CFTC Staff Letter 98-76: No-Action Request for Commodity Trading Advisor and Introducing Broker Registration Denied

98-76
CFTC Letter No. 98-76
November 18, 1998
Division of Trading & Markets
November 18, 1998
Re: Sections 4m(1) and 4d(1) – Request for an Interpretation or No-Action Position Regarding Commodity Trading Advisor and Introducing Broker Registration Dear :
This is in response to your letter dated June 23, 1998, to the Division of Trading and Markets (“Division”) of the Commodity Futures Trading Commission (“Commission”), as supplemented by your letter dated September 30, 1998 and telephone conversations with Division staff. By this correspondence, as supplemented, you request, on behalf of “X”, that the Division issue an interpretative letter regarding “X’s” obligation to register as a commodity trading advisor (“CTA”) and introducing broker (“IB”) under Sections 4m(1) and 4d(1) of the Commodity Exchange Act (“Act”) 1 , respectively, or, in the alternative, take a “no-action” position with respect to “X’s” obligation to register as a CTA and IB, in connection with its customer referral service (“Service”). To date, you have given us only a very cursory description of your clients’ proposed activities. However, based upon the representations made in your correspondence, we understand the facts to be as follows. “X” is an Illinois corporation with its principal place of business located in Illinois. “A”, a registered associated person (“AP”) of a futures commission merchant (“FCM”), is the sole principal and stockholder of “X”. “X” proposes to operate the Service in which members of the public seeking the services of a registered AP can be referred to an AP that advertises an expertise in the particular markets in which the customer intends to invest. Referrals will be made utilizing a database constructed and maintained by “X”. “X” intends to construct a database using information provided by registered APs who agree to advertise through “X” and pay an annual $500 fee to “X”. The Service will work as follows: (1) customers contact “X” to request the names of APs located in their geographical area; (2) if a customer decides to use “X’s” Service, the customer pays a one-time fee of $40 to “X”, provides “X” with some basic personal information such as name, address and phone number, and instructs “X” as to the type of trading he or she is interested in and the services he or she is seeking from an AP; (3) “X” searches its database in order to match the customer’s preferences with APs offering similar services; (4) if matches are found, “X” then forwards to the customer an informational sheet discussing each matched AP’s market expertise, limited biographical and employment histories, registration status and contact information and, in addition, informs each AP that his or her name has been given out to a prospective customer by forwarding the customer’s name and contact information to the AP; and (5) finally, either file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/98letters/tm98-76.htm (1 of 4) [5/6/2010 7:32:37 PM]