2001 Exemptive, No-Action, and Interpretative Letters

01-02; No-Action; December 1, 2000; The Division of Trading and Markets confirmed the continuation of an FCM registration no-action position to a registered IB (IB1) that had acquired the commodity interest trading business of another now-defunct IB (IB2). The FCM registration no-action position permits IB1, just as it had permitted IB2, to affect the transfer of funds via check from customers' securities to commodity interest accounts upon oral request. The no-action additionally permits IB1 to affect the transfer of funds via wire transfer from customers' securities to commodity interest accounts and to use an armored courier for the retrieval and delivery of checks. The relief was granted based upon representations made by IB1 that: 1) customers have provided pre-authorization in writing permitting the transfer of funds both ways between their commodity interest and securities accounts; 2) less than one percent of IB1's total revenue is derived from commodity interest-related activity; and 3) IB1 is not advertising its commodity interest-related activity but instead is offering these services to existing securities customers merely as a courtesy. The relief was granted on condition that IB1 adopt specified procedures designed to safeguard those customer funds required to be segregated, including detailed recordkeeping requirements concerning any transfers of funds. [Section 4d(2) of the Act -- No-Action Position from FCM Registration] (T&M).

01-03; Exemption; January 16, 2001; The Division of Trading and Markets provided exemptive relief to a registered CPO (CPO X) from the periodic and annual reporting requirements of Rules 4.7(b)(2) and 4.7(b)(3) in connection with its operation of a master fund that has as its sole participants two feeder funds. CPO X serves as the CPO of one of the feeder funds and CPO Y serves as the CPO of the other feeder fund. Both CPOs share the same managing members. Accordingly, the Division reasoned that requiring CPO X to provide periodic and annual reports would, in the one instance, be requiring it to provide information to itself, and, in the second instance, effectively be requiring it to provide information to itself since both CPOs have the same managing members. Relief is subject to the conditions that: (i) CPO X and CPO Y remain the CPOs of the respective funds, and the managing members of CPO X and CPO Y remain the same; (ii) participation in the Master Fund is limited to the two feeder funds; and (iii) the annual report of the feeder funds contain financial statements that include, among other information, the fees associated with the operation of the Master Fund. [Regulations 4.7(b)(2) and 4.7(b)(3)] (T&M).

01-04; Exemption; January 25, 2001; The CPO of a pool dissolved after four months of trading and requested exemption from the requirement of Rules 4.22(c) and (d) that the pool distribute an audited Annual Report. Based on the unique circumstances associated with this Pool, specifically the proprietary nature of the pool, the only participant (the sponsor/manager of the pool) was not required to file a supporting statement or distribute an unaudited report to itself. [4.22(c) & (d)] (T&M).

01-05; Exemption; January 30, 2001; The CPO of a pool, in which all of the participants in the pool were principals of the CPO or close family members, requested exemption from filing a certified Annual Report. The participants submitted consent waiver statements in support of the exemption. That exemption was granted. Further, as long as the pool continues to do business without soliciting unaffiliated participants, the CPO need not make the same claim for relief each year. [4.22(c) and (d)] (T&M).

01-06; Exemption; February 9, 2001; A U.S. CPO entered into an agreement with its administrator, an offshore entity, to maintain the books and records of the non-U.S. commodity pools operated by the U.S. CPO at its administrator's offshore location. The exemption was granted upon several conditions, including: (1) the CPO notify the Division if the location of any such books and records changes from that as represented to us; (2) the CPO notify the Division of any changes in law that would affect or impede production of the books and records; and (3) the CPO disclose where all books and records are maintained. [Rule 4.23] (T&M).

01-07; No-Action; January 11, 2001; 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. [Section 4m(1)] (T&M).

01-08; No-Action; August 11, 2000; The Division of Trading and Markets took CPO and CTA no-action positions permitting a registered investment adviser to manage and advise a pension plan group trust for employees of the adviser's parent or corporate affiliates, the general account of an insurance company subsidiary of the adviser's parent, a trust holding pension plan assets for employees of a spun-off subsidiary of the adviser's parent, two pension plans for Canadian employees of the adviser's corporate affiliates, and a United Kingdom pension plan trust for employees of the adviser's parent and affiliates. The Division declined to extend the no-action position to permit the entities managed or advised by the adviser to accept pension plan assets from entities unaffiliated with the adviser's parent. [Section 4m(1)] (T&M).

01-09; Exemption; February 23, 2001; The CPO of a pool, which commenced trading late November 2000, requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The participants supported the request. That exemption was granted upon condition that: 1) an unaudited 2000 Annual Report be provided to the participants, and 2) the audited 2001 report will include 2000 data. [4.22(d)] (T&M).

01-10; No-Action; February 22, 2001; 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. [Section 4m(1)] (T&M).

01-11; No-Action; March 12, 2001; 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. [Section 5 and 5a of the Act] (T&M).

01-12; Exemption; March 14, 2001; Exemption: A U.S. CPO entered into an agreement with its administrator, an offshore entity, to maintain the books and records of the non-U.S. commodity pools operated by the U.S. CPO at its administrator's offshore location. The exemption was granted upon several conditions, including: (1) the CPO notify the Division if the location of any such books and records changes from that as represented to us; (2) the CPO notify the Division of any changes in law that would affect or impede production of the books and records; and (3) the CPO disclose where all books and records are maintained. [Rule 4.23] (T&M).

01-13; Exemption; March 15, 2001; The CPO of a pool, which commenced trading June 2000, requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The request was denied on the basis of the length of time the pool was in operation and the size of the pool. The CPO was required to file a certified Annual Report for 2000 and granted an extension of time in which to file the required report. [Sections 4.22(c) & (d)] (T&M).

01-14; Exemption; March 16, 2001; The CPO of a small fund requested exemption from filing a certified Annual Report for year ending December 2000. The participants submitted statements in support of the exemption. The exemption was granted based on the size of the fund, the closely held nature of the fund and the fund was not soliciting or accepting new participants. [Rules 4.22(c) & (d)] (T&M).

01-15; Exemption; March 16, 2001; The CPO of a pool, which commenced trading November 2000, requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The participants supported the request. The exemption was granted upon condition that: (1) an unaudited 2000 Annual Report is provided to the participants, Commission, and NFA, and (2) the audited 2001 report will include the 2000 data. [Rules 4.22(c) & (d)] (T&M).

01-16; Exemption; March 16, 2001; The CPO of a small fund requested exemption from filing a certified Annual Report for year ending December 2000. The participants submitted statements in support of the exemption. The exemption was granted based on the size of the fund, the closely held nature of the fund, and the fund was not soliciting or accepting new participants. [Rules 4.22(c) & (d)] (T&M).

01-17; Exemption; March 19, 2001; The CPO of a pool that commenced trading September 1, 2000, requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The participants supported the request. That exemption was granted upon condition that: (1) an unaudited 2000 Annual Report be provided to the participants; and (2) the audited 2001 report will include the 2000 data. [Rules 4.22(c) & (d)] (T&M).

01-18; Exemption; March 13, 2001; The Division of Trading and Markets exempted a futures commission merchant (FCM) from the requirement in Regulations 1.10 and 1.16, that it file with the Commission a certified Form 1-FR-FCM within 90 days of its fiscal year end. The FCM did not carry customer accounts and was not otherwise engaged in activities requiring registration as an FCM. Furthermore, the FCM had submitted a request to have its FCM registration withdrawn. [Section 4f(b) of the CEAct and Commission Regulations 1.10 and 1.16] (T&M).

01-19; Exemption; March 23, 2001; The Division of Trading and Markets provided exemptive relief to a registered CPO from the periodic and annual reporting requirements of Rules 4.7(b)(2) and 4.7(b)(3) in connection with its operation of a master fund that has as its sole participants three feeder funds that are also operated by the CPO. The relief is subject to the conditions that: (i) the CPO remain the CPO of the Master Fund and the Feeder Funds; (ii) participation in the Master Fund is limited to the three Feeders Funds; and (iii) the annual report of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master Fund. [Regulations 4.7(b)(2) and 4.7(b)(3)] (T&M).

01-20; No-Action; March 26, 2001; 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. [Regulation 1.57(a)(1)] (T&M).

01-21; No-Action; March 23, 2001; 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. [Regulation 4.13(a)(1)] (T&M).

01-22; Exemption; March 28, 2001; The CPO of a pool that could not obtain an Annual Report from an investee fund until the end of the reporting period requested an extension of time to file its Annual Report. That extension was granted based upon the determination that the representations made in the request and that of the accountant established the type of unusual circumstances warranting relief under 4.22(f)(1). [4.22(f)(1)](T&M).

01-23; Exemption; March 29, 2001; The CPO of a small fund requested exemption from filing a certified Annual Report for year ending December 2000. The participants submitted statements in support of the exemption. The exemption was granted based on the size of the fund, the closely held nature of the fund and the fund was not soliciting or accepting new participants. [Rule 4.22(c) and (d).] (T&M).

01-24; Exemption; March 29, 2001; The CPO of a pool, which anticipates cessation prior to May 2001, requested exemption from the requirement of Rule 4.22(c) and (d) that the pool's 2000 Annual Report be certified and distributed, and that the CPO be allowed to file a certified Annual Report for the 17-month period from January 2000 through May 31, 2001. The request was granted. [Rule 4.22(c) and (d)] (T&M).

01-25; Exemption; March 29, 2001; The Accountant preparing the Annual Report on behalf of a pool requested a short extension of time to file the Annual Report in order to make some minor but important corrections to the accounting for certain partner distributions. The request was granted. [Rule 4.22(c) and (d)] (T&M).

01-26; Exemption; March 29, 2001; The CPO of a pool, which ceased operations in February 2001, requested exemption from the requirement of Rule 4.22(c) and (d) that the pool's 2000 Annual Report be certified and distributed, and that the CPO be allowed to file a certified Annual Report for the 14-month period from January 2000 through February 28, 2001. The request was granted. [Rule 4.22(c) and (d)] (T&M).

01-27; Exemption; March 29, 2001; The CPO of a pool, which commenced trading November 2000, requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The participants supported the request. The exemption was granted upon condition that: (1) an unaudited 2000 Annual Report is provided to the participants, Commission and NFA, and (2) the audited 2001 report will include the 2000 data. [Rule 4.22(d)] (T&M).

01-28; Exemption; March 29, 2001; The CPO of a pool was dissolved by the end of December 2000 and requested exemption from filing a certified Annual Report for year-end. The participants submitted statements in support of the exemption. The exemption was granted upon condition that an unaudited 2000 Annual Report be provided to the participants. [Rule 4.22(d)] (T&M).

01-29; Exemption; March 30, 2001; The CPO of a pool that commenced trading September 1, 2000, requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The Pools' only participant was its sponsor/manager. Given the proprietary nature of the Pool, a statement from the participant was not necessary nor the distribution of a 2000 uncertified report. The exemption was granted upon condition that the audited 2001 report include the 2000 data. [Rule 4.22(d)] (T&M).

01-30; Exemption; April 2, 2001; A CPO requested relief from the requirement of the books and records location of Rule 4.23. The CPO was permitted to keep its books and records at a location rather than its main business office. The CPO was permitted to maintain its books and records at the main business office of the entity that provides administrative services to the CPO. [Rule 4.23] (T&M).

01-31; Interpretation; April 2, 2001; The Division of Trading and Markets provided an interpretative letter to the Board of Trade Clearing Corporation regarding the requirement contained in Rule 1.25(c)(5) that a money market mutual fund, which constitutes an investment of customer segregated funds of a futures commission merchant or clearing organization, must be able to redeem an interest in the fund within one day following a redemption request. The Division's interpretation states that the permitted circumstances under which a delay beyond the one-day requirement are: (1) non-routine closure of the Fedwire (or applicable Federal Reserve banks); (2) non-routine closure of the NYSE or general market conditions leading to a broad restriction of trading on the NYSE, i.e., a restriction of trading due to market-wide events; or (3) declaration of a market emergency by the SEC. [Regulation 1.25(c)(5)] (T&M).

01-32; Exemption; April 3, 2001; The CPO of a pool that started trading in September 2000 requested exemption from the requirement of Rule 4.22(d) that the pool's 2000 Annual Report be audited. The participants supported the request. The exemption was granted. The CPO filed a 4.7 exemption notice in February 2001 and future filings of financial information on behalf of the pool must be made pursuant to Rule 4.7. [Rule 4.22(c) and (d)] (T&M).

01-33; Exemption; April 3, 2001; The CPO of a pool in the process of liquidation requested exemption from the requirement of Rule 4.22 (d) that the pool's 2000 Annual Report be audited. The CPO also requested that the closeout report be exempted from the certification requirements of 4.22(d). The partnership had only two investors that held remaining interests of less than one-half million dollars and would bear the costs of the certified Annual Report. The participants supported the request. The request included the unaudited report for the period January 1, 2000, through December 31, 2000. The exemption was granted upon the condition that: (1) the pool's closeout report include the period from January 1, 2001, through May 31, 2001, and (2) the CPO distribute an unaudited closeout report for the period from January 1, 2001, through May 31, 2001, to the participants. [Rule 4.22(c) and (d)] (T&M).

01-34; Exemption; April 4, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file Annual Reports containing the information required by Section 4.7 for its pools' year-end 2000. The CPO submitted a statement from the pool's accountant. Based on supporting documentation, the request for relief was granted for the pools.  [Rule 4.22; Rule 4.7] (T&M).

01-35; Other Written Communication; March 12, 2001; The Division of Trading and Markets addressed questions concerning the operator of a website that would be operated initially as strictly informational, and subsequently as a manager of customer accounts. The Division advised that the operator would likely be ineligible for the registration exemption under Section 4m(1) even if less than 15 accounts were managed, due to the "holding out" arising from an Internet presence. Without more information no answer could be given whether an investor who contacts the website operator is considered to have been solicited. The website operator was advised to register as a CTA before managing any accounts, and was referred to the Division's July 22 1997 Interpretation regarding electronic delivery of disclosure and other materials. He was further advised that registering for the purpose of managing accounts would probably vitiate any exemption under Rule 4.14(a)(9) and that clients cannot be solicited prior to registration. The Division clarified the handling of performance data pre-dating the disclosure document by more than five years and for which no records exist. Finally, the Division said it has no objection to the use by dual CFTC/SEC registrants of a single disclosure document, and referred the writer top NFA for any questions regarding simultaneous compliance with CFTC and SEC disclosure rules. [Section 4m(1) and Rule 4.14(a)(9)] (T&M).

01-36; Exemption; April 17, 2001; The CPO of a pool requested exemption from the requirement of Rule 4.22(c) that the pool's 2000 Annual Report be distributed. The Pool's only participants were its general partners and a member of the co-CPO. Given the proprietary nature of the Pool, a statement from the participants was not necessary nor the distribution of a 2000 uncertified report. The Pool operates pursuant to a Rule 4.7 exemption. [Rule 4.22(c).] (T&M).

01-37; Exemption; April 17, 2001; The CPO of a pool requested exemption from the requirement of Rule 4.22(c) that the pool's 2000 Annual Report be distributed. The Pool's only participant was the affiliate of the pool operator. Given the proprietary nature of the Pool, a statement from the participant was not necessary nor the distribution of a 2000 uncertified report. The Pool operates pursuant to a Rule 4.7 exemption. Rule 4.22 (c) (T&M).

01-38; Exemption; April 20, 2001; The registered CPO of pools requested, under Rule 4.22(f)(1), an extension to file its audited report. The auditors are not permitted to certify the audited financial statements until they receive the opinion letters for the pools from the attorneys outside of the U.S. Based on the supporting information, the extension was granted until April 30, 2001. [Rule 4.22(f)(1)] (T&M).

01-39; Exemption; April 20, 2001; The registered CPO of pools requested, under Rule 4.22(f)(1), an extension to file its audited report. The auditors are not permitted to certify the audited financial statements until they receive the opinion letters for the pools from the attorneys outside of the U.S. Based on the supporting information, the extension was granted until April 30, 2001. [Rule 4.22(f)(1)] (T&M).

01-40; Other Written Communication; April 20, 2001; The Division of Trading and Markets (Division) issued a reply treating as withdrawn a Petition seeking confirmation that a particular product qualified for exemption from the Commodity Exchange Act and rules thereunder as a hybrid instrument. The Division's reply was based upon the self-effectuating nature of the newly-enacted exclusion from regulation for hybrid instruments that are predominantly securities set forth in Section 105(a) of the Commodity Futures Modernization Act. The Division also advised the requester to seek advice from the SEC on the issue of whether its hybrid instruments satisfy the predominance test and should be registered as securities. [Part 34 of the Commission's rules and Section 105(a) of the Commodity Futures Modernization Act] (T&M).

01-41; No-Action; April 23, 2001; 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. [Section 4m(1) of the Commodity Exchange Act] (T&M).

01-42; No-Action; May 16, 2001; 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. [Section 2(a)] (OGC).

01-43; Exemption; May 16, 2001; The CPO of a small pool requested exemption from the requirement of rule 4.22(d) that the pool's 2000 Annual report be audited. The Fund terminated trading in October and had one participant by the end of the year. The participants supported the request. The exemption was granted. [Rule 4.22(d)] (T&M).

01-44; Exemption; May 2, 2001; The Division of Trading and Markets provided exemptive relief to a registered CPO from the periodic and annual reporting requirements of rules 4.7(b)(2) and 4.7(b)(3) in connection with its operation of a master fund that has as its sole participant two feeder funds that are also operated by the CPO. The relief is subject to the conditions that: (i) the CPO remain the CPO of the Master Fund and the Feeder Funds; (ii) participation in the master Fund is limited to the two Feeder Funds, and any fund for which the CPO is the sole CPO and files a claim for exemption under rule 4.7; and (iii) the annual reports of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master Fund. [Rules 4.7(b)(2) and 4.7(b)(3)] (T&M).

01-45; No-Action; May 23, 2001; 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. [Section 2(a)] (OGC).

01-46; Exemption; May 24, 2001;A registered CPO requested, under rule 4.22(f) (1), an extension of time to file its audited report. The CPO did not have the audited reports of investee pools. The CPO submitted statements from the investee pools and the pool's accountant. Based on supporting documentation, the request for relief was granted for the CPO until June 15, 2001. [Rule 4.22(f)(1)] (T&M).

01-47; No-Action; May 30, 2001; 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. [Section 2(a)] (OGC).

01-48; Interpretation; May 31, 2001; The CFTC privacy rules, to be published at 17 CFR Part 160, apply to operators of hedge funds that are registered with the CFTC as Commodity Pool Operators (CPOs), with a compliance date of March 31, 2002. CPOs are not subject to the privacy rules of the Federal Trade Commission (FTC), with a compliance date of July 1, 2001. [§5g of the CEA, 7 U.S.C. 7b-2, as amended by the Commodity Futures Modernization Act of 2000, New Part 160 of CFTC Regulations, 17 CFR 160, published as final rules at 66 Fed. Reg. 21,236 (April 27, 2001)] (T&M).

01-49; No-Action; March 24, 2001; 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. [Section 5, 5a and 5c of the Act] (T&M).

01-50; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until late June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until July 16, 2001. [Rule 4.22(f)(1)] (T&M).

01-51; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until mid to late June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until June 29, 2001. [Rule 4.22(f)(1)] (T&M).

01-52; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until late June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until July 10, 2001. [Rule 4.22(f)(1)] (T&M).

01-53; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until late June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until June 29, 2001. [Rule 4.22(f)(1)] (T&M).

01-54; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until late June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until July 16, 2001. [Rule 4.22(f)(1)] (T&M).

01-55; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until mid or late June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until July 16, 2001. [Rule 4.22(f)(1)] (T&M).

01-56; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until mid June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until June 29, 2001. [Rule 4.22(f)(1)] (T&M).

01-57; Exemption; June 8, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until mid July 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until July 31, 2001. [Rule 4.22(f)(1)] (T&M).

01-58; Exemption; June 13, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The CPO was working to obtain a legal opinion concerning certain partnership issues. The CPO submitted a statement from the pool's accountant. Based on supporting documentation, the request for relief was granted for the CPO until July 30, 2001. [Rule 4.22(f)(1)] (T&M).

01-59; Exemption; June 13, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until mid-June 2001. The CPO submitted a statement from the pool's accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until June 29, 2001. [Rule 4.22(f)(1)] (T&M).

01-60; Other Written Communication; June 13, 2001; The Division of Trading and Markets addressed questions concerning requirements applicable to certain hypothetical and proprietary presentations on a CTA's website. The Division advised that while Rule 4.41(b) requires that a prescribed cautionary statement accompany hypothetical results, the rule permits that either the statement specified therein, or a statement prescribed by a registered futures association, may be used. The Division also clarified the application of Rules 4.35(a)(6) and 4.35(a)(7) regarding the computation and presentation of proprietary performance, including pro-forma adjustments to reflect fees, commissions, and expenses that differ from the program offered to clients. [Rules 4.41(b), 4.35(a)(6) and 4.35(a)(7)] (T&M).

01-61; No-Action; June 14, 2001; 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. [Section 2(a)].

01-62; No-Action; Interpretation; June 13, 2001; 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).  [Section 4m(1) and Rule 4.14(a)(8)] (T&M).  

01-63; Exemption; June 19, 2001; The Division of Trading and Markets provided exemptive relief to registered CPOs from the periodic and annual reporting requirements of Rules 4.21 and 4.22 in connection with their joint operation of a master fund that has as its sole participants two feeder funds that are also operated by the CPOs.  The relief is subject to the conditions that: (i) the CPOs remain the CPOs of the Master Fund and the Feeder Funds; (ii) participation in the Master Fund is limited to the two Feeder Funds, and any fund for which the CPOs are the sole CPOs; and (iii) the annual reports of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master Fund.  [Regulations 4.21 and 4.22] (T&M).  

01-64; Interpretation; June 14, 2001; The Division of Trading and Markets issued an interpretation that the developer of a weather prediction software program is eligible for the exemption provided by Rule 4.14(a)(9), where the developer creates an Internet website to market the software program to bulk (commercial) purchasers and sellers of natural gas.   The program would issue impersonal recommendations indiscriminately to all subscribers to buy, sell or wait with respect to physical natural gas as well as derivative instruments, including commodity interests.  In addition, the website would offer calculator functions that enable a subscriber to translate the program’s recommendations into numerical amounts based on the subscriber’s particular goals for projected natural gas production or consumption.  The calculator functions would be entirely subscriber-operated with no involvement by the program developer.  [Section 4m(1) and Rule 4.14(a)(9)] (T&M).  

01-65; Exemption; June 21, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report.  The CPO did not have the audited reports of investee pools.  The CPO submitted a statement from the pool’s accountant and provided information regarding the missing investee pools.  Based on supporting documentation, the request for relief was granted for the CPO until June 29, 2001.  [Rule 4.22(f)(1)] (T&M).  

01-66; Exemption; June 21, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report.  The CPO anticipated that the audit would be final by late June.  The CPO submitted a statement from the pool’s accountant.  Based on supporting documentation, the request for relief was granted for the CPO until July 2, 2001.  [Rule 4.22(f)(1)] (T&M).  

01-67; No-Action; June 21, 2001; 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. [Section 4d(a)(1)] (T&M).  

01-68; Exemption; June 28, 2001; A registered CPO requested, under Rule 4.22(f)(1), an extension of time to file its audited report. The audited reports of investee pools would not be available until late June 2001. The CPO submitted a statement from the pool’s accountant and provided information regarding the missing investee pools. Based on supporting documentation, the request for relief was granted for the CPO until July 9, 2001. [Rule 4.22(f)(1)] (T&M).

01-69; Interpretation; July 2, 2001; The Division of Trading and Markets issued an interpretation that the assets of a revocable grantor trust (Trust) may be considered in determining whether the grantor and thus the Trust are qualified eligible persons (QEPs) within the meaning of amended Rule 4.7. The Trust was not formed for the specific purpose of either participating in an exempt pool or opening an exempt account, and the grantor of the Trust was the sole source of funding and was solely responsible for making investment decisions for the Trust. The Division’s interpretation is intended to coordinate the QEP definition with the accredited investor definition under Rule 501(a)(5) of Regulation D under the Securities Act of 1933. [Rules 4.7(a)(1)(v); 4.7(a)(2)(ix) and 4.7(a)(3)(ix)] (T&M).

01-70; Interpretation; July 6, 2001; An earlier interpretative letter (No. 01-48, posted on www.cftc.gov) answered the first inquiry in the MFA letter, and stated that the CFTC privacy rules, to be published at 17 CFR Part 160, apply to operators of hedge funds that are registered with the CFTC as Commodity Pool Operators (CPOs). This letter answers the second inquiry, and states that institutional investors are not “consumers” within the definition of the CFTC privacy rules, and are, therefore, not entitled to the notice, the information disclosure provisions, or the opt-out opportunity provided by these rules. [§5g of the CEA, 7 U.S.C. 7b-2, as amended by the Commodity Futures Modernization Act of 2000, New Part 160 of CFTC Regulations, 17 CFR 160, published as final rules at 66 Fed. Reg. 21,236 (April 27, 2001)] (T&M).

01-71; Exemption; July 17, 2001; A registered CPO requested, under Rule 4.22(f)(1), an additional extension of time to file its audited report. The CPO did not have the audited reports of investee pools. The CPO submitted statements from the investee pools and the pool’s accountant. Based on supporting documentation, the request for relief was granted for the CPO until August 15, 2001. [Rule 4.22(f)(1)] (T&M).

01-72; Exemption; July 17, 2001; The CPO of a pool, which commenced trading October 2000, requested exemption from them requirement of Rule 4.22(d) that the pool’s 2000 Annual Report be audited. The participants supported the request. That exemption was granted upon condition that the audited 2001 report will include the 2000 data. [Rule 4.22(d)] (T&M).

01-73; No-Action; June 21, 2001; 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. [Section 4m(1)] (T&M).

01-74; No-Action; July 30, 2001; 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. [Section 5 and 5s of the Act] (T&M).

01-75; No-Action; July 30, 2001; 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. [Sections 5 and 5a of the Act] (T&M).

01-76; No-Action; July 30, 2001; 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. [Rule 3.32] (T&M).

01-77; No-Action; Interpretation; August 9, 2001; 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. [Section4m (1)] (T&M).

01-78; Exemption; September 10, 2001; The Division of Trading and Markets provided exemptive relief to a registered CPO from the periodic and annual reporting requirements of Rules 4.21 and 4.22 in connection with its operation of a master fund that has as its sole participants two feeder funds that are also operated by the CPO. The relief is subject to the conditions that: (i) the CPO remain the CPO of the Master Fund and the Feeder Funds; (ii) participation in the Master Fund is limited to the two Feeder Funds; and (iii) the annual reports of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master fund. [Regulation 4.21 and 4.22] (T&M).

01-79; Exemption; September 24, 2001; The CPO of a pool that closed requested exemption from the requirement of Rule 4.22(d) that the pool’s 2001 Annual Report be audited. The participants supported the request. The exemption was granted. [Rule 4.22(d)] (T&M).

01-80; Exemption; October 11, 2001; A CPO requested relief from the requirement of the books and records location of Rule 4.23. The CPO was permitted to keep its books and records at a location other than its main business office. The CPO was permitted to maintain its books and records at the main business office of the entity that provides administrative services to the CPO. [Rule 4.23] (T&M)

01-81; Exemption; October 24, 2001; The Division of Trading and Markets provided exemptive relief to a registered CPO from the periodic and annual reporting requirements of Rules 4.7(b)(2) and 4.7(b)(3) in connection with its operation of a master fund that has as its sole participants two Feeder Funds that are also operated by the CPO. The relief is subject to the conditions that: (i) the CPO remain the CPO of the Master Fund and the Feeder Funds; (ii) participation in the Master Fund is limited to the two Feeder Funds; and (iii) the annual reports of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master Fund. [Regulations 4.7(b)(2) and 4.7(b)(3)] (T&M).

01-82; Interpretation; November 2, 2001; The Division of Trading and Markets responded to an inquiry on the regulation of the foreign currency market by a company that offers training courses on how to trade in off-exchange foreign currency. The Division indicated that the Commodity Futures Modernization Act of 2000 had amended the Commodity Exchange Act to make clear that the offering of off-exchange foreign currency futures and options contracts to retail customers is unlawful unless the counterparty is a regulated entity enumerated in the Commodity Exchange Act, such as a registered FCM. The Division noted that, based on the limited information provided by the company, the activities of the company might bring it within the definition of a CTA and, therefore, require registration as such. However, the Division further noted that, pursuant to Rule 4.14 (a)(9), the company may be exempt from registration as a CTA, but that, in order to qualify for this exemption, any opinion given as to what commodity interests to buy or sell in the company’s courses may not be tailored to a client’s particular circumstances and the company may not direct client accounts. [Section 2(c) of the Act; Rule 4.14(a)(9)] (T&M).

01-83; Interpretation; November 2, 2001; The Division of Trading and Markets responded to an inquiry on the regulation of the foreign currency market. The Division indicated that the Commodity Futures Modernization Act of 2000 had amended the Commodity Exchange Act to make clear that the offering of off-exchange foreign currency futures and options contracts to retail customers is unlawful unless the counterparty is a regulated entity enumerated in the Commodity Exchange Act, such as a registered FCM. Additionally, the Division noted that generally a person employed by an FCM to solicit customers must register as an AP of the FCM and a separate entity that introduces customers to an FCM must register as an IB. However, an entity that introduces retail customers to a registered FCM that is acting as counterparty under Section 2(c)(2)(B)(ii) of the Commodity Exchange Act may not be required to register as an IB, but may voluntarily do so. [Section 2(c) of the Act] (T&M).

01-84; Interpretation; October 30, 2001; The Division of Trading and Markets stated that the requirement of Commission Rule 1.31 to retain a third party technical consultant if all, or all of a particular class, of a registrant’s required records are stored on electronic media would not be met where an employee of the registrant kept duplicates of the records on a zip drive at the employee’s home, subject to a written agreement to make the records available if, for any reason the records were not available at the registrant. The Division based its interpretation on the need for an actual third party, separate and distinct from the registrant, to assure Commission access to required records in the event that the principals and employees of the registrant with knowledge of the registrant’s records storage systems became unable or unwilling to provide such access. Accordingly, an employee of the registrant would not be an acceptable substitute for the specified third party technical consultant. [Rule 1.31] (T&M).

01-85; Exemption; November 21, 2001; The Division of Trading and Markets provided exemptive relief to a registered CPO (CPO X) from the disclosure, periodic, and annual reporting requirements of Rules 4.21 and 4.22 in connection with its operation of a master fund that has as its sole participants two feeder funds. CPO X serves as the CPO of one of the feeder funds and CPO Y serves as the CPO of the other feeder fund. Both CPOs share the same managing members. Accordingly, the Division reasoned that requiring CPO X to provide a disclosure document and periodic and annual reports would, in the one instance, be requiring it to provide information to itself, and in the second instance, effectively be requiring it to provide information to itself since both CPOs have the same managing members. Relief is subject to the conditions that: (i) CPO X and CPO Y remain the CPOs of the respective funds, and the managing members of CPO X and CPO Y remain the same; (ii) participation in the Master Fund is limited to the two feeder funds; and (iii) the annual reports of the feeder funds contain financial statement that include, among other information, the fees associated with the operation of the Master Fund. [Regulations 4.21 and 4.22] (T&M).

01-86; Exemption; November 21, 2001; The Division of Trading and Markets provided emptive relief to a registered CPO from the periodic and annual reporting requirements of Rules 4.7(b)(2) and 4.7(b)(3) in connection with its operation of master funds that have as their sole participant one of two feeder funds that are also operated by the CPO. The relief is subject to the conditions that: (i) the CPO remain the CPO of the Master Funds and the Feeder Funds; (ii) participation in the Master Funds is limited to the two Feeder Funds; and (iii) the annual reports of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master Funds. [Regulations 4.7(b)(2) and 4.7(b)(3)] (T&M).

01-87; Interpretation; October 15, 2001; The Division of Trading and Markets stated, in response to an inquiry from a person who intended to develop a website with a daily forecast of the S&P 500 futures contract, that the unsettled nature of the proposed website did not permit delineation of the disclosures required under Commission rules. Nevertheless, the Division offered general guidance regarding: (1) the availability of exemption from CTA registration requirements for CTAs who provide advice on an impersonal basis that is not tailored to any client's particular circumstances; (2) the advisability, even for exempt CTAs, of clearly displaying all material information; (3) the applicability of Rule 4.41 regarding advertising, particularly to presentation of simulated or hypothetical trading results; (4) the applicability of the Part 4 disclosure and recordkeeping rules if a CTA is not within Rule 4.14(a)(9); and (5) the guidance available in the Commission's July 22, 2997, release regarding delivery of required disclosure materials in electronic environments. [Rules 4.14(a); 4.31; and 4.33 - 4.36 - Required disclosures by commodity trading advisors] (T&M).

01-88; Interpretation; December 3, 2001; The Division of Trading and Markets responded to a request for clarification whether, in view of the possibility that required records stored electronically in the .pdf format may be altered in the process of conversion from text file format to .pdf format, it is sufficient to document how the information was obtained and the process used to convert it into .pdf format for storage. The Division stated that the fact that alteration may occur during this conversion process is part of the reason that the Commission continues to require that original trading cards and customer order tickets be retained in hard copy form. With respect to other required records, so long as the registrant insures that the information has been retained and carried over from one format to the other with substantial accuracy and integrity, the fact that some minor level of alteration may occur as part of the conversion process does not in itself constitute failure to comply with Rule 1.31. [Rule 1.31 - Books and records, keeping and inspection] (T&M).

01-89; Interpretation; September 28, 2001; The Division of Trading and Markets stated, in response to an inquiry from a person who intended to develop a website to provide foreign currency trading advice, that the Commodity Futures Modernization Act of 2000 had confirmed the CFTC's jurisdiction over foreign currency futures and options trading. The Division referred the person to the Commission's February 5, 2001, Advisory on Foreign Currency. Assuming that the subject matter of the proposed website could fall within CFTC jurisdiction, the Division offered general guidance regarding: (1) the general requirement that a CTA must register; (2) the availability of exemption from commodity trading advisor registration requirements for CTAs who provide advice on an impersonal basis that is not tailored to any client's particular circumstances; and (3) the applicability of a antifraud jurisdiction regardless of any registration exemption. [Section 4(a); Rule 4.14(a)(9) - Foreign currency futures and option; CTA registration exemption for providers of impersonal non-tailored trading advice] (T&M).

01-90; Exemption; December 11, 2001; The CPO of a 4.7 pool requested permission to file monthly periodic reports to participants, which is more frequent than the quarterly periodic reports required by Rule 4.7(b)(2), but the CPO requested permission to file those reports 45 days after the end of the month. The exemption was granted based on the fact that, on balance, the participants would receive the majority of the financial information earlier than if the CPO were filing quarterly information. [Rule 4.7] (T&M).

01-91; Interpretation; December 12, 2001; The Division of Trading and Markets responded to an inquiry about the regulation of the foreign currency market by a company that offers to exercise discretionary trading authority over a customer's account for trading in foreign currency on an off-exchange basis. The Division indicated that the Commodity Futures Modernization Act of 2000 had amended the Commodity Exchange Act to make clear that the offering of off-exchange foreign currency futures and options contracts to retail customers is unlawful unless the counterparty is a regulated entity enumerated in the Commodity Exchange Act, such as a registered FCM. The Division noted that, generally, a firm that, for compensation or profit, exercises discretionary trading authority over a customer's account for trading in futures or options contracts is a CTA and must register as such. However, with respect to a firm that manages the funds of retail customers that are held by a registered FCM acting as a counterparty under Section 2(c)(2)(B)(ii) of the Act for the purposes of off-exchange foreign currency trading, the firm is not required to register with the Commission as a CTA, but may voluntarily do so. [Section 2(c) of the Act] (T&M).

01-92; Interpretation; December 11, 2001; The Division of Trading and Markets responded to an inquiry regarding a registered CTA becoming an NFA member. The Division indicated that NFA Bylaw 1101 provides that an NFA member may not accept an order or handle a transaction for or on behalf of any non-Member of NFA that is required to be registered with the Commission. Accordingly, before a registered CTA could direct client accounts it must be a member of NFA. The CTA indicated that it was contemplating becoming a principal of an IB that is a member of NFA. The Division noted that if the IB were provided with a power of attorney to direct trading in client accounts, its NFA membership would be sufficient for purposes of satisfying NFA Bylaw 1101. However, the IB would fall within the definition of a CTA and, absent an exemption, the IB also would be required to register with the Commission as a CTA. If, however, the customer, instead of giving the power of attorney to the IB, gives it to the CTA directly, the IB would be acting solely as an IB and would not also be required to register as a CTA. However, the IB's NFA membership would not be sufficient as to the CTA for purposes of NFA Bylaw 1101, even though the CTA was a principal of the IB. [Section 4m(1); Rule 4.14(a)(6); NFA Bylaw 1101] (T&M).