CFTC Staff Letter 02-113: No-Action Position on Expanding Eligible Participants in Employee Funds Under Rule 4.7

CFTC Letter 02-113
CFTC letter No. 02-113
November 19, 2002
Interpretation
Division of Clearing and Intermediary Oversight Re: Rule 4.7 – Request to Permit Additional Non-QEPs in Certain Commodity Pools Dear :
This is in response to your letter dated January 24, 2002, to the Division of Trading and Markets (the “Division”) [1] of the Commodity Futures Trading Commission (the “Commission”), as supplemented by your letters dated April 15, 2002 and July 9, 2002, by your e-mail messages dated August 14, 2002, September 10, 2002 and November 5, 2002, and by telephone conversations with Division staff. By your correspondence, you request certain relief on behalf of “S” (successor to “T”), “U” and their affiliates (collectively, “V”).[2] By letter dated September 17, 1997 (“Staff Letter 97-95”) [3] the Division had permitted “W”, a registered commodity pool operator (“CPO”) affiliated with “V”, to admit certain persons not within the definition of “qualified eligible person” (“QEP”) under Commission Rule 4.7[4] to participate in investment funds with respect to which “W” claimed (or another registered CPO, in the future would claim) relief under Rule 4.7(b) (“Employee Funds”). That relief was based upon, among others, representations that: (1) participation in, and contribution to, the Employee Funds would be entirely voluntary; (2) Employee Funds would not charge any fees to the participants, although they would pass along fees charged by any investee funds; (3) a small percentage of an Employee Fund’s assets could be allocated to direct commodity interest trading; and (4) the purpose of the Employee Funds would be to reward and retain key personnel of “V” and to attract talented professionals. “V” now seeks to permit additional persons to participate in these Employee Funds. For purposes of this request, we are incorporating by reference the representations made in support of the relief issued by Staff Letter 97-95. Based upon the representations made in the instant correspondence, we understand the facts giving rise to this request to be as follows. In addition to the representations made in connection with Staff Letter 97-95, you state “V” believes that additional facts warrant expanding the class of persons eligible to participate in Employee Funds, so that participation in Employee Funds that engage in commodity interest trading will be available to all employees to whom “V” currently may privately offer employee investment funds that invest in securities or real estate. Besides the existing categories of managing directors and limited partners, the expanded class of potential participants (“Eligible Participants”) file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/02letters/tm02-113.htm (1 of 5) [5/6/2010 5:52:47 PM]