CFTC Staff Letter 94-72: No-Action Relief from Rule 4.7 Ten Percent Limitation

DIVISION OF
TRADING AND MARKETS
Dear
COMMODITY FUTURES TRADING COMMISSION 2033 K Street, NW, Washington, DC 20581 (202) 254-8955 (202) 254- 8010 Facsimile May 6 1 1994 Re: Request for Relief from Rule 4.7 (i '·/ • / I ~ This is in response to your letter dated April 14 1 1994 1 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commigsion ("CFTC") 1 in which you request certain relief from Rule 4.71./ on behalf of "V" 1 a registered commodi￾ty pool operator ("CPO") in connection with its operation of "W"/ "X" and "Y" (collectively/ the "Funds''). Specifically/ on behalf of "V" and for the benefit of "V" and the CPOs of commodity pools in which the Funds invest or may invest (the "Investee CPOs") I you request a waiver from the ten percent limitation ("Ten Percent Limitation") on investments in Rule 4.7 exempt pools set forth in Rule 4. 7 (a) (1) (ii) (B) (xi) for pools that are "qualified eligible participants" ("QEPs") but in which some participants are not QEPs to permit the Funds 1 each of which is a pool that is a QEP but has some participants who are not QEPS 1 to invest more than ten percent of the fair market of their respective assets in other commodity pools that are Rule 4.7 exempt pools ("Rule 4.7 Investee Pools"). Based upon the representations made in your letter/ we understand the pertinent facts to b~ as follows. Each Fund is what is commonly referred to as a "fund of funds~" Each Fund 1 considered alone 1 would qualify as a QEP since: (1) it satisfies the portfolio requirement of Rule 4.7(a) (1) (ii) (B); (2) it has total assets in excess of $5 1 000 1 000; (3) it was not formed for the purpose of participating in a Rule 4.7 pool; and (4) its partic:;ipation in any Rule 4.7 Investee Pool is directed by "V 11 1 a QEP.2.1 The individual investors in each of the Funds are all "accredited investors" under Regulation D of the Securities Act 1./ Commission rules referred to herein are found at 17 C.P.R. Ch . I ( 19 9 3 ) . 2./ See Rule 4.7(a) (1) (ii) (A) (3) 1 which includes within the QEP definition certain registered CPOs.