CFTC Staff Letter 99-49 (No-Action): CPO permitted to treat a trust as a QEP where the grantor was the CFO of a company owned by a founding limited partner of the Rule 4.7 exempt pool

99-49
CFTC Letter No. 99-49
November 30, 1999
Exemption
Division of Trading & Markets
Re: Rule 4.7(a); Request to Treat A as a Qualified Eligible Participant Dear :
This is in response to your letter dated March 4, 1999, to the Division of Trading and Markets ( Division ) of the Commodity Futures Trading Commission ( the Commission ), as supplemented by your letter dated June 7, 1999, your facsimile dated June 10, 1999 and telephone conversations with Division staff. By your correspondence, you request on behalf of X , the commodity pool operator ( CPO ) of the Pool , an exemption from Rule 4.7 (a) 1 so that X may treat the Trust as if it satisfies the qualified eligible participant ( QEP ) criteria of the rule. The Facts Based upon the representations you have made in your correspondence, we understand the facts to be as follows. The Pool is a common investment fund that was formed in 1991. Virtually all of its assets are invested in securities. However, the Pool does engage in commodity interest trading to hedge its securities portfolio and, to a limited degree, to conduct spread strategies in commodity interest contracts. In fact, since the inception of the Pool, less than 0.5% of the Pool s total assets have been committed to establish commodity interest trading positions. X is the CPO of the Pool, and it operates the Pool pursuant to a Claim for Exemption under Rule 4.7(a).2 Accordingly, X is permitted to accept only persons who are QEPs as participants in the Pool. X now would like to accept the Trust as a participant in the Pool. The Trust is not a QEP however, because it does not meet the requirements of Rule 4.7(a)(1)(ii)(B)(2)(xi), the QEP criteria applicable to trusts, that it has total assets in excess of $5 million and its participation in the Pool is directed by a QEP. In support of your request, you explain that the Trust is a living trust established by A , who is its sole trustee and beneficiary. The Trust owns securities and other investments file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/99letters/tm99-49.htm (1 of 4) [5/6/2010 7:14:24 PM]