Exemptive Letters

05-01 ; Commission Rule 4.22; Exemption
The Division of Clearing and Intermediary Oversight issued an exemption to certain commodity pool operators (CPO) from the requirement of Rule 4.22(j) that the oath or affirmation in commodity pool annual reports filed with a registered futures association contain a manual signature. National Futures Association (NFA), a registered futures association which the Commission has authorized to receive and review pool annual reports filed in accordance with Commission Rule 4.22(C), had requested the exemption so that CPOs may participate in NFA’s voluntary pilot program for electronic filing of reports, commencing with reports for the year ending December 31, 2004.

05-12 ; Rule 4.13(a)(2); Exemption
The Division of Clearing and Intermediary Oversight denied a request by a CPO for relief from the requirement of Rule 4.13(a)(2) that, for a CPO to be eligible to claim the CPO registration exemption available under that rule, none of the pools that the CPO operates may have more than 15 participants at any time.

05-15 ; Section 4m(1); Exemption
The Division of Clearing and Intermediary Oversight granted a request by a CPO for relief from the CPO registration requirement of Section 4m(1) of the Act with respect to a pool in which seven of the pool’s thirty-four participants are non-accredited investor. The relief was based upon representation made with respect to the nature of the non-accredited investors and representations that the pool would trade commodity interest solely for bona fide hedging purposes. The relief was further subject to the condition that the aggregate initial margin and premiums the pool commits to establish its commodity interest positions will not exceed one percent of the liquidation value of the pool’s portfolio.

05-17 ; Rule 166.4; Exemption
The Division of Clearing and Intermediary Oversight denied a request by a registered CPO/CTA that it be permitted to operate its branch office, a wholly-owned subsidiary of the CPO/CTA, as a separately incorporated entity. The Division denied the request because, in its view, allowing separately incorporated branch offices would frustrate a core purpose of Rule 166.4 – i.e., that Commission registrants be accountable for the acts and omissions of their branch offices. The Division further noted that this position is consistent with prior positions taken both by the Commission and the Division’s predecessor, the Division of Trading and Markets.

05-18 ; Sections 4d and 4k(s); Exemption
Because of conflicting information provided to it, the Division of Clearing and Intermediary Oversight declined to consider a request for confirmation that registration is not required for an individual to receive ongoing payments in connection with past solicitation activity on behalf of various funds. The Division further advised that, in the event the interested parties are unable to agree as to the facts bearing on the registration question, they may elect to resolve their dispute in a court or other competent fact finding forum.

05-19 ; Rules 4.21, 4.22 and 4.23; Exemption
The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 rules to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those rules.

05-22 ; Section 4m(1); Exemption
The Division of Clearing and Intermediary Oversight issued a CTA registration “no-action” position to a third party trading system developer where (1) the third party trading system developer’s clients execute a “letter of direction” authorizing an IB to trade those clients’ accounts pursuant to the third party trading system developer’s trading signals; (2) the IB shares common principals with the third party trading system developer; and (3) the IB does not provide services to its customers other than trading their accounts pursuant to the third party trading system developer’s trading signals, subject to the conditions that the IB: (1) registers with the Commission as a CTA; and (2) provides a Disclosure Document, as specified by Part 4 of the Commission’s regulations, to each of the third party trading system developer’s clients that have executed a “letter of direction.”

06-03 ; Regulations 4.24 and 4.25; Exemption
The commodity pool operator (CPO) of a pool that was offered solely to employees of the CPO that participate in the CPO’s 401(k) plan requested exemption from including in a pool’s disclosure document the past performance of pools and accounts other than the offered pool. Where a pool has operated for three years or longer, and during that time at least seventy-five percent of the contributions to the pool have been made by persons unaffiliated with the pool operator, trading advisor, and their principals, the only required performance is that of the offered pool. Although this pool had operated for more than three years, it could not meet the seventy-five percent threshold due to the limitation on participation to the CPO’s employees. The purpose of the threshold for outside participation is “to assure that the three-year performance history would not represent the performance of a significantly dissimilar trading vehicle.” In this case, the composition of pool participants would not appear to cause the performance of the offered pool to be dissimilar in light of its being offered only to prospective participants who are similarly situated to the existing participants – i.e., employees of the CPO. DCIO provided the requested exemption on the condition that the CPO provides notice to its employees that performance disclosures for its other pools and accounts are available to any employee upon request.

06-04 ; Regulation 4.23; Exemption
The Division of Clearing and Intermediary Oversight (DCIO) granted a request from a commodity trading advisor (CTA) for exemption regarding composite presentation of the past performance of accounts traded by a trading principal of the CTA in his capacity as an associated person (AP) of a futures commission merchant (FCM). The accounts are not traded according to the CTA’s offered program and may be traded differently from each other, leading to material differences in their rates of return that would preclude their presentation in a single composite performance capsule. However, presenting the performance in additional separate performance capsules, perhaps as many as one capsule per account, would result in numerous performance capsules, overwhelming prospective clients with excessive amounts of data on accounts and a trading program that bears little, if any, relationship to the CTA’s trading program. In order to provide more meaningful disclosure to prospective CTA clients, DCIO determined that the CTA could present the principal’s accounts in an expanded capsule format that includes the range of data for each capsule element.