CFTC Staff Letter 98-54: Exemptive Relief for CPO to Treat Employees as Qualified Eligible Participants

98-54
CFTC Letter No. 98-54
June 24, 1998
Division of Trading & Markets
Re: Rule 4.7(a) -- Request for Exemptive Relief to Treat Certain Employees of Registered CPO as Qualified Eligible Participants. Dear :
This is in response to your letter dated January 12, 1998, to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by telephone conversations with Division staff, wherein you request exemptive relief on behalf of "X", a registered commodity pool operator ("CPO"), to permit two employees of "X" to be treated as if they satisfy the qualified eligible participant ("QEP") criteria of Rule 4.7(a)1 in connection with "X's" operation of the "Fund". Based upon the representations made in your correspondence, we understand the relevant facts to be as follows. "X" serves as the general partner and CPO of the Fund. The Fund invests in a variety of financial instruments, including stocks, bonds, currencies, futures and options. Pursuant to a Notice of Exemption filed in accordance with Rule 4.7(a), all investors in the Fund are QEPs.2 "X" now seeks relief to permit it to accept investments in the Fund from two employees of "X" who are not QEPs (the "Proposed Non-QEP Participants").3 The Proposed Non-QEP Participants are:
(1) "A." "A" has been employed by "X" and "Y", an affiliated company,4 since 1991. "A" currently serves as a senior trader specializing in emerging market countries and option strategies. Prior to joining "X" and "Y", "A" was employed by "Z" where he performed international equity research and engaged in portfolio management. "A" received a B.A. from the University of "T", received the Chartered Financial Analyst designation in 1991 and has passed the Series 3 examination. "A" is registered as an associated person ("AP") of "X" and "Y". "A" is also an accredited investor under Rule 501 of Regulation D5 under the Securities Act of 1933, as amended. (2) "B." "B" has been employed by "X" and "Y" since 1993. "A" specializes in European fixed income and currency trading. Prior to joining "X", "B" had eight years of experience trading derivatives and currency with "U" (in the United States and Japan). "B" earned a B.S. from the State University of file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/98letters/tm98-54.htm (1 of 3) [5/6/2010 7:32:20 PM]