CFTC Staff Letter 17-41: Exemption from Annual Report Filing for Commodity Pool Operator

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5000 eflaherty@cftc.gov
Division of Swap Dealer and
Intermediary Oversight
Eileen T. Flaherty
Director
CFTC Letter No. 17-41
Exemption
July 10, 2017
Division of Swap Dealer and Intermediary Oversight Re: Relief from the annual report requirement of Commission regulation 4.7(b) for “A” with respect to certain commodity pools Dear :
This is in response to your letter dated May 12, 2017 to the Division of Swap Dealer and Intermediary Oversight (“Division”) of the Commodity Futures Trading Commission (“Commission”). You request on behalf of “A”, the commodity pool operator (“CPO”) of certain commodity pools, relief from the requirement in Commission regulation 4.7(b)(3) to file with the National Futures Association (“NFA”) and distribute to participants an annual report for fiscal year 2016 and an annual report for fiscal year 2017 within 90 calendar days after the permanent cessation of trading, which occurred on March 31, 2017. Instead, you propose to file with NFA and distribute to participants reports for the applicable commodity pools that cover the period of time from January 1, 2016 to March 31, 2017 that otherwise satisfies the requirements of Commission regulation 4.7(b)(3). Based upon the representations made in your letter and other telephone and email correspondence (“Correspondence”), we understand the facts to be as follows. You state that “A”, which is a wholly-owned subsidiary of “B” (together with all entities in which it has a controlling financial interest, “C”), is the CPO for “D” (“Master Fund”) and “E” (“Feeder Fund”, and, together with the Master Fund, “Pools”), both of which were operated pursuant to Commission regulation 4.7. You state that the Pools permanently ceased trading on March 31,
2017. As of March 31, 2017, you state that the net asset value of the Master Fund was $ and the
net asset value of the Feeder Fund was $. You further state that, between the end of fiscal year 2016 and the permanent cessation of trading, the Feeder Fund had no participants and the Master Fund was owned by entities in the “C” and one outside participant. You have provided to the Division a copy of written waivers from all Pool participants permitting a report that covers the period from January 1, 2016 to March 31, 2017 in lieu of two separate annual reports for fiscal years 2016 and 2017. Additionally, you state that you have received an extension of time to file and distribute the annual reports for fiscal year 2016 for the Pools by June 29, 2017 from NFA. Furthermore, pursuant to your ongoing discussions with the Division, you also state that you have already filed with NFA and distributed to all participants such reports for the Pools as of June 29, 2017.

“A”
Commission regulation 4.7(b)(3) provides a CPO an exemption from filing and distributing an annual report in accordance with Commission regulation 4.22(c) with respect to an exempt pool it operates in accordance with Commission regulation 4.7; provided, that the CPO files with NFA and distributes to each participant an annual report for the exempt pool that complies with Commission regulation 4.7(b)(3) within 90 calendar days after the end of the exempt pool’s fiscal year or the permanent cessation of trading, whichever is earlier. The principal purpose of financial reporting required by Commission regulation 4.7(b)(3) is to ensure that pool participants receive accurate, fair, and timely information on the overall trading performance and financial condition of the pool. Based upon the representations made in the Correspondence, the Division believes that granting relief is neither contrary to the purpose of Commission regulation 4.7(b)(3) nor to public interest. Accordingly, pursuant to the authority delegated by Commission regulations
140.93 and 4.12(a), “A” is hereby granted relief from the requirement in Commission regulation
4.7(b)(3) to file with NFA and distribute to participants an annual report for fiscal year 2016 and an annual report for fiscal year 2017 within 90 calendar days after the Pools’ permanent cessation of trading; provided, that “A” files with NFA and distributes to participants a report for each Pool pursuant to Commission regulation 4.7(b)(3) that covers the period of time from January 1, 2016 to March 31, 2017 that otherwise satisfies the requirements of Commission regulations.1 The Division notes that “A” has stated that it has already filed and distributed such reports as of June 29, 2017 pursuant to its ongoing discussions with the Division. The relief issued by this letter does not excuse persons relying on it from compliance with any other applicable requirements contained in the Commodity Exchange Act or in the Commission regulations issued thereunder. Further, this letter, and the relief contained herein, is based upon the representations made to the Division. Any different, changed, or omitted material facts or circumstances might render this letter void. Finally, the Division retains the authority to condition further, modify, suspend, terminate, or otherwise restrict the terms of the relief provided herein in its discretion.

1 The Division notes that “A” does not need to distribute the Master Fund’s report to the Feeder Fund, because the latter has no ownership interests in the former. The Division also notes that “A” does not need to distribute the Master Fund’s report to the participants in the Master Fund that are part of the “C”, which is consistent with the Division’s historical interpretation of Commission regulation 4.22(c)(8). However, “A” is required to distribute the Master Fund’s report to its outside participant.

“A”
Should you have any questions, please do not hesitate to contact Amanda Olear, Associate Director, at 202-418-5283, or Chang Jung, Special Counsel, at 202-418-5202. Very truly yours, Eileen T. Flaherty Director Division of Swap Dealer and Intermediary Oversight