CFTC Staff Letter 92-06: Interim No-Action Relief for CTAs Pending Rule 4.7 Adoption

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DIVISION OF
TRADING AND MARKETS
COMMODITY FUTURES TRADING COMMISSION 2033 K STREET, N.W., WASHINGTON, D.C. 20581 (202) 264--8955 (202) 254-3534 FACSIMILE April 20, 1992 Re: -- Request for Interim Relief Pending Final Action on Proposed Rule 4.7 Dear This is in response to your letter dated March 11, 1992, wherein, on behalf of , you request relief from certain requirements contained in Part 4 of the Commission's regulati£?s, pending final action by the Commis￾sion on proposed Rule 4.7- • Based upon the representations made in your letter, we understand the pertinent facts to be as follows. was registered as a commodity trading advisor ("CTA") on October 11,
1991. As of the date of your letter, has not offered
commodity interest advisory or management services. intends to offer these services to institutioQal and other large clients who meet the standards set forth for "qualified eligible clients" in proposed Rule 4.7 and commodity pools operated by registered commodity pool operators ("CPOs") who may be granted interim relief under proposed Rule 4.7 (collectively the "Rule 4.7 Clients"). Pending final action on proposed Rule 4.7, you request interim relief on behalf of from the disclosure requirements of ~u~' 4.31 and from certain recordkeeping require￾ments· of Rule 4.32- as provided in paragraphs (c)(l) (i) and (c)(l)(ii) of proposed Rule 4.7. In connection with your re￾quest, you have provided the Division with the representations required by proposed Rule 4.7(c)(2) for aCTA claiming relief thereunder. Based on the foregoing, the Division will not recommend that the Commission take any enforcement action against for 1/ Proposed 3148 (January 1992. Rule 4.7 was published for comment in 57 Fed. Reg. 28, 1992). The comment period closed.on March 30,. :6.1 Commission rules referred to herein are found at 17 C.F.R. Ch. I (1991).

. . . failure to comply with Rules 4.31 and 4.32 if complies with the requirements of proposed Rule 4.7(c) with respect to its Rule
4.7 Clients. This relief is, however, subject to the condition
that upon final action by the Commission on proposed Rule 4.7, will submit to the Division the notice of claim for relief required by Rule 4.7 and will comply with the terms and condi￾tions of that notice and the provisions of Rule 4.7 as adopted, which will be deemed to supersede the relief granted herein. That notice must be filed within 30 days following the effective date of Rule 4.7. In addition, if has provided advice under proposed Rule 4.7 to clients or pools that do not meet the criteria set forth in adopted Rule 4.7 for qualified eligible client~ and pools or if Rule 4.7 is not adopted or the relief set forth in the proposed rule is for any reason unavailable under the rule as adopted, will: (1) promptly provide the Divi￾sion and the National Futures Association with the names of such clients and pools and the CPOs thereof; (2) promptly commence making and keeping the records required by Rule 4.32 with respect to these clients and pools; (3) provide such clients and the CPOs of such pools with the Disclosure Document required by Rule 4.31 within forty-five days of the date of either announcement by the Commission that it has determined not to adopt Rule 4.7 or publication in the Federal Register of the release announcing the adoption of Rule 4.7; and (4) provide such clients and the CPOs of such pools the right to terminate their advisory agreement with for a period of thirty days following their receipt of .the Disclosure Document required by Rule 4.31. We note that this letter does not excuse from any other applicable requirements contained in the Commodity Exchange Act (the "Act") or the Commission's regulations issued thereunder. For example, it remains subject to the anti-fraud provisions of
Section 4Q of the Act, 7 u.s.c. S 6Q (1988), the reporting
requirements for traders set forth in Parts 15, 18 and 19 of the regulations, and to all other provisions of Part 4. This letter is based on the representations that have been made to us and is subject to compliance with the conditions set forth above. Any different, changed or omitted facts or circum￾stances might require us to reach a different conclusion. In this connection, we request that you notify us immediately ·in the event that 's operations change from those as represented to us. Further, this letter represents the position of the DiVision of Trading and Markets only. It does not necessarily reflect the views of the Commission or of any other office or division of the Commission.

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If you have any questions concerning this correspondence, please feel free to contact me or Susan C. Ervin, the Division's Chief Counsel, at (202) 254-8955.