CFTC Staff Letter 97-12: No-Action Relief for Variable Annuity CPO Registration and Rule 4.7 Waiver

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 March 7, 1997 Re: Section 4m(1) -- Request for Relief from Registration as a Commodity Pool Operator; Rule 4.7 -- Request to Treat the Diversified Income Subaccount as a Rule 4.7 Exempt Pool and Waiver of the Ten Percent Restriction This is in response to your letter dated November 26, 1996, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by your letter dated January 10, 1997 and telephone conversations with Division staff. By your correspondence, you request certain relief on behalf of "V", a mutual life insurance company, in connection with the offering of a variable annuity contract (the "Contract") to certain employees of "W", a privately-held corporation engaged in business consulting for Fortune 500-type companies. Specifically, you request that the Contract's Diversified Income Subacc,ount not be deemed to be a commodity "pool" under Rule
4.10 (d) (1) .1./ In the event that the Division is unwilling to
treat the Diversified Income Subaccount as outside the definition of "pool" under Rule 4.10(d) (1),.you request that the Division take a no-action position with respect to "V" for failure to register as a commodity pool operator ("CPO") '1.1nder Section 4m(1) of the Commodity Exchange Act (the "Act") .'J/ You further request that "X" be allowed to claim relief on behalf of the Diversified Income Subaccount from certain requirements pursuant to Rule 4.7 and that "X" and the CPO of any Rule 4.7 exempt commodity pool in which the Diversified Income Subaccount invests be exempt from complying with Rule 4.7(a) (1) (ii) (B) (2) (xi) (the "Ten Percent Restriction") 1./ As is explained below, the Diversified Income Subaccount is
part of a separate account offered by "V". However, because it
will not be operated pursuant to the provisions of Rule 4.5(c), an exclusion from the CPO definition pursuant to Rule 4. 5 is not available to "V". Commission-rules referred to herein are found at 17 C.F.R. Ch. I (1996). 'J/ The Act is found at 7 U.S.C. §§ 1 et seq. (1994). '1{.·1: