CFTC Staff Letter 96-69: No-Action Relief for CPO Under Rule 4.7(a) with Non-QEP Investors

U.S. COMMODITY FUTURES TRADING COMMISSION Three lafayette Centre 1155 21st Street, NW, Washington, DC 20581 Telephone: (202) 418-5430 Facsimile: (202) 418-5536 D.IVISIONOF TRADING & MARKETS Dear September 30, 1996 Re: Request to Treat Investors as Qualified Eligible Participants under Rule 4.7 This is in response to your letter dated July 31, 1996, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ( 11 Commission"), as supplemented by telephone conversations with Division staff. By your correspon￾dence you request relief from th~ qualified eligible participant ("QEP") criteria of Rule 4.7(a)1.1 on behalf of 11 U", a regis￾tered commodity pool operator ("CPO") and commodity trading advisor ("CTA"), with regard to the "Fund", a commodity pool operated by "U" that invests primarily in United States securi￾ties. Based upon your representations, we understand the relevant facts to be as follows. The F~nd has been operated pursuant to the criteria of Rule 4.12(b) .2.1 "U" now seeks relief under Rule 4.7, as it wishes to cause the Fund to invest more than ten percent of its assets in commodity interests and still be exempt from certain disclosure and monthly reporting requirements of
Part 4. With the exception of certain existing and prospective
non-QEP investors ("Non-QEP Investors"), all limited partners of the Fund are QEPs. You represent that the Non-QEP Investors are sophisticated investors "fully capable of evaluating and assuming the risks of an investment in the Fund" as QEPs without the full disclosure and reporting safeguards of the Commodity Exchange Act 1./ Commission rules referred to herein are found at 17 C.F.R. Ch. I ( 19 9 6) . 2./ Interests in the Fund have been privately offered and sold under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D thereunder_ Pursuant to a Claim of Exemption under Rule 4.12 filed on January 2, 1996, the Fund may not invest more than ten percent of its -assets in commodity interests.