23(a) with respect to the location of original books and records.
08/25/1997
97-74 PDF Image; Rule 3.10; Interpretation
The Division of Trading and Markets provided interpretative advice regarding the regulatory requirements under the Commodity Exchange Act for forming an FCM or IB. The staff advised that Rule 3.10 requires that certain documents be submitted to NFA, and that Rule 3.34 requires that registrants attend ethics training as specified in the rule. The staff noted that nothing in the Act or Commission rules prohibits a bank from registering as an FCM or IB, although due to certain financial requirements as well as restrictions imposed by banking regulators, banking enterprises generally create a subsidiary or affiliate to act as an FCM or IB.
09/25/1997
97-75 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets provided relief under Rule 4.7(a) to a registered CPO, notwithstanding the presence of a non-QEP in its pool, where the non-QEP is a trust established by the Chairman of the CPO for the sole benefit of the Chairman's two teenage sons. The non-QEP trust has ready access to information pertinent to an investment in the pool and agrees to being treated as a QEP.
09/24/1997
97-76 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets provided relief under Rule 4.7(a) to a registered CPO, notwithstanding the presence of non-QEPs in its pool, where the non-QEPs are employees of the CPO who hold high level director or officer positions with the CPO and who perform as analysts and portfolio managers for the pool. The non-QEPs have ready access to information pertinent to an investment in the pool and agree to being treated as QEPs.
09/16/1997
97-77 PDF Image; Section 4m(1) - Requirement to register as a CPO; No-Action
CPO registration relief was provided to the operator of a partnership that traded commodity interests based upon, among others, representations that participants were Commission registrants, certain of their current and former employees and certain of their current and former family members.
09/24/1997
97-78 PDF Image; Rule 4.10(d)(1) and Rule 4.7(a)(1)(ii)(B)(2)(viii); No-Action
The Division of Trading and Markets found that a partnership consisting of a wife and her ex-husband, two trusts for the benefit of their children, a trust for the benefit of the wife, the ex-husband's current spouse, the wife's sister-in-law and a trust for her benefit, the sister-in-law's children and trusts for their benefit, the sister of the sister-in-law and the sister-in-law's grandson was not a commodity pool within the meaning and intent of Rule 4.10(d)(1) and, consequently, that the General Partners were not CPOs thereof. Because the partnership qualified for treatment as a QEP under Rule 4.7(a)(1)(ii)(B)(2)(viii), the Division did not address the request for relief from the ten percent restriction imposed on the assets of a Rule 4.7(a) exempt pool that may be used to purchase units in other Rule 4.7(a) exempt pools where not all investors in the investor fund will be QEPs.
09/29/1997
97-79 PDF Image; Section 4m(1) - CPO Registration; No-Action
The Division of Trading and Markets provided a CPO registration no-action position for a general partner of a fund where: the general partner was affiliated with a registered FCM; the CTA for the fund was also affiliated with the general partner; each investor in the fund was and would be an accredited investor; the fund would commit no more than two percent of its net asset value to establish commodity interest positions; the minimum investment in the fund was $500,000; the fund would trade commodity interests solely for bona fide hedging purposes; the fund would not be marketed as a commodity pool; and, the general partner did not and would not serve as the CPO to any other commodity pool. The Division conditioned the relief by requiring the general partner and the CTA of the fund to provide the Division with a signed acknowledgment whereby each party accepts joint and several liability with the other for any violation of the Act or the Commission's rules issued thereunder applicable to CPOs.
09/10/1997
97-80 PDF Image; 1a(5); Interpretation
The Division of Trading and Markets provided interpretative guidance in response to any inquiry concerning whether a futures commission merchant (FCM) needed to register as a commodity trading advisor (CTA) if it solicited and managed retail customer accounts. The Division noted that Section la(5) of the Commodity Exchange Act provides a statutory exclusion from the CTA definition for certain categories or persons, among which are FCMs, who provide commodity interest trading advice in a manner "solely incidental" to the conduct of their business or profession. The Division noted that as a general rule, the Commission has not required an FCM which manages a customer's commodity interest account to register as a CTA so long as the firm is acting as an FCM with respect to the account, i.e. carrying the account on its books and accepting customer funds in a connection with commodity interest transactions.
09/24/1997
97-81 PDF Image; Rule 3.1; No-Action
The Division of Trading and Markets denied the request of an individual that he not be required to be listed as a principal of two affiliated firms for which his title was "senior vice president." The Division noted that the Commission had previously interpreted the term "principal" to include any vice president. In addition, since the individual was already registered as an associated person of both firms the Division stated that the only additional step required would be for the two firms to each file a Form 3-R to amend their respective Form 7-Rs to add the individual as a principal.
09/23/1997
97-82 PDF Image; Section 4m(1) of the Act; No-Action
Trust investment manager not required as a CPO or CTA and Trustee not required to register as a CPO where, among other things: (l) the Trust would trade in compliance with the trading requirements of Rule 4.5(c)(2); (2) the Trust contained only two United States persons as investors, an investment vehicle operated pursuant to Rule 4.7 and a subsidiary of public cooperation; and (3) the two United States persons would not own, in the aggregate, more than two percent of the Trusts outstanding shares.
09/05/1997
97-83 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets granted "no-action" relief from the requirement to register as a CPO with respect to the Board of Managers of a commodity pool organized as a limited liability company, and with respect to a registered CTA and registered investment adviser (RIA) that acted as the pool's investment manager (and to which the Board of Managers had delegated extensive authority regarding the management and operation of the pool). Participants in the pool were all existing accredited investor clients of the CTA/RIA and a registered broker-dealer that acted (with the CTA/RIA) as the pool's co-placement agent. Relief was conditioned upon: (1) the CTA/RIA remaining registered as a CTA and as an RIA: (2) the pool being closed to new participants and having as participants only exiting clients of the co-placement agents; (3) participants having purchased their interests by contributing securities encumbered by transfer restrictions or with substantial unrealized capital gain; (4) the pool was constructed to mirror the performance of the S&P 500 index; and (5) commodity interest trading was limited pursuant to Rule 4.5(c)(2)(I).
10/17/1997
97-84 PDF Image; Section 4.7(a) - Exemptive Relief for CPO's; No-Action
The Division of Trading and Markets granted continued relief under Rule 4.7 fa) to a registered CPO/CTA notwithstanding the admission of a non-QEP into a Pool operated by the CPO. The non-QEP, who has more than 3 0 years of investment experience, is the father of the CPO's president, sole shareholder, and sole director. The Division granted the relief subject to the condition that the non-QEP consent in writing to being treated as a QEP.
10/08/1997
97-85 PDF Image; Section 4d of the Act; No-Action
Separately incorporated affiliates of a bank affiliate FCM that refers business to the FCM not required to register as IBs or otherwise where, among other things: (1) each affiliate was subject to regulation by regulatory authorities other than the Commission; (2) all employees of the affiliates engaged in referring commodity business to the FCM will be registered as APs of the FCM; (3) each office of each affiliate will be identified as a branch office of the FCM for registration purposes; (4) existing principals or APs of the FCM will supervise the commodity interest-related activities of affiliate's employees; and (5) the affiliates agree to be jointly and severally liable with the FCM for any violations of the Act or regulations committed by the affiliate's employees.
09/15/1997
97-86 PDF Image; Rule 4.7(a) and Rules 4.21 - 4.26; No-Action
The Division of Trading and Markets granted "no-action" relief permitting the registered CPO of a Rule 4.7 exempt pool to admit as a participant an investor pool composed entirely of five employees of the Rule 4.7 exempt pool, each of whom (1) had a least five years' relevant employment experience in the financial services industry, (2) was an accredited investor and/or had an annual income of at least $100,000, and (3) consented to QEP treatment. The investor pool was formed to enable employees to participate in profits with favorable tax treatment. A no-action position was also taken with respect to failure of the investor pool's CPO (who was also the sole principal of the Rule 4.7 exempt pool's CPO) to comply with the requirements of Rules 4.21 through 4.2 6 in operating the investor pool. Both no-action positions were taken on condition that no additional participants would be admitted to the investor pool without prior approval of the Division. Among the factors considered in granting relief was the representation by the CPO that the five employees were "knowledgeable employees" of the Rule 4.7 exempt pool (as the term "knowledgeable employee" is defined in new Rule 3c-5(a) (4) under the Investment Company Act of 1940).
10/29/1997
97-87 PDF Image; Rules 4.21, 4.22(a) and 4.22(b), 4.24, 4.25, and 4.26 - Exemptive Relief for CPO; No-Action
The Division of Trading and Markets granted relief from the disclosure and reporting requirements of Rules 4.21, 4.22, 4,24, 4.25, and 4.26 to a registered CPO with regard to its operation of a newly-established Fund comprised exclusively of principals and/or employees of the CPO or an entity affiliated with the CPO as advisor to the Fund where all but one of the participants in the Fund have duties with respect to the day-to-day trading and/or operation of the Fund, all of the participants adequately understand the risks of futures trading, and all of the participants will have access to the books and records of the Fund. The one participant who does not have daily duties with respect to the Fund is himself a QEP and the controlling principal of both the CPO and its affiliate.
10/10/1997
97-88 PDF Image; Section 4m (1); Exemption
The Division of Trading and Markets permitted a registered investment adviser to rely on an exemption from CTA registration provided by Rule 4.14(a)(8), despite the fact that the entities for which the advice was being provided, two Canadian funds having no U.S. investors, were not qualifying entities under Rule 4.5. The advisor provided commodity trading advice which was "solely incidental" to its business of providing securities advice, agreed to employ only those strategies which were consistent with the eligibility status under Rule 4.5(c)(2), and did not otherwise hold itself out as a CTA.
10/27/1997
97-89 PDF Image; Section 4(m) (1) - CPO Registration; No-Action
The Division of Trading and Markets took a CPO and CTA registration no-action position with respect to the managing member of a pool that was established for the estate planning purposes of a single family. The pool was not marketed to the public and the managing member's commodity interest trading advice was solely incidental to his provision of securities advice to the pool.
10/29/1997
97-90 PDF Image; Rules 4.7(a), 4.21, 4.22(a) and 4.22(b), 4.25, and 4.26 - Exemptive Relief for CPO.; No-Action
The Division granted relief from the disclosure and reporting requirements of Rules 4.21, 4.22, 4.25, and 4.26 to a CPO in connection with its operation of a pool with respect to the participation of two employees of the CPO's advisory affiliate, each of whom had substantial experience in the financial services industry and was involved in the trading or management of the pool, and a third person who was an accredited investor and had been the executive vice-president of the CPO's advisory affiliate. The Division also granted relief from the QEP criteria of Rule 4.7 to the CPO where the proposed participants in the pool included two persons who were accredited investors and a third person who was employed as controller for both the CPO and its advisory affiliate. One of the two accredited investors was the friend and neighbor of the controlling principal of the CPO and had a net worth of $5 million. The other accredited investor was a limited partner in another pool operated by the CPO and had been the executive vice-president of the CPO's advisory affiliate.
11/24/1997
97-91 PDF Image; Section 4(m) (1); No-Action
The Division of Trading and Markets declined to provide relief to a company that offered an agricultural marketing service from the requirement that it register as a commodity trading advisor (CTA). The Division stated that to the extent that the company recommend the use of commodity futures or options contracts to achieve it clients' marketing goals, the company was register as such. The company was also informed that if it intended to solicit discretionary authority over its clients commodity interest trading accounts, even if such authority was only sought to carry out the agreed upon marketing plans, or if it guided client accounts, the company would first have to provide its clients with a Disclosure Document pursuant to Rule 4.31.
11/21/1997
97-92 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets provided relief under Rule 4.7(a) to a registered CPO, notwithstanding the presence of a non-QEP in its pools, where the non-QEP is an employee of the CPO who holds a high level officer position with the CPO. The non-QEP is investing in the pools on behalf of the CPO in order to act as the "Tax Matters Partner" for the pools in proceedings before the Internal Revenue Service. The non-QEP has ready access to information pertinent to an investment in the pool and agrees to being treated as a QEP.
06/03/1997
97-93 PDF Image; Sections la, 2(a) (1) (A), 4, 5, and 6 of the Commodity Exchange Act; No-Action
The CFTC's Off-Exchange Task Force has issued a no-action letter recommending that the Commission not take enforcement action against certain individuals for operating, or participating in, a physical delivery electronic natural gas trading system. Trading on the system is limited to qualified commercial participants and transactions executed on the system impose binding physical delivery obligations on the participants. The Task Force has determined that the operation of this physical delivery trading system does not require designation as a contract market, registration under the Commodity Exchange Act (Act), or compliance with the Act or Commission Regulations except such parts thereof that relate to manipulation.
11/21/1997
97-94 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets granted CPO registration "no-action" relief to an insurance company (that was also a registered investment adviser) in connection with acting as sponsor and fiduciary of a group trust comprised of assets of employee pension or profit-sharing plans or of governmental plans, on the condition that the insurance company would comply with the requirements of Rule 4.5. The Division also granted CTA registration "no-action" relief in connection with the insurance company providing commodity interest trading advice to the group trust, upon the additional conditions that the insurance company would not hold itself out as a CTA and that it would comply with the notice requirement of Rule 4.14(a)(8). Finally, the Division granted CPO registration "no-action" relief with respect to the failure of the trust company acting as the group trust's trustee and custodian, since the trust company would have minimal contact with participants, would have no investment discretion with respect to group trust assets, would not make investment recommendations or review the insurance company's investment decisions, and would have no authority to hire or fire the group trust's fund managers or its FCMs.
09/17/1997
97-95 PDF Image; Rule 4.7 (a); No-Action
The CPO of an employee limited partnership (the Fund) which consisted of sophisticated, senior management employee could claim relief pursuant to Rule 4.7(a) with respect to the operation of the Fund, could treat the Fund as a QEP for the purpose of investing more than ten percent of the Fund's assets in other Rule 4.7(a) Exempt Pools, and was not required to provide quarterly reports to Fund participants. In addition, the CTA for the Fund could treat the Fund as a qualified eligible client pursuant to Rule 4.7(b). This relief was based upon, among others, representations that all Fund participants were sophisticated investors, had ready access to information regarding the Fund's operation and investments, and would be provided with a detailed offering memorandum and annual report.
11/18/1997
97-96 PDF Image; Section 4m (1)-Requirement to Register as a CPO or as a CTA. Rule 4.14(a)(8)-Exemption from CTA registration for certain registered investment advisers.; No-Action
CPO and CTA registration no-action relief issued to a registered investment adviser in connection with the operation and advisement of an offshore fund based upon, among others, representation that: (1) the adviser was not a sponsor of the fund; (2) interests in the fund would be held solely by non-U.S. persons; (3) the primary responsibility for managing the fund rested with its Board and officers: (4) information provided by the adviser to existing and prospective participants would be limited to publicly available information; and (5) any U.S. contact would be minimal and would not be initiated by the adviser. In addition, no-action relief from certain of the criteria of Rule 4.14(a)(8) issued to the adviser such that it could continue to claim exemption from CTA registration with respect to certain of other funds for which it previously had filed a Rule 4.14(a)(8) notice of exemption.
11/18/1997
97-97 PDF Image; 1a(4) and 1a(5); Interpretation
The Division of Trading and Market provided interpretative guidance in response to an inquiry concerning the ability of a registered futures commission merchant (FCM) also to be registered as a commodity trading advisor (CTA) or commodity pool operator (CPO). The Division noted that nothing in the Act or in the Commission's rules prohibited an FCM from also being registered as a CPO or CTA. The Division explained that pursuant to Rule 4.13(a)(2), an FCM could claim an exemption from CPO registration if the aggregate gross value for all commodity pools operated by the FCM did not exceed $200,000 and none of the pools contained more than fifteen participants at any time. Furthermore, Section la(5) of the Act provides a statutory exclusion from the CTA definition for certain categories of persons which includes, among others, banks, teachers and FCMs who provide commodity trading advice in a manner "solely incidental" to the conduct of their business or profession. The Division explained that, as a general rule, the Commission has not required an FCM which manages a customer's commodity interest account to register as a CTA so long as the firm is acting as an FCM with respect to the account, i.e., carrying the account on its books and accepting customer funds in connection with commodity interest transactions.
11/10/1997
97-98 PDF Image; Rule 4.7(a); Section 4m(1) of the Act; No-Action
CPO provided relief from the ten percent investment limitation of Rule 4.7(a)(1)(ii)(B)(2)(xi) notwithstanding an investment in the pool operated by the CPO by a limited partnership (LP) containing certain trusts that are not QEPs. Registration relief also was provided to the general partners of the LP based upon, among other things, the familial relationship among the trust beneficiaries.
12/29/1997
97-99 PDF Image; Rule 4.7(a); No-Action
The Division of Trading and Markets provided relief under Rule 4.7(a) to registered CPO, notwithstanding the presence of non-QEPs in its pools, where the non-QEPs are employees of a wholly-owned subsidiary of the CPO that was established solely to provide research to the CPO. The non-QEPs are employed as analysts and traders for the subsidiary research company. However, relief was denied to one employee based on his brief experience working in the securities industry and his relative lack of financial resources compared to the QEP standards. The non-QEPs that were granted relief have ready access to information pertinent to an investment in the pool and agree to being treated as QEPs.
12/24/1997
98-02 PDF Image; 4m(1); No-Action
The Division of Trading and Markets denied the request of the general partner of a limited partnership that sought to trade commodity interests for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act. Among other things, the general partner had sought relief based upon representations that the limited partnership would engage in a de minimis amount of commodity interest trading. However, the Division stated that adequate relief was available to the general partner pursuant to Rule 4.12(b) and, thus, the Division did not believe further relief on an ad hoc basis was warranted. The Division indicated that if the general partner wished to pursue the issue of registration relief further, it should do so by a petition for rulemaking.
12/24/1997
98-03 PDF Image; Section 4d of the Act; No-Action
The Division of Trading and Markets denied registration relief to a farm management company that proposed to use options on agricultural futures contracts in order to hedge the production of its clients farms. The company stated that it intended to execute all trades through a single account and that it would assign interest in options contracts to its individual clients based upon the output from each farm that was required to be hedged. The Division, citing a previous similar letter, stated that the company would be required to register as a futures commission merchant in order to provide the hedging service. The Division also stated that because the company intended to assign partial interests in single option contracts to its clients, the proposed service may raise other regulatory issues.
02/21/1997
98-04 PDF Image; Section 4m(1); Rule 4.23(a); Interpretation
The Division of Trading and Markets confirmed that "A," a registered CPO that performed certain recordkeeping and administrative functions on behalf of "B" and "C," two other registered CPOs, would not be deemed to be a CPO with respect to the pools operated by B and C (although A would still be an agent and fiduciary of "B" and "C"). Comptemporaneously, the Division exempted "B" and "C" (in connection with "A"'s performance of recordkeeping services on their behalf) from the requirements to maintain at their main business offices the books and records specified in Rules 4.23(a)(1) and (a)(2), 4.23(a)(4) through (a)(8) and 4.23(a) (10) and (a) (11), provided that, among other things: (1) duplicates of such records would be kept, respectively, at "B"'s and/or "C"'s main business office; and (2) all books and records would be available to Commission or Justice Department representatives.
11/12/1997
98-08 PDF Image; Rule 4.23; Exemption
The Division of Trading and Markets exempted a CPO from the requirements of Rule 4.23 to maintain the original books and records for a pool at its main business office in New Jersey based upon the conditions that: (1) the CPO notify the Division if the location of any such records changes from that a represented to the Division; (2) the CPO remains responsible for the maintenance of all required books and records and for assuring their availability to the Commission; (3) within 48 hours after as request by a duly qualified representative of the Commission, the National Futures Association or the Department of Justice, the CPO will obtain the original books and records from its branch office in New Jersey and provide them for inspection at its main business office in Tennessee; and (4) that the CPO disclose in the Disclosure Document for each pool it operators that all Commission-required books and records are kept at its branch office in New Jersey.
11/13/1997
98-09 PDF Image; Rule 4.13(a)(2); No-Action
The Division of Trading and Markets permitted a CPO to continue to claim CPO registration relief pursuant to Rule 4.13(a)(2) in connection with the operation of a limited liability company (Company) that consisted of three members (Members) and would trade commodity interests for its own account. Although the CPO had previously filed a Notice of Claim of Exemption from CPO registration pursuant to Rule 4.13(a)(2), the members of the Company now wished to make additional capital contributions which would exceed the $200,000 limit imposed by the rule. The relief was based upon, among others, representations that: (1) each member was a Commission registrant; (2) each members was equally and actively involved in the management of the Company; (3) no intention existed to admit additional members; and (4) the company was the only commodity pool operated by the CPO.
12/30/1997
98-12 PDF Image; Rule 30.10; Other Written Communication
Denial of Relief under Part 30 Order - The Commission determined not to provide relief to a foreign firm under certain orders granted under Commission Rule 30.10 where, among other things, the firm was doing business in, but not domiciled in, the country whose regulatory scheme was reviewed for comparability with that of the U.S. prior to granting the orders ("Host Country") and the firm would be regulated in part by its "home" country rather than solely by the Host Country as contemplated under the orders.
12/03/1997
98-13; Section 1a(11) and 2(a)(1)(A)(i) of the CEAct; Interpretation
On December 3, 1997, the CFTC's Division of Economic Analysis issued an interruptive letter indicating that, in its view, certain transactions in agricultural commodities are forward contracts. The contracts are to be entered into between commercial agricultural participants for a set amount of commodity. The price of the commodity is determined at the delivery and will be bounded by minimum and maximum prices. The contracts create binding delivery obligations and will be for a set amount of commodity which does not vary depending upon the commodity's price level. Cancellation of the contracts absent an event beyond the parties' control is not to be permitted.
05/09/1997
98-45 PDF Image; Section 4(b); No-Action
The Division of Trading and Markets (Division) would not recommend enforcement action to the Commission against the Deutsche Terminborse (DTB) if DTB terminals were installed in DTB member firm booths on the floor of the Chicago Mercantile Exchange. The Division's no-action position was subject to, among other things, all of the terms and conditions of the Division's February 29, 1996, no-action letter to the DTB, (CFTC Interpretative Letter No. 96-28, (1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) f26,669), in which the Division agreed not to recommend that the Commission take enforcement action against the DTB if, under certain conditions, DTB terminals were installed in the U.S. offices of DTB members without the DTB becoming designated as a U.S. contract market.

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