CFTC Staff Letter 95-106: No-Action Position on Treating Certain Foreign Clients as Qualified Eligible Clients

U.S. COMMODITY FUTURES TRADING COMMISSION Three Lafayette Centre 1155 21st Street, NW, Washington, DC 20581 Telephone: (202) 418-5430 Facsimile: (202) 418-5536 95r- /O(c DIVISION OF 1RADING & MARKETS Dear November 9, 1995 Re: Rule 4.7 -- Request for Relief To Treat Certain Foreign Persons as Qualified Eligible Clients This is in response to your letter dated September 5, 1995 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), in which you request on behalf of "X" that the Division confirm that "X" may treat certain categories of foreign clients/ as qualified eligible clients ( "QECs") under Rule 4. 7 (b) .1. As is explained below, you believe that these foreign entities ("the Foreign Clients"), but for their foreign organization, are comparable in natufe and purpose to domestic entities that qualify for QEC status.a 1./ Unless otherwise noted, Commission rules referred are found at 17 C.F.R. Ch. I (1995) (as amended by 60 38,146 at 38,182 (July 25, 1995)). to herein Fed. Reg. a! For the purposes of this letter the term "foreign entity" is defined as:
(1) A partnership, corporation or other entity, other than an entity organized principally for passive investment, organized under the laws of a foreign jurisdiction and which has its principal places of business in a foreign jurisdictioni {2) An estate or trust the income of which is not subject to United States income tax regardless of sourcei (3) An entity organized principally for passive investment such as a pool, investment company or other similar entity, provided that units of participation in the entity held by United States persons represent in the aggregate less than 10 percent of the beneficial interest in the entity and that such entity was not formed principally for the purpose of facilitating investment by (continued ... )