CFTC Staff Letter 96-64: No-Action Relief for CPO to Treat Non-QEP Investors as Qualified Eligible Participants

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5430
Facsimile: (202) 418-5536
DIVISION OF
1RADING & MARKETS
Dear:
August 12, 1996
Re: Request to Treat Investors as Qualified Eligible Par￾ticipants under Rule 4.7 This is in response to your letter dated July 3, 1996, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by telephone conversations with Division staff. By your correspon￾dence, you request relief from the qualified eligible participant ( "QEP") criteria of Rule 4. 7 (a) 1/ on behalf of "N", a registered commodity pool operator ("CPO"), with regard to "the Fund", a commodity pool operated by "N" that invests primarily in mort￾gage-backed securities. Based upon your representations, we understand the relevant facts to be as follows. The Fund has been operated pursuant to the criteria of Rule 4.7(a) .'J.7 "N" now wishes to admit certain non-QEP investors ("Non-QEP Investors") into the Fund. All of these Non-QEP Investors are members of "N" or employees of "0", a registered commodity trading advisor that is owned by the persons who own "N". Specifically, the Non-QEP Investors are:
(1) "A", a portfolio manager for "0", who is registered as an associated person ( "AP") of both "N" and "0". "A", who has a master's degree in business, formerly struc￾tured and traded agency collateralized mortgage obliga￾tions ("CMOs") at "P". (2) "B", a certified public accountant, who is the chief financial officer of "0" and is responsible for super￾1/ Commission rules referred to herein are found at 17 C.F.R. Ch . I ( 19 9 6 ) . a/ Pursuant to a Notice of Claim for Exemption under Rule 4.7, filed by "N" on August 1, 1995, interests in the Fund may be sold only to QEPs. As of May 31, 1996, the Fund had approximately $142 million in net assets.