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No-Action Letters

Date
No-Action Letters
01/11/2001
01-07 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets confirmed an existing CPO registration no-action position for one of two general partners (administrative general partner) of a pool where the other general partner (managing general partner) was a registered CPO if tax-exempt U.S. persons (who are QEPs) participate in the pool. At the same time, the Division took a CPO registration no-action position for the directors of the fund through which investors participate in the pool involved in the original no-action position. The Division further provided for extension of this position to cover investment by U.S. tax exempt investors through the fund in future pools operated by the general partners under the same circumstances. These positions were conditioned upon: (1) the managing general partner remaining CPO registered; (2) U.S. persons engaged in investor solicitation being registered as APs; (3) cross acknowledgement by both general partners of joint and several liability for CEA or Commission rule violations; (4) cross acknowledgement by the directors of the fund and by the managing general partner of joint and several liability for CEA and Commission rule violations; and (5) no statutory disqualification on the part of the fund's directors who are U.S. persons.
02/22/2001
01-10 PDF Image; Section 4m(1); No-Action
Relief from CPO registration was granted to a general partner (X) of a private investment limited partnership where: (1) the other partner (Y) is registered as a CPO, (2) X's responsibilities will be limited to back office and administrative matters, and (3) the general partners have the same managing members.
03/12/2001
01-11 PDF Image; Section 5 and 5a of the Act; No-Action
The Division of Trading and Markets issued a letter granting no-action relief to permit the London Metal Exchange Limited to make its electronic trading and order matching system, known as Ime?select, available to its members in the U.S. without obtaining contract market designation or registering as a derivatives execution transaction facility pursuant to Sections 5 and 5a of the CEA.
03/26/2001
01-20 PDF Image; Regulation 1.57(a)(1); No-Action
The Division of Trading and Markets adopted a no-action position with respect to a guaranteed introducing broker (GIB) and the guarantor futures commission merchant (GFCM) notwithstanding the fact that the GFCM would not be carrying and clearing all of the GIB's trades. Commission Rule 1.57 generally requires the GFCM to carry all of the GIB's customer accounts. In reaching this position, the Division noted, inter alia, that the customers being referred are Eligible Contract Participants, that the GFCM had sufficient adjusted net capital and excess net capital to meet all of the GIB's obligations, and that the GFCM agreed to be jointly and severally liable for all obligations under the Commodity Exchange Act and the regulations thereunder with respect to the solicitation of, and transactions involving, all customer accounts of the GIB.
03/23/2001
01-21 PDF Image; Regulation 4.13(a)(1); No-Action
The Division of Trading and Markets confirmed that the manager of the Feeder Fund, who has previously filed an exemption from registration as a CPO pursuant to Rule 4.13(a)(1), may continue to rely upon the exemption, notwithstanding his serving as the general partner of a second commodity pool, the Proposed Fund. The Feeder Fund and the Proposed Fund both invest substantially all of their assets in the Investment Fund. The funds were formed as an investment vehicle for partners and key employees of a law firm. The participants in the Feeder Fund and the Proposed Fund are all partners or key employees of the firm. The position was based upon the fact that the Proposed Fund is being created solely to minimize adverse tax treatment of partners and key employees subject to U.K. tax laws and essentially will function exactly the same as the Feeder Fund, only in a limited partnership structure.
04/23/2001
01-41 PDF Image; Section 4m(1) of the Commodity Exchange Act; No-Action
The Division of Trading and Markets granted a CPO registration no-action position to a grain farmer and registered IB/CTA that was seeking to operate a marketing club (Club) that will enable local farmers to contribute a fixed amount of certain grain and trade commodity interests primarily to hedge the price risks associated with marketing that grain. The Club, which is being created under the auspices of the North Dakota Cooperative Extension Service (NDCES), is being formed to assist the Club members in learning the techniques for managing grain price risks and will be comprised of no more than 30 farmers. The relief was based upon specific characteristics of the Club and was granted on the condition, among others, that an NDCES cooperative extension agent will serve as a facilitator for the Club for so long as it is in operation.
05/16/2001
01-42 PDF Image; Section 2(a); No-Action
A no-action letter was issued allowing the Mercato Italiano dei Derivati Mini futures contract based on the MIB 30 Index to be offered or sold in the United States.
05/23/2001
01-45 PDF Image; Section 2(a); No-Action
A no-action request was granted to permit the offer and sale in the United states of the futures contract on the S&P/TOPIX 150 Index Traded on the Tokyo Stock Exchange.
05/30/2001
01-47 PDF Image; Section 2(a); No-Action
letter was issued permitting the offer and sale in the United States of the mini futures contract based on the FTSE 100 Index traded on The London International Financial Futures and Options Exchange.
03/24/2001
01-49 PDF Image; Section 5, 5a and 5c of the Act; No-Action
The Division of Trading and Markets (Division) responded to a request for a no-action position from the subsidiary of a national securities association (Subsidiary). The Division stated that it would not reject any application seeking designation as a contract market (DCM) or registration as a derivatives transaction execution facility (DTF) solely on the basis that such application identifies Subsidiary as its delegatee of relevant SRO functions, despite provisions in the Commodity Futures Modernization Act that these functions can only be delegated to a registered futures association or another registered entity and the fact that the Subsidiary is neither. The Division's position is based upon Subsidiary's experience as a self-regulatory organization in the securities market and its express commitment to apply for resignation as a futures association. The Division also confirmed that if a DCM or DTF application otherwise comports with the requirements for designation or registration, but the review of Subsidiary's application for registration as a futures association has not yet been completed, the Division will grant appropriate no-action relief to the DCM or DTF, provided Subsidiary's application contains all of the relevant information required by Section 17 of the Act and Part 170 of the Commission's rules.
06/14/2001
01-61 PDF Image; Section 2(a); No-Action
No-Action request to permit the offer and sale in the United States of futures contracts based on the S&P Euro Index and the S&P Europe 350 Index traded on MEFF Renta Variable.
06/13/2001
01-62 PDF Image; Section 4m(1) and Rule 4.14(a)(8); No-Action
The Division of Trading and Markets took: (1) a CPO registration no-action position regarding a non-U.S. bank (with no U.S. directors) serving as trustee of a Cayman Islands pool in which all participants are (and would be) non-U.S. (Japanese); and (2) a CTA registration no-action position regarding the Cayman Islands pool's SEC-registered investment adviser. No marketing activity for the pool would solicit U.S. persons and no capital would be accepted or sought from U.S. sources. Except for the fact that the Cayman Islands pool is not a Rule 4.5 entity, the adviser would meet the eligibility requirements for Rule 4.14(a)(8). No officer or director of the bank or adviser is subject to statutory disqualification. The Division also advised that by taking the CTA no-action position it was not barring the adviser from subsequently claiming relief under Rule 4.14(a)(8), should it decide to provide commodity interest trading advice to Rule 4.5 entities in a manner consistent with Rule 4.14(a)(8).
06/21/2001
01-67 PDF Image; Section 4d(a)(1); No-Action
The Division of Trading and Markets issued a no-action position, for failing to register as an IB, where an individual who authors a newsletter and maintains the website of a registered IB, advertises subscriptions to the newsletter on the website and provides the names of subscribers to the IB. The Division took this position based upon representations that: (1) the author of the newsletter does not have contact with commodity customers, other than through his newsletter; (2) he is not directly compensated for providing the IB with the list of subscribers; and (3) the IB does not initiate contact with any person on the subscriber list.
06/21/2001
01-73 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets granted CPO and CTA registration "no-action" relief to two state-regulated insurance companies (parent and wholly-owned subsidiary) in connection with the offer and sale of life insurance and annuity products to QEPs. The premiums paid for the products would be invested through insurance company separate accounts in one or more investment fund(s) managed by a registered CPO, which would in turn invest in other investment funds, one or more of which may be commodity pools operated by registered CPOs. The products would be marketed by SEC-registered broker-dealers. The Division considered significant the following: (1) that a registered CPO and CTA would select any commodity pools into which premiums would be invested; (2) the insurance companies are subject to state regulation and the placement agents for the products would be SEC-registered broker-dealers; (3) the insurance companies would design insurance features and would not participate in managing commodities-related investments; (4) premiums would not be used for direct commodity interest trading, but only to purchase interests in limited liability trading vehicles, some of which would trade commodity interests; and (5) only QEPs would be allowed to purchase the products. The no-action position was expressly conditioned upon restriction of commodity interest trading exposure to pools operated by registered CPOs who will perform the same functions as the CPO identified in the request letter.
07/30/2001
01-74 PDF Image; Section 5 and 5s of the Act; No-Action
The Division of Trading and Markets issued a letter granting no-action relief to permit the Hong Kong Futures Exchange Ltd. to make its electronic trading and order matching system, known as HKATS, available to non-Exchange Participants without obtaining contract market designation or registering as a derivatives execution transaction facility pursuant to Sections 5 and 5a of CEA.
07/30/2001
01-75 PDF Image; Sections 5 and 5a of the Act; No-Action
The Division of Trading and Markets issued a letter granting no-action relief to permit the SFE Corporation Limited to make its electronic trading and order matching system, known as SYCOM?, available to non-Exchange Participants without obtaining contract market designation or registering as derivatives execution transaction facility pursuant to Sections 5 and 5a of the CEA.
07/30/2001
01-76 PDF Image; Rule 3.32; No-Action
The Division of Trading and Markets issued a letter to a commodity trading advisor (CTA) granting no-action relief from the requirements of Rule 3.32. Subject to the terms set forth therein, the Division stated that it will not recommend that the Commission commence any enforcement action against the CTA for failing to list certain natural persons as principals in connection with a reorganization and merger involving the CTA and another wholly-owned subsidiary of the parent corporation. The manager-managed CTA will list as principals each member of the governing manager in lieu of listing as principals each natural person principal of the parent corporation.
08/09/2001
01-77 PDF Image; Section4m (1); No-Action
The Division of Trading and Markets confirmed continued effectiveness of the positions taken in Staff Letter 00-83 notwithstanding the following changed facts: (1) acquisition by a bank holding company of one of the joint managers of a group of existing Puerto Rico mutual funds; and (2) the intention to employ one or more unaffiliated persons to advise certain additional Puerto Rico mutual funds (not yet formed). In each case the unaffiliated person would be either a registered CTA, a SEC-registered investment adviser or a person excluded from the definition of "investment adviser" under the Investment Advisers Act of 1940. In all other respects, the terms and conditions of Staff Letter 00-83 would be observed.
12/20/2001
02-03 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took a CPO and CTA registration no-action position with respect to an SEC-registration investment adviser operating a limited liability company (the Company) to pool an invest assets of ERISA pension and profit sharing plans and government plans. The Company would invest in limited liability vehicles, some of which may trade commodity interests. The Division considered the requester's investment adviser registration and the fact that it would be managing and advising the Company in essentially the same way that would be permitted for an individual plan that was qualifying entity under Rule 4.5 (except that the requester intended to restrict its commodity interest trading advice to bona fide hedging transactions). The no-action position was conditioned upon the requester maintaining all books and records prepared in connection with operating and advising the Company, and making such books and records available in accordance with the provisions of Rule 1.31.
07/11/2001
02-22 PDF Image; Sections 4d, 4f, 4g, 4k and 4p of the Act and Parts 1, 3 and 180; No-Action
The Division of Trading and Markets took a no-action position with respect to certain securities broker-dealers and registered representatives who register with the Commission as limited-purpose FCMs and APs for the sole purpose of trading certain proprietary electronically-traded broad-based-index futures contracts (the "Contracts") on a specified contract market. Under the no-action position, such limited-purpose FCMs and APs would be deemed to have complied with Commission-mandated registration, sales practice, minimum financial, treatment of customer funds, reporting, and books and records requirements by virtue of their limited-purpose registration with the Commission and their compliance with corresponding securities law regulatory and self-regulatory-organization requirements (to which they are already subject as securities broker-dealers or registered representatives). The limited-purpose FCMs and APs would remain subject to statutory disqualification proceedings, would be required to inform customers that they may still bring reparations proceedings, and would remain subject to daily computation and record requirements of Rule 1.32 concerning segregation of customer funds. In addition, with respect to books and records, they would be required to identify Contract positions in their books and records, to observe the Commission's five-year record retention requirement, to maintain in hard-copy all originally handwritten trade information documents and written orders, and to make Contract-related books and records open to inspection and copying by Commission or Justice Department representatives.

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