CFTC Staff Letter 07-10: No-Action on Per-Trade Compensation to CTA Firms of IB Associated Persons

U.S. COMMODITY FUTURES TRADING COMMISSION
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Facsimile: (202) 418-5547 aradhakrishnan@cftc.gov Division of Clearing and Intermediary Oversight CFTC letter No. 07-10 June 25, 2007 No-Action Division of Clearing and Intermediary Oversight Re: Section 4d(a)(1) of the Act Request for relief from requirement to register as an IB where commissions payable to an AP of the IB are paid to a registered CTA owned and operated by the AP Dear :
This is in response to the letter dated January 26, 2007 from “A”, President of “B”, to the Division of Clearing and Intermediary Oversight (the “Division”) of the Commodity Futures Trading Commission (the “Commission”), as supplemented by your statements (provided to the Division March 22, 2007), in which you acknowledge the representations in “A’s” letter and authorize him to submit this request on your behalf, and by telephone conversations and e-mail communications between Division staff and “B” (the “correspondence”). By the correspondence, you request confirmation that the Division will not recommend that the Commission commence any enforcement action against you or your commodity trading advisory firms, based solely upon the failure of those firms to register as introducing brokers (“IBs”) under the circumstances described below. Based upon the representations made in the correspondence, we understand the relevant facts to be as follows. “B” is registered with the Commission as a guaranteed IB. “C” and “D” are registered as associated persons (“APs”) of “B”. “C” owns and operates “E”. “D” and his wife own and operate “F”. “E” and “F” are each registered as a commodity trading advisor (“CTA” or, collectively “The CTAs”) and each of “C” and “D” is listed as a principal of his respective advisory firm. The CTAs are in the business of providing marketing, merchandising advice and assistance to agricultural producer customers. Neither CTA exercises discretion or control over customer accounts. For accounting, tax and recordkeeping purposes, “C” and “D” desire to have the per-trade compensation that becomes payable to them from time to time, as APs of “B”, paid to their Ananda Radhakrishnan Director