CFTC Staff Letter 03-10: Exemption from Rule 4.22 Reporting for Joint Master Fund Operations

CFTC Letter 03-10
CFTC letter No. 03-10
January 7, 2003
Exemption
Division of Clearing and Intermediary Oversight Re: Request for Exemption from Rule 4.22 Dear :
This is in response to your letter dated December 16, 2002, to the Division of Clearing and Intermediary Oversight (the “Division”) of the Commodity Futures Trading Commission (the “Commission”), as supplemented by your letter dated December 31, 2002, e-mails dated January 2, 2003, and telephone conversations with Division staff. By your correspondence, you request on behalf of your clients “U” and “V”, each a registered commodity pool operator ("CPO"), that the Division exempt “U” and “V” from the financial reporting requirements of Rule 4.22[1] in connection with the operation of “Master Fund I”, “Master Fund II”, “Master Fund III” and “Master Fund IV’ (collectively, “Master Funds”), for which “U” and “V” will serve as CPOs. Based upon the representations made in your correspondence, we understand the facts to be as follows. “U” and “V” will serve as the Co-CPOs of Master Fund I and Master Fund II. “U” will serve as the CPO of “Feeder Fund II”, Master Fund III and Master Fund IV. “W”, a registered CPO, is the CPO of “Feeder Fund I” and “Feeder Fund III”. Feeder Fund I, Feeder Fund II and Feeder Fund III (collectively, the “Feeder Funds”) are commodity pools in which investors are permitted to directly invest. Feeder Fund I will invest in Master Fund I, Feeder Fund II will invest in Master Fund II, and Feeder Fund III will invest in Master Fund III. Master Fund I will invest in Master Fund II, which may in turn invest in Master Fund III, which may in turn invest in Master Fund IV. The only participants in the Master Funds are the Feeder Funds and other Master Funds. The Master Fundswill conduct trading activities for the commodity pools that invest in them. “U”, “V” and “W” are separate legal entities, but have identical ultimate ownership, officers and directors. Since the same persons are the owners, officers, and directors of “U”, “V”, and “W”, absent the requested exemption “U” and “V” would have to provide financial reports to themselves as follows: (i) “U” and “V” as the Co-CPOs of Master Fund I would be required to provide financial reports for Master Fund I to “W” as the CPO of Feeder Fund I; (ii) “U” and “V” as the Co-CPOs of Master Fund II would be required to provide reports for Master Fund II to themselves as the Co-CPOs of Master Fund Iand to “U” as the CPO of Feeder Fund II; (iii) “U” as the CPO of Master Fund III would be required to provide reports for Master Fund III to itself and “V” as the Co-CPOs of Master Fund II and to “W” as the CPO of Feeder Fund III; and (iv) “U” as the CPO of Master Fund IV would be required to provide reports for Master Fund IV to itself as the CPO of Master Fund III. file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/03letters/tm03-10.htm (1 of 3) [5/6/2010 5:38:28 PM]