CFTC Staff Letter 94-15 (No-Action): Relief from Rule 4.7 Ten Percent Limitation for CPO X

DIVISION OF
TRADING AND MARKETS
COMMODITY FUTURES TRADING COMMISSION 2033 K Street, NW, Washington, DC 20581 (202) 254 - 8955 (202) 254-8010 Facsimile December 10, 1993 Re: Request for Relief from Rule 4.7 Dear This is in response to your letter dated October 19, 1993, as supplemented by telephone conversations with Division staff, in which, on behalf of "X", a registered commodity pool operator ("CPO"), you request relief from certain requirements of Rule 4.7!1 in connection with the operation of the "Pool". Based upon the representations made in your letter, as supplemented, we understand the pertinent facts to be as follows. "X" is the CPO of the Pool. The Pool follows a multi-manager, multi-strategy investment approach, allocating its assets among numerous investment ·managers operating through managed accounts and collective investment vehicles, including commodity pools. The Pool currently has approximately $228 million in assets allocated to approximately sixty managers. Many of the Pool's investment managers have elected to operate Rule 4.7 exempt pools. As a result, almost ten percent of ''the Pool's assets are currently invested in Rule 4. 7 exempt pools. Furthermore, you expect more of the Pool's existing managers and many of the managers "X" may wish to engage as managers for the Pool to claim Rule 4.7 relief. The Pool is a qualified eligible participant ("QEP"), as defined in Rule 4.7(a) {1) (ii) (B) (xi), but not all participants in the Pool are QEPs .. Rule 4.7(a) (1) (ii) (B) (xi) ("ten percent limitation") provides, among other things, that a pool may not invest more than ten percent of its assets in Rule 4.7 exempt pools unless all participants in the pool are QEPs. As of October 1, 1993, 27 of the Pool's 97 participants were non-QEPs. You represent, however, that all of the Pool's non￾QEPs, except for one assignee of an interest in the Pool, were Pool participants prior to January 1, 1992, that is, prior to the !/ Commission rules referred to herein are found at 17 C.F.R. Ch . I ( 19 9 3 ) .