CFTC Staff Letter 97-92 (No-Action): Relief for CPO Regarding Non-QEP Employee Investor and Ten Percent Restriction

97-92
CFTC Letter No. 97-92
November 21, 1997
Division of Trading & Markets
Re: Rule 4.7(a) -- Request for Relief from Qualified Eligible Participant Criteria Rule 4.7(a)(1)(ii)(B)(2)(xi) -- Request for Relief from Ten Percent Restriction Dear :
This is in response to your letter dated October 28, 1997, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by your facsimile dated November 13, 1997 and telephone conversations with Division staff. By this correspondence, you request on behalf of R , a registered commodity pool operator ("CPO"), that the Division permit R , in connection with its operation of two Delaware business trusts (the "Funds")1 , to treat a prospective investor as a qualified eligible participant ("QEP"), as that term is defined in Rule 4.7(a).2 In addition, you request relief on behalf of R from the restriction in Rule 4.7(a)(1)(ii)(B)(2)(xi) (the "Ten Percent Restriction") which would prevent the Funds, as pools with a non-QEP participant, from investing more than ten percent of their assets in other pools for which the CPOs thereof have claimed exemption pursuant to Rule 4.7(a) ("Rule 4.7 Exempt Pools"). Based upon the representations made in your correspondence, we understand the pertinent facts to be as follows. Pursuant to a Notice of Claim for Exemption filed under Rule 4.7(a) with respect to the Funds, interests in the Funds may be sold only to QEPs.3 However, R would like to admit A , a non-QEP, into the Funds. A is employed as the Chief Operating Officer of R and has served in this capacity since October 1995. In addition, since October 1995 A has also been employed as a Senior Vice President of U , the parent company of R . Prior to joining R , A was employed by the following investment advisory firms: as a Senior Vice President of V from March 1994 through October 1995; as the Chief Financial Officer of W from July 1987 until March 1994; and as the controller of X from June 1981 until July 1987. A , who is an accredited investor, will serve as the Tax Matters Partner of the Funds.4 A consents to his treatment as a QEP. Based upon your representations, it appears that granting the requested relief would not be file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/97letters/tm97-92.htm (1 of 3) [5/6/2010 7:36:26 PM]