Dear :

This is in response to your letter dated February 16, 1998 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by letter dated March 30, 1998, facsimile dated April 18, 1998 and telephone conversations with Division staff. By your correspondence, you request an exemption from Rule 4.7(a) on behalf of "H", a registered commodity pool operator¹ and the general partner of the "Fund", so that six investors in the Fund may be treated as if they satisfy the qualified eligible participant ("QEP") criteria of Rule 4.7(a).² You also seek an exemption from the ten percent investment limitation of Rule 4.7(a)(1)(ii)(B)(2)(xi) (the "Ten Percent Limitation") in connection with "H's" operation of the Fund.

Based upon your representations, we understand the facts to be as follows. The Fund is the successor to "I", an limited partnership formed in 1982, prior to the adoption of Rule 4.7.³ It had several investors that were not QEPs. However, through the filing by "H" of a Notice of Exemption ("Notice"), the Fund agreed to admit only QEPs in the future. In its Notice, "H" also claimed relief from only the disclosure requirements of Rules 4.21, 4.24, 4.25 and 4.26 but not from the reporting requirements of Rules 4.22(a) and (b) or the recordkeeping requirements of Rule 4.23.

"H" now seeks to admit six individuals who are not QEPs. Each of these individuals is employed as a trader or portfolio manager for "J", a registered futures commission merchant, commodity trading advisor and securities broker-dealer that provides securities brokerage services for the Fund. The six individuals (the "Proposed Non-QEP Participants") also provide similar services for "J's" affiliates, "H" and "K".⁴ "K" is a CTA that advises "X", an offshore fund into which the Fund invests a substantial portion of its capital. The Proposed Non-QEP Participants technically are not employees of "H" or "K"; however, both entities pay "J" the work performed for them by the Proposed Non-QEP Participants. In their role as traders and portfolio managers for "H", the six individuals assist the principals of "H" in devising and implementing trading strategies and opportunities for the Fund. The Proposed Non-QEP Participants are as follows:

In support of your request, you assert that "[b]y virtue of their work with "H", [the Proposed Non-QEP Participants] are all intimately familiar with the trading strategies employed by, and the associated risks of, investing in the Fund, and they all have ready access to all information pertinent to an investment in the Fund." You further assert that each of the Proposed Non-QEP Participants will consent to being treated as a QEP for purposes of investment in the Fund and to a waiver of the Ten Percent Limitation for investment of the Fund's assets in other exempt pools.

Based upon the foregoing, it appears that granting your request would not be contrary to the public interest or the purposes of Rule 4.7(a). Accordingly, by the authority delegated to it under Rule 140.93(a)(1), the Division hereby grants "H" an exemption such that it may treat the Proposed Non-QEP Participants as QEPs and continue to claim relief pursuant to Rule 4.7(a) notwithstanding their investment in the Fund. "H" further is permitted, notwithstanding the investments by the Proposed Non-QEP Participants, to invest more than ten percent of the fair market value of the Fund's assets in other Rule 4.7(a) exempt pools.

This letter does not excuse "H" from compliance with any otherwise applicable requirements contained in the Commodity Exchange Act (the "Act") or in the Commission's regulations thereunder. For example, "H" remains subject to all antifraud provisions of the Act and the Commission's regulations, the reporting requirements for traders set forth in Parts 15, 18, and 19 of the regulations, and all other provisions of Part 4. Moreover, this letter is applicable to "H" solely in connection with its operation of the Fund, as discussed above.

This letter, and the exemptions granted herein, are based upon the representations you have made to us. Any different, changed or omitted material facts or circumstances might render these exemptions void. You must notify us immediately in the event the operations or activities of "H" or the Fund, including the composition of the investors in the Fund, change in any material way from those as represented to us.

If you have any questions concerning this correspondence, please contact Helene D. Schroeder, an attorney on my staff, at (202) 418-5450.

¹ "H" also is registered as a commodity trading advisor ("CTA").

² Commission rules referred to herein are found at 17 C.F.R. Ch. I (1997).

³ In this regard, and based upon the CFTC's Advisory for Interpretative Letters Nos. 93-1 and 93-2, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,935 (Jan. 7, 1993), "H" claimed relief from the disclosure requirements of Rules 4.21, 4.24, 4.25 and 4.26 but not from the reporting requirements of Rules 4.22(a) and (b) or the recordkeeping requirements of Rule 4.23. The Advisory permitted CPOs for certain pools, the participants in which included both QEPs and non-QEPs prior to the adoption of Rule 4.7, to claim relief from Rule 4.7, provided, among other things, that the CPOs agreed, prospectively, to admit only QEPs into the pools.

⁴ "J", "H" and "K" are affiliated through common ownership. The three principals of "J" are the sole shareholders of three of the five corporations which serve as general partners of "H" and "K".