CFTC Staff Letter 94-88: Non-Action for CPO Treating Accredited Non-QEPs 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 August 30, 1994 Re: Rule 4.7 -- Request to Maintain Non-QEPs in Exempt Pool Dear This is in response to your letters dated July 26, 1994 artd August 17, 1994, to the Division of Trading and Markets (the "Division") of the Commodity Futures Trading Commission (the "Commission") . By your letters, as supplemented by telephone conversqtions with Division staff, you request relief under Rule 4.7(a)l./ on behalf of "X", a registered commodity pool operator ("CPO"), in connection with "X's" operation of (the "Securities Group") and (the "Investment Group") (collectively, the "Partner￾ships"). Your request for relief relates to the participation in the Partnerships of persons who are not "qualified eligible participants" ( "QEPs") as that term is defined in Rule 4.7(a) (1) (ii). Based upon the representations made in your letters, as supplemented, we understand the relevant facts to be as follows. "X" is a limited partnership whose general partner is "Y" and whose sole limited partner is "A". '.'A" is also the sole shareholder of "Y". "X" is the CPO and sole general partner of the Securities Group and the Investment Group. The Securities Group was formed in December 1992 to invest primarily in securities and financial instruments but it is also authorized to trade commodity futures cont~acts and options on commodity futures contracts. The Securities Group presently has seven limited partners and total assets of approximately $75 million. The Investment Group, originally formed in September 1989 and reorganized in December 1992, also invests principally in securities and trades in commodity futures contracts for hedging purposes. The Investment 1./ Commission rules referred to herein are found at 17 C.F.R. Ch. I (1993).