CFTC Staff Letter 94-56: No-Action for Treating Non-QEP Founders as QEPs

DIVISION OF
TRADING AND MARKETS
COMMODITY FUTURES TRADING COMMISSION 2033 K Street, NW, Washington, DC 20581 (202) 254- 8955 (202) 254-8010 Facsimile May 6, 1994 Re: Request for Relief from Certain Requirements of Rules 4.7(a) and (b) Dear This is in response to your letter dated March 25, 1994 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by telephone conversations with Division staff, in which you request that the Division permit "X", a registered commodity pool opera￾tor ("CPO") and commodity trading advisor ("CTA"), to file notices of claims for relief under Rule 4.7(a) and (b) in connec￾tion with a commodity pool (the "Pool") it intends to operate. Your request for relief relates to the participation in the Pool of two persons who are not "qualified eligible/participants" ("QEPs") as that term is defined in Rule 4.7.1. Based upon the representations made in your letter, as supplemented, we understand the facts to.be as follows. "X" is in the process of forming the Pool. Each of the Pool's investors will be a QEP, except for "A", the president of "X", and ""B, the vice president of "X". With respect to these two non-QEP investors your letter states:
As two of the founders of "X" [in 1991], "A" and "B" have been directly and personally involved in all of "X"'s investment manage￾1./ Rule 4.14(a) (4) provides an exemption from CT~ registration for a person who is registered as a CPO and whose commodity interest trading advice is directed solely to and for the sole use of the pools for which it is registered. Inasmuch as 11 X11 intends to have clients in addition to the Pool and for which it will not serve as the CPO if the client is a commodity pool, "X" has not sought to claim the relief from CTA registration in Rule 4.14(a) (4). Commission rules referred to herein are found at 17 C.F.R. Ch. I (1993).