CFTC Staff Letter 96-20: No-Action Relief for CPO Treating Non-QEP Investors as Qualified Eligible Participants

DIVISION OF
U.S. COMMODITY FUTURES TRADING COMMISSION Three Lafayette Centre 1155 21st Street, NW, Washington, DC Telephone: (202) 418-5430 Facsimile: (202) 418-5536 20581 1RADING & MARKETS February 27, 1996 Re: Rule 4. 7 (a) ; Request To Treat Certain Investors As Qualified Eligible Participants Dear This is in response to your letter dated January 17, 1996, as supplemented by telephone conversations with Division staff, in which you ·request <;>n behalf of "P" a registered commodity pool operator ("CPO")l.l and general partner of (the "Fund"), confj,rmation that "P" may continue to claim relief under Rule 4.7~/ with respect to its operation of the Fund despite the fact that certain investors in the Fund are not qualified eligible participants ("QEPs"), as that term is defined in the rule. In addition, you request on behalf of "P" relief from the restriction in Rule 4. 7 (a) (1) (ii) (B) (2) (xi) (the "ten percent restriction") which would prevent the Fund, as a pool with non-QEP participants, from investing more than ten percent of its assets in other pools for which the CPOs thereof have claimed relief under Rule 4. 7 ("Rule 4. 7 exempt pools") . The Fund has been operating on a "proprietary" basis since June 1994,J./ but was opened to outside, "non- proprietary" .1/ Our records indicate that "P" is also registered with the Commission as a commodity trading advisor ("CTA"). Further, our records indicate that "P's" registration as both a CPO and CTA was effective on April 3, 1995. ~/ Commission rules referred to herein are found at 17 C.F.R. Ch. I (1995), as amended Qy 60 Fed. Reg. 38,146 (July 25, 1995). J./ You use "proprietary" to indicate that all investors in the Fund were employees or officers of "P" or of its affiliated companies, "Q", a registered CTA and CPO and a listed principal of "P", or "R", which is also a listed principal of "P", or relatives of such persons. Since all investors in the Fund were affiliated with "P" or its principals, "P" did not believe that the Fund was a "pool" as that term is defined in Rule 4.10(d) (1). The Division (continued ... )