CFTC Staff Letter 98-32: Confirmation of Exemptive Relief for Registered CPO J

98-32
CFTC Letter No. 98-32
April 28, 1998
Division of Trading & Markets
Re: Request for Exemptive Relief from Rules 4.21, 4.22 (a) and (b), 4.25, and 4.26 Dear :
This is in response to your letter, dated March 10, 1998, to the Division of Trading and Markets of the Commodity Futures Trading Commission ("Commission"), as supplemented by facsimiles dated March 23, 1998, March 24, 1998, April 7, 1998 and telephone conversations with Division staff. By your correspondence, you request a continuation of the exemptive relief from the requirements of Rules 4.21, 4.22(a) and (b), 4.25 and 4.26 ("Rules")1 that the Division previously issued to "J", a registered commodity pool operator ("CPO"),2 with regard to ("Insider Fund"), a commodity pool operated by "J", notwithstanding the addition of certain additional participants in the Insider Fund. Based upon the representations made in your correspondence, we understand the relevant facts concerning the Insider Fund to be as follows. The Insider Fund began trading as of January 1, 1996 and was formed for the purpose of permitting investment by the principals and employees of "J" and its affiliate, "K",3 and certain members of their immediate families. By letters dated November 4, 1996, March 24, 1997, June 2, 1997, October 29, 1997, and February 27, 1998, the Division granted "J's" requests for exemption from compliance with the Rules in connection with the Insider Fund.4 You now seek confirmation that "J" may continue to claim relief from the Rules if it admits six additional investors into the Insider Fund (the "Proposed Participants"). You assert that each of the Proposed Participants is an investment manager for "K" who makes trading decisions for one or more of the subaccounts through which the Insider Fund invests in securities, and is a "sophisticated investor fully capable of evaluating the risks of an investment in the Insider Fund without the full disclosure and reporting safeguards of the Commodity Exchange Act ['Act']5 and the Commission's regulations." You further state that each of the Proposed Participants will have access to the Insider Fund's books and records on an ongoing basis and has received or will receive: (1) a copy of the Insider Fund's Limited Partnership Agreement and Private Placement Memorandum; (2) quarterly financial statements; and (3) audited annual financial statements. Finally, you represent that "J" will obtain the consent of each Proposed Participant to be treated as a QEP. The Proposed Participants are the following:
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