CFTC Staff Letter 97-60: No-Action Relief for CPO Registration and QEP Criteria for Funds I, II, and III

97-60
CFTC Letter No. 97-60
July 1, 1997
Division of Trading & Markets
Re: Request for Relief from CPO Registration Requirement of Section 4m(1) of the Act; Request for Relief from the QEP Criteria of Rule 4.7(a) Dear :
This is in response to your letter dated May 22, 1997 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by your facsimile dated June 18, 1997 and by telephone conversations with Division staff. By your correspondence, you request that the Division not recommend that the Commission take any enforcement action against: (1) "N" for failure to comply with the commodity pool operator ("CPO") registration requirements of Section 4m(1) of the Commodity Exchange Act ("Act")1 in connection with serving as the sole general partner of Fund I and Fund II, both of which are organized and operated in the United States ("U.S.") and for which relief has been claimed pursuant to Rule 4.7(a)2; and (2) "O", a registered commodity pool operator, for failure to comply with the "qualified eligible participant" ("QEP") criteria of Rule 4.7(a) in connection with serving as the CPO of Fund I, Fund II, and Fund III, which is not organized and operated in the U.S. Based upon the representations made in your correspondence, we understand the relevant facts to be as follows. "O" will serve as the commodity trading advisor ("CTA") to Funds I and II, each of which is a Delaware limited partnership, and you request that it also be deemed to be the CPO of these funds. "O" also will serve as the CTA to Fund III, a Cayman Islands company, which will be operated as a Rule 4.7(a) exempt pool.3 "P" and "Q" (the "Directors"), each of whom is a U.S. resident, will serve as members of the board of directors of Fund III.4 These Directors comprise a minority of the members of the board of directors of Fund III.5 "P" and "Q" are listed as principals of "O". In addition, "P" is registered as an associated person ("AP") of "O". Funds I, II and III invest in a variety of securities and other financial instruments issued by U.S. and foreign issuers and they may trade commodity interests. The current minimum investment for Funds I, II and III is $1,000,000, 5,000,000, and $1,000,000, respectively, subject to the discretion of each Fund's general partner or board of directors.6 Since "N" will be serving as the general partner of Funds I and II, it would, absent relief, be required to be registered as a CPO in connection with its operation of each such fund.7 You file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/97letters/tm97-60.htm (1 of 5) [5/6/2010 7:36:32 PM]