CFTC Staff Letter 99-55: Exemption for CPO to Treat Managing Member as Qualified Eligible Participant

99-55
CFTC Letter No. 99-55
November 30, 1999
Exemption
Division of Trading & Markets
Re: Rule 4.7(a) - Request for Exemptive Relief so that a CPO May Treat Its Managing Member as a QEP. Dear :
This is in response to your letter dated August 12, 1999, to the Division of Trading and Markets ( Division ) of the Commodity Futures Trading Commission ( Commission ), as supplemented by your letter dated September 1, 1999 and telephone conversations with Division staff. By your correspondence, you request on behalf of X , a registered commodity pool operator ( CPO ) and commodity trading advisor ( CTA ), that the Division permit X , in connection with its operation of the Fund , to treat the managing member of X , A , as if he satisfies the qualified eligible participant ( QEP ) criteria of Rule 4.7(a). 1 Based upon the representations made in your correspondence, we understand the facts to be as follows. X serves as the CPO of the Fund. Pursuant to a Notice of Claim for Exemption filed under Rule 4.7(a), interests in the Fund may be sold only to QEPs.2 X now seeks an exemption to permit A , who is not a QEP, to participate in the Fund. A is the managing member of X and, as such, he is responsible for the management of the Fund s assets. Also, A is listed as a principal and associated person ( AP ) of X . From June 1983 until his employment with X , A held various positions in the financial services industry. For example, from September 1991 to January 1993, A was a Director at Y . Although he does not qualify as a QEP, A is an accredited investor as that term is defined in Rule 501(a)(6) under the Securities Act of 1933.3 Finally, in support of your request for relief, you represent that A consents to treatment as a QEP for purposes of his investment in the Fund. The purpose of Rule 4.7 is to reduc[e] unnecessary regulatory prescriptions for CPOs offering pool participations only to persons who, based upon the qualifying criteria in the rule, do not appear to need the full protections offered by the Part 4 framework.4 As noted file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/99letters/tm99-55.htm (1 of 3) [5/6/2010 7:14:25 PM]