CFTC Staff Letter 99-34: Exemption for CPO to Treat Non-QEP Employee as QEP

99-34
CFTC Letter No. 99-34
August 16, 1999
Exemption
Division of Trading & Markets
Re: Rule 4.7(a) --Request for Exemptive Relief to Treat an Employee of a CPO as a QEP under Rule 4.7(a) and Confirmation of the Availability of Prior Relief Dear :
This is in response to your letter dated March 17, 1999 to the Division of Trading and Markets ( Division ) of the Commodity Futures Trading Commission ( Commission ). By your correspondence, you request an exemption from Rule 4.7(a) on behalf of T , a registered commodity pool operator ( CPO ) and the CPO of The Directors Fund Limited Partnership ( Pool ), so that T may treat A , an employee of T , as though he satisfies the qualified eligible participant ( QEP ) criteria of Rule 4.7(a) in connection with T s sale to A of Class B units of participation in the Fund.1 In addition, you request that the Division confirm that T may continue to rely on the relief from the QEP criteria of Rule 4.7 provided by prior letters issued to T and its predecessors2 on August 12, 1993, May 2, 1996, August 13, 1996 and June 24, 1998 ( Prior Letters ). Based upon the representations made in your correspondence, we understand the facts to be as follows. The Pool currently has two outstanding classes of units: Class A and Class B. Class A units may be sold to Non-QEPs, but Class B units may be sold only to QEPs. The two classes of units have different fee structures, but all Pool participants share pro rata in Pool s profits and losses. By letter dated August 12, 1993, the Division granted V an exemption from the Rule 4.7 requirement that, for Rule 4.7 relief to be available, all participants in a pool must be QEPs. The August 12, 1993 letter therefore allowed V to file notices of claim for exemption pursuant to Rule 4.7 in connection with the sale of only Class B, rather than all, units of participation in the Fund. Thus, Class B units now may be held by: (1) QEPs; and (2) non-QEPs for whom V has received exemptive relief from the Division such that V may treat the non-QEPs as though they were QEPs. By letters dated May 2, 1996 and August 13, 1996, the Division granted U exemptive relief in connection with the sale of Class B units pursuant to Rule 4.7 to certain high￾file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/99letters/tm99-34.htm (1 of 3) [5/6/2010 7:12:18 PM]