RegAlert1993-12-27 | CFTC Staff Letter 94-13Added · Updated
CFTC Staff Letter 94-13 (No-Action): Treatment of Non-QEP Trust as QEP
The Division of Trading and Markets permits a registered commodity pool operator to treat a trust as a Qualified Eligible Participant under Rule 4.7, despite the trust having only $700,000 in assets. This no-action relief applies on the condition that the trust's sole trustee and beneficiary, who is a Qualified Eligible Participant with approximately $7 million in assets, consents to the treatment. The Division will not recommend enforcement action against the operator for failing to comply with Rule 4.7 if the operator files the required notice of claim for exemption. This relief is specific to the operator's operation of the pool and does not excuse compliance with other applicable requirements under the Commodity Exchange Act or Commission regulations.
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DIVISION OF
TRADING AND MARKETS
COMMODITY FUTURES TRADING COMMISSION 2033 K Street, NW, Washington, DC 20581 (202) 254-8955 (202) 254-8010 Facsimile December 27, 1993 Re: Request to Treat Trust as a Qualified Eligible Participant Under Rule 4.7 Dear This is in response to your letter dated December 10, 1993, as supplemented by telephone conversations with Division staff, in which you request confirmation that "X", a registered commodity pool operator ("CPO"), may claim relief under Rule 4. 71/ in connection with his operation of the "Pool" despite the fact that the "Trust••, a participant in the Pool, is not a qualified eligible participant ("QEP"), as defined in the rule. You also request confirmation that the Trust may be treated as a QEP of the Pool for the purposes of Rule 4.7. Based upon the representations made in your letter, as supplemented, we understand the pertinent facts to be as follows. The Trust, an irrevocable trust with approximately $700,000 in assets, has been a participant in the Pool since the pool was formyd in 1988. "B" is the sole trustee and beneficiary of the trust. "B" is a QEP with an investment portfolio of approximately $7 million in assets, virtually all of which are invested in the Pool . ~I Relief under Rule 4.7 is available with respect to pools that, among other things, have only QEPs as participants. Pursuant to Rule 4.7 a trust is a QEP if: (1) it meets the portfolio requirement set forth in Rule 4.7(a) (1) (ii) (B)(~); and (2) it has total assets in excess of $5 million, is not formed for the specific purpose of investing in a Rule 4.7 exempt pool and its participation in the Rule 4.7 exempt pool is directed by a QEP (Rule 4. 7 (a) (1) (ii) (B) (xi). Because the Trust has $700,000 in assets, it meets neither the portfolio requirement of Rule
1.1 Commission rules referred to herein are found at 17 C.F.R.
Ch . I ( 19 9 3 ) .
~I In managing these investments and the investments for the Trust, "B" employs an experienced investment advisory firm.
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Source: Commodity Futures Trading Commission — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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