CFTC Staff Letter 99-27: Exemption from QEP Criteria for Commodity Pool Participants

99-27
CFTC Letter No. 99-27
July 14, 1999
No-Action; Exemption
Division of Trading & Markets
Re: Request for Exemption from the QEP Criteria of Rule 4.7 Dear :
This is in response to your letter dated February 24, 1998 to the Division of Trading and Markets (the "Division") of the Commodity Futures Trading Commission (the "Commission"), as supplemented by your letters dated March 30, 1998, September 24, 1998, January 29, 1999 and May 24, 1999, your facsimile transmission dated February 12, 1999 and telephone conversations with Division staff. By your correspondence you request an exemption from the "qualified eligible participant" ("QEP") criteria of Rule 4.71 such that "X", a registered commodity pool operator ("CPO"), may claim the relief available under Rule 4.7 in connection with its operation of the "Partnership". Based upon the representations made in your correspondence, we understand the facts to be as follows. "X" serves as the general partner and registered CPO of the Partnership, which is a limited partnership that invests primarily in a diversified portfolio of large capitalization common stocks that are publicly traded and registered under the Securities Act of 1933 ("'33 Act") and the Securities Exchange Act of 1934.2 As of December 31, 1998, "X" had a net equity of $13,072,132 and the Partnership had capital of $88,395,802. All participants in the Partnership are "accredited investors" as that term is defined under Regulation D of the '33 Act. In addition, as of December 31, 1998, 93.6 percent of the capital of the participants in the Partnership was attributed to persons who are QEPs. "X" would now like to have the Partnership trade commodity interests and would like to operate the Partnership pursuant to Rule 4.7. However, as noted above, not all of the participants in the Partnership are QEPs. In support of your request you represent the following:
As a prerequisite to investment in commodity interests by the Partnership, the limited partners of the Partnership will approve an amendment to the Partnership's limited partnership agreement and consent to the creation of a file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/99letters/tm99-27.htm (1 of 5) [5/6/2010 7:12:32 PM]