CFTC Staff Letter 95-88: Limited Partners Treated as Qualified Eligible Participants

U.S. COMMODITY FUTURES TRADING COMMISSION Three Lafayette Centre 1155 21st Street, NW, Washington, DC 20581 Telephone: (202) 418-5430 Facsimik: (202) 418-5536 DIVISION OF TRADING & MARKETS Dear October 10, 1995 Re: Qualified Eligible Participants for Purposes of Rule 4.7 This is in response to your letter dated August 17, 1995, to the Division of Trading and Markets ("Division") of the Conunodity Futures Trading Conunission ("Conunission"), as supplemented by your letter dated August 29, 1995, and telephone conversations with Division staff, in which you request that "A" and "B" be treat~d as qualified eligible participants ("QEPs") under Rule 4.7.~/ The decision to treat "A" and "B" as QEPs is necessary to allow "U", of which "A" and "B" are limited partners, to claim relief under Rule 4.7. Based upon the representations made in your correspondence, we understand the pertinent facts to be as follows. "U" is a private investment partnership that principally engages in long term equity acquisitions or securities investments and invests its cash pending such acquisitions or investments in securities. "U" intends to invest a small portion of its assets as initial margin deposits and premiums in futures and options on futures for hedging or risk management purposes. The general partners of "U" are "C" and "D". "C" and "Dn are both registered as conunodi￾ty pool operators. "A" and "B" are limited partners and Managing Directors of "U". Additionally, "A" and "B" are employed by "U" to "target" merger and acquisition opportunities. All decisions concerning the activity "U" should take with respect to such opportunities are, however, made by "C" and "D". In support of your request to treat "A" and "B" as QEPs, you state that they are accredited investors within the meaning of Rule 501(a) under the Securities Act of 1933. Furthermore, "A" and "B" have consented to treatment as QEPs. ~/ Commission rules referred to herein are found at 17 C.F.R. Ch. I (1995), amended by 60 Fed. Reg. 38146 (July 25, 1995).