CFTC Staff Letter 01-86: Exemption from Reporting Requirements for Master Funds

CFTC Letter No. 01-86
CFTC Letter No. 01-86
November 21, 2001
Exemption
Division of Trading and Markets
Re: Request for Exemption from Rules 4.7(b)(2) and 4.7(b)(3) Dear :
This is in response to your letter dated October 12, 2001, to the Division of Trading and Markets (“Division”) of the Commodity Futures Trading Commission (“Commission”). By your correspondence, you request that “X”, a registered commodity pool operator (“CPO”) and commodity trading advisor (“CTA”) and the CPO of “Master Fund I”, “Master Fund II”, “Master Fund III”, “Master Fund IV”, “Master Fund V”, “Master Fund VI”, Master Fund VII”, “Master Fund VIII”, and “Master Fund IX” (collectively the “Master Funds”), be granted an exemption from the periodic and annual reporting requirements of Rule 4.22, as modified by Rules 4.7(b)(2) and 4.7(b)(3).[1] Based upon your representations, we understand the facts to be as follows. The Master Funds are all Cayman Island companies. In addition to the Master Funds, “X” serves as the CPO of “Feeder Fund I” and “Feeder Fund II” (collectively the “Feeder Funds”), both of which are Cayman Island companies. The Master Funds have as their sole participants one of the Feeder Funds. Feeder Fund I is the sole participant in Master Funds I, II, III, IV, and V. Feeder Fund II is the sole participant in Master Funds VI, VII, VIII, and IX. The Feeder Funds invest substantially all of their assets in the Master Funds. “X” has previously claimed relief under Rule 4.7 with respect to both the Master Funds and the Feeder Funds. Rules 4.7(b)(2) and 4.7(b)(3) require that a CPO of a pool operated under Rule 4.7 comply with certain periodic and annual reporting requirements, as set forth in the Rule. Therefore, absent the requested exemption, “X” as the CPO of the Master Funds would be required to provide periodic reports and an annual report to itself as the CPO 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 4.7(b)(2), 4.7(b)(3), and 4.22.[2] Accordingly, by the authority delegated to it under Rule 140.93(a)(1), the Division hereby exempts “X” from the periodic and annual reporting requirements of Rules 4.7(b)(2), 4.7(b)(3), and 4.22, in connection with its operation of the Master Funds. This relief is subject to the conditions that: (i) “X” remains the CPO of the Master Funds and the Feeder Funds; (ii) “X” limits participation in the Master Funds 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 Funds.[3] file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/01letters/tm01-86.htm (1 of 2) [5/6/2010 6:16:02 PM]