CFTC Staff Letter 88-08: No-Action Relief for Foreign Associated Persons of U.S. CTAs

COMMODITY FUTURES TRADING COMMISSION
2033 K STREET, N.W., WASHINGTON, D.C. 20581 April 8, 1988 Re: Registration of Foreign Associated Persons of a U.S . Corrm::xli ty Trading Advisor. Dear Mr. This is in response to your letter dated Fe.bruary 25, 1988, by which you sought our opinion on whether, as described ll'Ore fully below, the activ￾ities of certain foreign persons would require registration as an associated person ("AP") of a cam:rodity trading advisor· ("CTA") with the Corrmission. Based upon the representations you made in your letter we understand the facts to be as follows: "X" of which you serve as president is registered as aCTA. Another company in which you are a partner currently is involved in importing goods, ~· , minerals and chemicals, from Japan and Brazil. Through that other company you have come to make the acquaintance of various foreign businessmen, including "Y, 11 a Japanese citizen currently living in the United States but whose business takes him to Asia on a continuing basis, and "Z", a Brazilian citizen living in Sao Paulo, Brazil. "Y11 and "Z" have expressed an interest in 11 showing" "X" 's CTA Disclosure Document to their contacts in Asia and Brazil, respectively. By your letter you explain that neither 11Y11 nor "Z" would market "X"' s Disclosure Docurrent to United States citizens or to any individual residing in the United States. 1/ Rather, their activities would be conducted solely outside the United States and would be directed to non-United States citizens and residents. It appears that in showing the Disclosure Docurnent t..o their contacts Messrs. 11Y11 and 11 Z" vJould be soliciting discretionary accounts for Pollard and, as such, would be acting as an AP of aCTA as defined in Rule 1.3(aa) (4), 17 C.F.R. §1.3(aa) (4) (1987). In this regard, Section 4k(3) of the Conrrcdity Exchange Act (the "Act"), 7 u.s.c. 6k(3) (1982), generally requires each AP of a CTA. to register as such with the Commission. In the Federal Register release accompanying the adoption of regula￾tions on AP registration, the Commission a'Plained its position with respect to the registration of foreign APs of futures ccmnission merchants ( ~~ as follcvm ~ J:.j For the purpose of this letter the tenu "Uni-ted States" means the United Stat..es, its territories or possessions.

The Commission and its staff have periodically received inquiries as to whether persons who are engaged in activities which would require regis￾tration if conducted in this country are nonethe-- less required to register if they confine their activities to areas outside the United States. The Corrmission has previously indicated with respect to the APs of [FC'Ms] that it believes that, given this agency's limited resources, it is appropriate at this time to focus [the Ccmnission' s] customer protection activities upon domestic firms and upon firms soliciting or accepting orders from domestic users of the futures markets and that the protection of foreign customers of firms confining their activities to areas outside this country, its territories and possessions may best be for local authorities in such areas. Any person who solicits or accepts from witlcin, or frcm any person residing within, the United States, its territories or possessions, or who supervises any person or persons so engaged, however, ~tTould be
required to register ....
. . . Affected persons should also be a\vare that the C(Jl'[[(jj_ssion view's advertising t.o be a fonn of solicitation, so that a person who employs any fonn of adve:r:tising medium which can reasonably be expected to reach persons residing within the United States, its territories or possessions will, absent some other e..xernption, be required to register in an appropriate capacity. 48 Fed. Reg. 35248r 35261 (AUgL1St 3, 1983). We see no reason why the foregoing reasoning and relief should not be applied in the conte..'{t of dornestic erAs with respec-t to their foreign APs inasmuch as similar to the F~£ addressed in G~e Federal Register release, those persons are subject to registration, recordkeeping and other require￾rrents under the Act and the Ccm:nission' s regulations. Accordingly, based upon the representations you have made to us, the Division will not recorrunend that the C(Jl'[[(jj_ssion take any enforcernent. action fer fililure to register as an AP of a erA against "Y" or "z., . We note that this letter: dces not excuse Messrs, "Y" c.nd 11 Z" from ccmpliance with any otl1er applicable requirements contained i11 the Act or in the Ccnmission' s regulc1.tions thereunder, For exarnple, each would rerrB.in subject_ to the anti-fraud provisions of Section 4~r of the Act, 7 U.S.C. 6o, (1982) 1 and to the reporting requireruentu for. t...raders set forth in Parts 15,

18 and 19 of the Commission's re~1lations, 17 C.F.R. Parts 15, 18 and 19 (1987) • The position taken in this letter is based up_;n the representations that you have made to us, as stated above. Any different, changed or omitted facts or conditions might require us to reach different conclusions. In this connection, we request that you notify us inmediately in the event the operations and activities of "X" or its foreign APs change in any way from that as represented to us. Finally, this position is that of the Division of Trading and Markets and does not necessarily represent the views of the Commission or any other office or division of the Commission. If you have any questions about this letter, please feel free to contact Barbara S . Gold, the Division' s Assistant Chief Counsel, at 202/254-8955. Very t~-uly yours, Andrea M. Corcoran Director cc: Daniel A. Driscoll, National Futures Association