For Release: December 21, 1995
Interpretative Letter Concerning Rule 4.7 Relief for CTA
with Non-QEC Foreign Clients
The Commodity Futures Trading Commission's Division of Trading and Markets has issued CFTC Interpretative Letter 96-106. Subject to certain conditions, CFTC Interpretative Letter 96-106 allows a CTA to claim the relief provided in Rule 4.7(b)(2) from the Commission's disclosure and recordkeeping requirements with respect to accounts of certain categories of institutional foreign clients who would otherwise be ineligible for treatment as qualified eligible clients ("QECs") under Rule 4.7(b)(2) because they are organized under the laws of a foreign jurisdiction. The categories of institutional investors listed in Rule 4.7(b)(1)(ii)(A) and (B) as qualifying for treatment as QECs are banks and other institutions operating pursuant to United States laws and regulations. The Interpretative Letter requires that the CTA's foreign clients for whom relief may be claimed must be comparable in nature and purpose to United States entities that specifically qualify for QEC treatment under Rule 4.7(b) and must have portfolios in excess of $25 million.
By this Advisory, the Division of Trading and Markets is confirming that other CTAs may claim relief under Rule 4.7(b)(2) from the disclosure and specific recordkeeping requirements of Rules 4.31, 4.33, 4.34, 4.35 and 4.36 with respect to the accounts of qualifying foreign entities by filing a notice of a claim for exemption required by Rule 4.7(b)(1)(i) according to the procedures set forth at Rule 4.7(b)(3). Each such foreign entity with respect to whose accounts such claims may be made: (1) must be comparable in nature and purpose to one of the United States entities eligible for QEC treatement pursuant to Rule 4.7(b); (2) must have a portfolio with a minimum value of $25 million (although all such assets do not have be placed for management with the CTA claiming relief under the terms of this Advisory); and (3) must have consented in writing to being treated as a QEC. Further, a CTA must maintain all records relating to the qualifications of a foreign client in support of the relief granted herein in accordance with Rule 1.31.
A CTA may not claim relief pursuant to this Advisory for any foreign entity that is registered or required to be registered with the Commodity Futures Trading Commission under the Commodity Exchange Act and is not otherwise exempt from such registration. Any foreign entity for whose account a CTA may claim relief by the terms of this Advisory would be considered a "person listed" in Rule 4.7(b)(1)(ii)(A) or (B) for the purposes of claiming relief under Rule 4.7(b)(1)(ii)(D).