CFTC Staff Letter 01-85: Exemption from Rules 4.21 and 4.22 for CPO X

CFTC Letter No. 01-85
CFTC Letter No. 01-85
November 21, 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 October 31, 2001, to the Division of Trading and Markets (“Division”) of the Commodity Futures Trading Commission (“Commission”), as supplemented by telephone conversations with the Commission staff, in which you request that “X” a registered commodity pool operator (“CPO”) and the CPO of “Z” (the “Master Fund”), be granted an exemption from the disclosure, periodic, and annual reporting requirements of Rules 4.21 and 4.22.[1] Based upon your representations, we understand the facts to be as follows. “X” operates the Master Fund, which has as its sole participants two feeder funds, “Feeder Fund I” and “Feeder Fund II” (collectively the “Feeder Funds”). “X” serves as the CPO of Feeder Fund I and the registered CPO of Feeder Fund II is “Y”. “A” and “B” are the Managing Members of both “X” and “Y”. Rules 4.21 and 4.22 require that a CPO comply with certain disclosure, periodic, and annual reporting requirements, as set forth in the Rules. Therefore, absent the requested exemption, “X” as the CPO of the Master Fund would: (i) be required to provide disclosure documents, periodic reports, and an annual report to itself as the CPO of Feeder Fund I; and (ii) with respect to Feeder Fund II, would effectively also be required to provide disclosure documents, periodic reports, and an annual report to itself since the Managing Members of both “X” and “Y”, the CPO of Feeder Fund II, are the same. 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” from the disclosure, 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” remains the CPO of the Master Fund and Feeder Fund I, “Y” remains the CPO of Feeder Fund II, and “A” and “B” remain the Managing Members of “X” and “Y”; (ii) “X” limits participation in the Master Fund to the Feeder Funds; 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” from compliance with any other applicable requirements contained in the Commodity Exchange Act (the “Act”) [4] or the Commission’s regulations issued thereunder. For example, it remains subject to all antifraud provisions of the Act and the file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/01letters/tm01-85.htm (1 of 2) [5/6/2010 6:15:59 PM]