CFTC Staff Letter 00-20: Exemption for CPO to Treat Non-QEP Employee as QEP Under Rule 4.7(a)

00-20
CFTC Letter No. 00-20
February 16, 2000
Exemption
Division of Trading & Markets
Re: Rule 4.7(a)
Dear :
This is in response to your letter dated January 20, 2000, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"). By your correspondence, you request on behalf of "X", a registered commodity pool operator ("CPO"), that the Division permit "X", in connection with its operation of two Delaware business trusts (the "Funds"), to treat an investor as if he satisfies the qualified eligible participant ("QEP") criteria of Rule 4.7(a).1 Preliminarily, we note that by letter dated November 21, 1997 the Division permitted "X", which at the time had been named "Y", to treat its Chief Operating Officer ("COO") as a QEP ("Prior Letter").2 The Division issued the Prior Letter based upon, among other factors, the COO's employment with "X" and "X's" parent company, the COO's status as an "accredited investor" as that term is defined in Rule 501(a)(6) under the Securities Act of 19333 and the COO's status as the Tax Matters Partner ("TMP") of the Funds.4 Based upon the representations made in your correspondence, we understand the facts to be as follows. "X" has substituted "A" as the TMP of the Funds. Although he is not a QEP, "A" is the Chief Administrative Officer ("CAO") of "X" and is a "knowledgeable employee" as that term is defined in Rule 3c-5 under the Investment Company Act of 1940 ("ICA").5 The purpose of Rule 4.7 is to "reduc[e] unnecessary regulatory prescriptions for CPOs offering pool participations only to persons who, based upon the qualifying criteria in the rule, do not appear to need the full protections offered by the Part 4 framework."6 As noted above, "A" does not meet the applicable QEP criteria. However, as also noted above, "A" is a "knowledgeable employee" as that term is defined under Rule 3c-5 of the ICA. file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/00letters/tm00-20.htm (1 of 3) [5/6/2010 6:18:22 PM]