CFTC Staff Letter 97-67: No-Action Relief for CPOs Admitting Non-QEP Trusts to Rule 4.7(a) Pools

97-67
CFTC Letter No. 97-67
August 1, 1997
Division of Trading & Markets
Re: Rule 4.7(a)(1)(ii)(B)(2)(xi)-- Request to Treat Trust as a QEP and Request for Relief from the Ten Percent Restriction Dear :
This is in response to your letter dated July 7, 1997 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 correspondence, you request on behalf of A , B , C and D , each of whom is registered with the Commission as a commodity pool operator ( CPO ) and is a general partner (collectively, the General Partners ) of the "Fund", confirmation that the General Partners may continue to claim relief pursuant to Rule 4.7(a)1 in the event that they admit as a participant in the Fund a trust which is not a qualified eligible participant ( QEP ) 2 as that term is defined in Rule 4.7(a)(1)(ii)(B)(2)(xi). In addition, you request that the General Partners may claim relief from the restriction in Rule 4.7(a)(1)(ii)(B)(2)(xi) which would otherwise prevent them, as the CPOs of a Rule 4.7(a) pool in which not all participants are QEPs, from investing more than ten percent of the fair market value of the Fund's assets in other pools for which the CPOs thereof have claimed relief pursuant to Rule 4.7(a) (the "Rule 4.7(a) Exempt Pools"). Based upon the representations made in your correspondence, we understand the pertinent facts to be as follows. The General Partners wish to permit the Trust , which is not a QEP because it has less than $5,000,000 in assets, to invest more than ten percent of the fair market value of its assets in the Pool. In support of your request, you represent that: (1) the Trust was created in 1997 for a term of fifteen years by the will of E , who was a QEP; (2) the sole trustee of the Trust is F , who is E's widow and a QEP; (3) F is responsible for making the investment decisions for the Trust; (4) the E and F Foundation, which is the sole income recipient for fifteen years, is a QEP; and (5) upon the Trust's termination, the remaining principal of the Trust is payable in equal shares to E's grandchildren. Based upon the foregoing, it appears that granting the requested relief would not be contrary to the public interest or the purposes of Rule 4.7(a). Accordingly, subject to the condition set forth below, the Division will not recommend that the Commission take enforcement action against: (1) the General Partners solely on the basis that they continue to claim relief from Rule 4.7(a) in connection with their operation of the Fund, notwithstanding the admission of the Trust as a participant in the Fund and treatment of the Trust as a QEP; and (2) the General Partners or the CPO of any Rule 4.7 (a) Exempt Pool in which the Fund is or becomes a participant based solely upon the Fund's file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/97letters/tm97-67.htm (1 of 2) [5/6/2010 7:36:39 PM]