CFTC Staff Letter 10-25: Family Investment Entities Are Not Commodity Pools

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5430
Facsimile: (202) 418-5547 aradhakrishnan@cftc.gov Division of Clearing and Intermediary Oversight Ananda Radhakrishnan Director

CFTC Letter No. 10-25
Interpretation
June 25, 2010
Division of Clearing and Intermediary Oversight Re: Regulation 4.10(d)(1) – Request for interpretation stating that family investment entities are not commodity pools

Dear :
This is in response to your letter dated May 6, 2010, to the Division of Clearing and Intermediary Oversight (“Division”) of the Commodity Futures Trading Commission (“CFTC”). By your letter, you request an interpretation that “A” and “B” are not commodity pools within the meaning and intent of Regulation 4.10(d)(1)1 and therefore that the manager of “A”, “C”, is not a commodity pool operator (“CPO”). Based upon the representations made in your letter, we understand the relevant facts to be as follows. “A” is a two-member limited liability company managed by “C”, one of its members and an investment professional who will make all investment decisions on behalf of “A”. The other is a family trust established by “C”. “B” is a member-managed limited liability company, the only member of which is “A”. In addition to investments in a variety of other assets, “B” intends to trade commodity futures contracts exclusively for its own account. No person other than “C” and the immediate family members of “C” will hold any interest in “A” or “B”. “C” will neither receive compensation as manager of “A” or “B”, nor manage any other investment vehicle that trades commodity interests. Based upon our review of the representations made in your letter concerning the close family relationship among the persons involved in the request and the restrictions on their activities, and consistent with the Division’s prior practice in this area,2 we believe that neither 1 Commission regulations referred to herein are found at 17 C.F.R. Ch. 1 (2010). They can be accessed through the Commission’s website at www.cftc.gov. 2 See, e.g., CFTC Interpretive Letter 00-100 [2000-2002 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶28,420 (Nov. 1, 2000) (Virginia limited partnership consisting of immediate family members which invests family assets in commodity futures contracts is not a commodity pool).