CFTC Staff Letter 98-20: No-Action Position on CPO Registration and Rule 4.7(a) Exemptions

98-20
CFTC Letter No. 98-20
March 24, 1998
Division of Trading & Markets
Re: Section 4m(1) of the Commodity Exchange Act -- Request for no￾action position regarding CPO registration where an affiliated registered CPO performs the pool's CPO functions. Rule 4.7(a) -- Request for exemption to permit participation in a Rule 4.7(a) exempt pool by a non-QEP trust established for the benefit of the mother of an existing participant. Rule 4.7(a) -- Request for interpretation that persons meeting the "knowledgeable employee" definition in Investment Company Act Rule 3c￾5 be deemed to be qualified eligible participants ("QEPs") for purposes of Commission Rule 4.7(a). Dear :
This is in response to your letter dated September 3, 1997, to the Division of Trading and Markets (the "Division") of the Commodity Futures Trading Commission (the "Commission"), as supplemented by your facsimile transmissions dated October 1, 1997, October 14, 1997, October 22, 1997, November 5, 1997, November 14, 1997 and March 10, 1998 and by telephone conversations with Division staff. By your correspondence, you request that the Division agree not to recommend enforcement action: (1) if "S" does not register as a commodity pool operator ("CPO") in connection with serving as the general partner of "U", a pool as to which exemption has been claimed under Commission Rule 4.7(a) (the "Pool");1 (2) if "T", a registered CPO under common ownership with "S", serves as the Pool's CPO; (3) if "T" admits as a participant in the Pool , (the "Trust"), a trust established for the benefit of "A" (the mother of "B", an existing participant in the Pool), notwithstanding that the Trust is not a qualified eligible participant ("QEP") as defined in Rule 4.7(a); and (4) if "T" continues to claim exemption under Rule 4.7(a) with respect to the Pool, notwithstanding future investment in the Pool of persons who are not QEPs, but who are "knowledgeable employees" as defined in Rule 3c-5 under the Investment Company Act of 1940 (the "ICA").2 Based upon the representations contained in your correspondence, we understand the pertinent facts to be as follows. The respective general partners of "S" and "T" are limited partnerships of which the sole general partner is "V". The Pool commenced operations in file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/98letters/tm98-20.htm (1 of 4) [5/6/2010 7:30:17 PM]