CFTC Staff Letter 99-30: No-Action Position on CPO Registration for Co-General Partner

99-30
CFTC Letter No. 99-30
July 14, 1999
No-Action
Division of Trading & Markets
Re: Section 4m(1) - - Request for CPO Registration No￾Action Position Dear :
This is in response to your letter dated December 21, 1998 to the Division of Trading and Markets ("Division") of the Commodity Futures Trading Commission ("Commission"), as supplemented by your facsimile transmission dated February 2, 1999 and telephone conversations with Division staff. By your correspondence, you request that the Division not recommend that the Commission commence any enforcement action against "X" registered investment adviser under the Investment Advisers Act of 1940, for failure to register as a commodity pool operator ("CPO") under Section 4m(1) of the Commodity Exchange Act (the "Act")1 in connection with "X's" serving as a co-general partner of the "Fund". Based upon the representations made in your correspondence, we understand the facts to be as follows. "A" is currently the sole general partner of the Fund, a Texas limited partnership. To provide certain tax benefits, "A" proposes that "X" become a co-general partner of the Fund. Currently, "X" receives payments from the Fund for investment advisory services, and these payments are treated as ordinary income. However, as a co￾general partner, "X" will be able to treat compensation received from the Fund as a partnership allocation, thereby qualifying all or a portion of such compensation for capital gains treatment rather than treatment as ordinary income.2 In support of your request, you represent that "A" is a registered CPO and the sole shareholder, president, and employee of "X". "A" will undertake all CPO responsibilities in connection with the Fund, including performing all activities subject to regulation by the Commission. Conversely, "X's" activities will be limited to providing to the Fund investment advice on investments not subject to regulation by the Commission. Additionally, you have represented that, upon becoming co-general partners, "A" and "X" will be jointly and severally liable for any violations of the Act or the Commission's regulations committed by the other in connection with the operation of the Fund. file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/99letters/tm99-30.htm (1 of 3) [5/6/2010 7:12:30 PM]