CFTC Staff Letter 94-22: No-Action Relief for Offshore Fund Director CPO Registration

COMMODITY FUTURES TRADING COMMISSION 2033 K Street, NW, Washington, DC 20581 (202) 254 - 8955 (202) 254- 8010 Facsimile DIVISION OF TRADING AND MARKETS January 24, 1994 Re: Request for CPO Registration No-Action Position Dear This is in response to your letter dated October 28, 1993, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission") , as supplemented by telephone conversations and by additional correspondence dated November 18, 1993, and December 13, 1993. By your letter you request, on behalf of your client, "A", that the Division not recommend that the Commission take any enforcement action against "A" for failure to register as a commodity pool operator ( 11 CPO") in connection with his serving as a member of the board of directors of an offshore commodity pool, as explained more fully below. Based upon the representations contained in your letter, as supplemented, we understand that the facts are as follows. "U", an offshore investment banking corporation, is in the process of forming an offshore commodity pool to be organized as a corporation in and under the laws of (the "Fund"). The Fund is being created for the purpose of providing an investment alternative to clients of (the "Bank"), a bank and an affiliate of "U". "U" and the Bank have'arranged for and are paying for the organization of the Fund. The Fund will not be registered with the Securities and Exchange Commission as an investment company under the Investment Company Act of 1940 or under the Securities Act of 1933.1/ 1/ We note that in furtherance of the antifraud provisions of
Section 4Q of the Commodity Exchange Act, the Division has issued
an Advisory concerning material information that must be displayed with respect to "guaranteed" commodity pools, such as the Fund appears to be. See Division of Trading and Markets Advisory No. 86-1, [1986-87 Transfer Binder] Comm. Fut. L. Rep. (CCH) ~ 23,035 (April 25, 1986). In particular, the Division stated that:
[A]ny statements that suggest that the risks of futures trading are decreased by reason of [a guarantee] struc￾ture have a high potential to mislead or deceive and could result in serious violations of the . . anti￾fraud provisions. (continued ... )