CFTC Letter No. 01-63
June 19, 2001
Exemption
Division of Trading and Markets
Re: Request for Exemption from Rules 4.21 and 4.22
Dear :
This is in response to your letter dated May 1, 2001, to the Division of
Trading and Markets ("Division") of the Commodity Futures
Trading Commission ("Commission"), as supplemented by telephone
conversations with Division staff. By your correspondence, you request
that “X” and “Y”, both registered commodity pool
operators ("CPO") and the joint CPOs of the "Master
Fund", be granted an exemption from the periodic and annual
reporting requirements and the delivery of disclosure documents of Rules
4.21 and 4.22.[1]
Based upon your representations, we understand the facts to be as
follows. In addition to the Master Fund, “X” and
“Y” serve as the CPOs of "Feeder Fund I", a
Delaware limited partnership, and "Feeder Fund II", a Cayman
Islands exempted company. The Master Fund has as its only participants
Feeder Fund I and Feeder Fund II (collectively the "Feeder
Funds"). “X” and “Y” have previously claimed
relief under Rule 4.7 with respect to Feeder Fund I and Feeder Fund
II.
Rules 4.21 and 4.22 require that a CPO provide participants with certain
disclosure documents and periodic and annual reports, as set forth in the
Rules. Therefore, absent the requested exemption, “X” and
“Y” as the CPOs of the Master Fund would be required to
provide disclosure documents, periodic reports, and an annual report to
themselves as the CPOs of the Feeder Funds.
Based upon the representations contained in your letter, the Division
believes that granting the requested exemption would not be contrary to
the public interest and the purposes of Rules 4.21 and 4.22.[2] Accordingly, by the
authority delegated to it under Rule 140.93(a)(1), the Division hereby
exempts “X” and “Y” from the disclosure
requirement and the periodic and annual reporting requirements of Rules
4.21 and 4.22, in connection with its operation of the Master Fund. This
relief is subject to the conditions that: (i) “X and
“Y” remain the CPOs of the Master Fund and the Feeder Funds;
(ii) participation in the Master Fund is limited to the Feeder Funds, and
any fund for which “X” and “Y” 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.[3]
The exemption granted by this letter does not excuse “X” or
“Y” from compliance with any other applicable requirements
contained in the Commodity Exchange Act ("Act")[4] or the Commission's
regulations issued thereunder. For example, they remain subject to all
antifraud provisions of the Act and the Commission's regulations
issued thereunder, the reporting requirements for traders set forth in
Parts 15, 18, and 19 of the Commission's regulations and to all other
applicable provisions of Part 4. Moreover, this letter is applicable to
“X” and “Y” solely in connection with their
operation of the Master Fund.
This letter, and the exemption granted herein, is based upon the
representations that have been made to us. Any different, changed, or
omitted facts or conditions might render the exemption void. You must
notify us immediately in the event the operations or activities of
“X”, “Y”, the Master Fund, or the Feeder Funds
change in any material way from those represented to us.
If you have any questions concerning this correspondence, please contact Michael A. Piracci, an attorney on my staff, at (202) 418-5430.
Very truly yours,
John C. Lawton
Acting Director
[1] Commission rules
referred to herein are found at 17 C.F.R. Ch. 1 (2001).
[2] See, CFTC
Interpretative Letter No. 00-87, [Current Transfer Binder]
Comm. Fut. L. Rep. (CCH) ¶ 28,246 (September 11,
2000).
[3] See, letter
from John C. Lawton, Acting Director, Division of Trading and Markets, to
all registered CPOs (January 12, 2001) (http://www.cftc.gov/tm/tmcpoannualreport2000.htm).
(Stating that "[a]t a minimum, the pool's financial statements
should disclose, for each major investee fund: (1) the name of the fund;
(2) the carrying value of the instrument; (3) liquidity information (such
as limitations on withdrawals from the investee fund); and (4) the
summary income statement information discussed in Regulation 4.22(e).
This should include fees paid by the investee pool expressed in
dollars.").
[4] 7 U.S.C.
§ 1 et seq. (1994), as amended by Pub. L.
No. 106-554, 114 Stat. 2763 (to be codified as amended in scattered
sections of 7 U.S.C.).