CFTC Staff Letter 00-83: Confirmation of Continued Effectiveness of Prior CPO and CTA No-Action Positions for Puerto Rico Funds Following Manager Substitution

00-83
CFTC Letter No. 00-83
July 5, 2000
No-Action; Interpretation
Division of Trading & Markets
Re: Section 4m(1) of the Commodity Exchange Act -- Request for confirmation of continued effectiveness of prior CPO and CTA no-action positions if operation of a group of investment companies is transferred to a trust company affiliated with one of the current joint managers. Dear :
This is in response to your letter dated April 17, 2000, to the Division of Trading and Markets (the "Division") of the Commodity Futures Trading Commission (the "Commission"), as supplemented by telephone conversations with Division staff. By your correspondence, you request on behalf of your client "N" that the Division confirm the continued effectiveness of several prior no-action letters issued by the Division1 affecting certain management investment companies (the "Existing Puerto Rico Funds") organized under the laws of the Commonwealth of Puerto Rico and registered pursuant to the Puerto Rico Investment Companies Act ,2 in the event that one of the existing managing entities of the investment companies is replaced by "N". You further request extension of the prior no-action positions to cover similar investment companies ("New Puerto Rico Funds") not yet formed. Based upon the representations contained in your correspondence, we understand the facts to be as follows. "R" and "S"3 jointly manage the "T" and additional funds in the same series,4 the "U" and the "V" (all collectively referred to herein as the "Tax Free Funds") as well as the "Allocation Fund" and the Tax-Free Funds together comprise the Existing Puerto Rico Funds). It has been decided that "N" will replace "R" with respect to the operation and management of the Existing Puerto Rico Funds and the commencement of the New Puerto Rico Funds. Current employees of "R" who are involved with the Existing Puerto Rico Funds and the development of New Puerto Rico Funds are being transferred to "N". "S", however, will continue to act as a joint trading manager for the Existing Puerto Rico Funds. "R" will also continue to act as the administrator, transfer agent and custodian for the Existing Puerto Rico Funds. With respect to any New Puerto Rico Funds, "N" will be the administrator, transfer agent and custodian. The Existing Puerto Rico Funds are not required to register as investment companies pursuant to Section 6(a)(1) of the Investment Company Act of 1940 ("ICA").5 Except for one open-end portfolio of the Allocation Fund, each of the Existing Puerto Rico Funds is a non-diversified, closed-end management investment company. Each of the Existing Puerto Rico Funds may utilize financial futures contracts and options on those contracts traded on designated contract markets for purposes consistent with Commission Rule 4.5(c)(2). Pursuant to the prior no-action letters, "R" has not registered as a commodity pool operator ("CPO") in connection with operation of the Existing Puerto Rico Funds and neither "R" nor "S" has registered as a commodity trading advisor ("CTA") in connection with commodity interest trading advice to the Existing Puerto Rico Funds. You request that the prior no-action letters remain effective following the substitution of "N" for "R" and that "N" not be required to register as either a CPO or a CTA. In support of your request, you make the following representations:
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