CFTC Staff Letter 94-14: Division of Trading and Markets No-Action Relief for Rule 4.7 Exempt Pools

DIVISION OF
TRADING AND MARKETS
COMMODITY FUTURES TRADING COMMISSION 2033 K Street, NW, Washington, DC 20581 (202) 254- 8955 (202) 254- 8010 Facsimile December 28, 1993 Re: Request for Relief Under Rule 4.7 Dear This is in response .to your letter dated December 7, 1993, as supplemented by telephone conversations with Division staff, in which you request confirmation that Messrs. "A", "B", "C" and "D'' (collectively, the "General Partners") may claim relief under Rule 4.71/ in connection with their operation of "V" and "W" collectively the ''Pools" despite the fact that "X", a participant in the Pools, is not a qualified eligible participant {"QEP"), as defined in the rule. The General Partners also would like to admit as participants in the Pools "E" and "F", two individuals who are not QEPs. You also request confirmation that "X", "E" and "F" (the "Non-QEPs") may be treated as QEPs of the Pools for the purposes of Rule 4.7. In addition, you request a waiver from the ten percent limitation ("ten percent limitation") on investment in Rule 4.7 exempt pools set forth in Rule 4.7(a) (1) (ii) (B) (xi) for pools that are QEPs but in which some
part;Lcipants are not QEPs to permit "Y" and "Z", two partnerships
that are QEPs but in which some participants are not QEPs, to make or maintain an investment of more than ten percent of each of "Y"'s and "Z"'s assets in each of the Pools. (a) Representations Based upon the representations made in your letter, as supplemented, we understand the pertinent facts to be as follows. Each of the four General Partners is a general partner of the law firm (the "Firm'') and has applied for CPO registration in connec￾tion with his operation of the Pools. Each of the Pools is an investment partnership in which all but three of the limited partners are clients of the Firm, family of those clients or entities related to those clients. The other three limited partners are individuals who are business associates of the General Partners. "V" is an operative partnership. "W" will begin operating on January 1, 1994. Neither has traded commodity 11 Commission rules referred to herein are found at 17 C.F.R. Ch. I (1993).