CFTC Staff Letter 97-95: No-Action Relief for Employee Partnership Under Rule 4.7

97-95
CFTC Letter No. 97-95
September 17, 1997
Division of Trading & Markets
Re: Request to Treat Employee Partnership as a QEP under Rule 4.7(a), for Relief from the Ten Percent Limitation of Rule 4.7(a)(1)(ii)(B)(2)(xi), and for Relief from Providing Quarterly Reports; Request to Treat Employee Partnership as a QEC under Rule 4.7(b) Where Not All Participants are QEPs Dear :
This is in response to your letter dated August 12, 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 Y , a registered commodity pool operator ( CPO ), that the Division not recommend that the Commission take any enforcement action against (1) Y if it claims relief from Rule 4.7(a) with respect to the operation of the "Fund" notwithstanding participation in the Fund of certain persons which are not "qualified eligible participants" ("QEPs") as defined in Rule 4.7(a); (2) Y if it does not comply with the restriction in Rule 4.7(a)(1)(ii)(B)(2)(xi)(the "Ten Percent Limitation") on the amount of Fund assets that may be invested in pools for which the CPOs thereof have claimed relief pursuant to Rule 4.7(a)1 (the "Rule 4.7(a) Exempt Pools"); and (3) the CPOs of the Rule 4.7(a) Exempt Pools in which the Fund becomes a participant (the "Investee Pools") if the CPOs thereof do not comply with the Ten Percent Limitation with respect to the Fund's participation in their pools; and (4) Y if it does not comply with the requirement in Rule 4.7(a)(2)(ii) to provide quarterly reports to Fund participants. You also request that Y or an affiliated, registered CPO be able to claim all of the aforementioned relief in connection with future funds for which it or the affiliated, registered CPO will serve as the CPO and for which the same category of investors, as further described herein, would be eligible to participate. In addition, you request on behalf of Z , 2 a registered commodity trading advisor ("CTA"), or other CTAs retained to trade Fund assets, that the Division not recommend that the Commission take any enforcement action against Z or the other CTAs if they treat the Fund as a "qualified eligible client" ("QEC") as defined in Rule 4.7(b). The Fund, Y and Z are affiliated with V . 3 Based upon the representations made in your correspondence, we understand the pertinent facts to be as follows. The Fund will be operated as an employees' investment pool and will be either organized file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/97letters/tm97-95.htm (1 of 4) [5/6/2010 7:36:27 PM]