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No-Action Letters
Date
No-Action Letters
01/12/1998
98-05 
;
Section 4d(2) of the Act; Commission Rules 1.25 and 1.31;
No-Action
In CFTC Interpretative Letter No. 96-78 (f26,822), enforcement action was not recommended against FCM clearing members of a contract market based solely upon their investment of customer funds in a program involving the establishment of two limited liability company accounts that would allow clearing members to direct that customer funds and, separately, proprietary funds deposited with the clearing organization be placed in the limited liability company accounts, subject to various conditions. Further relief is now granted to permit the use of repurchase agreement (repos) to manage redemptions of investments in the program, subject to the condition that the repos in question are unwound no later than three business days after they are entered into and continued compliance with the conditions set forth in CFTC Interpretative Letter No. 96-78. The repos would be entered into by the program managers only if that was considered to be an economically superior alternative to selling securities outright and only to fund liquidity needs so that participating clearing members can satisfy settlement variation requirements in cash.
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Section 4d(2) of the Act; Commission Rules 1.25 and 1.31;
No-Action
In CFTC Interpretative Letter No. 96-78 (f26,822), enforcement action was not recommended against FCM clearing members of a contract market based solely upon their investment of customer funds in a program involving the establishment of two limited liability company accounts that would allow clearing members to direct that customer funds and, separately, proprietary funds deposited with the clearing organization be placed in the limited liability company accounts, subject to various conditions. Further relief is now granted to permit the use of repurchase agreement (repos) to manage redemptions of investments in the program, subject to the condition that the repos in question are unwound no later than three business days after they are entered into and continued compliance with the conditions set forth in CFTC Interpretative Letter No. 96-78. The repos would be entered into by the program managers only if that was considered to be an economically superior alternative to selling securities outright and only to fund liquidity needs so that participating clearing members can satisfy settlement variation requirements in cash.
03/24/1998
98-20 ;
Section 4m(1), Rule 4.7(a), Rule 4.7(a);
No-Action; Exemption
The Division of Trading and Markets took a "no-action" position with respect to the failure of the general partner of a commodity pool to register as a CPO where an affiliated registered CPO conducted all of the pool's CPO functions and the affiliated CPO acknowledged joint and several liability with the pool's general partner for any violation of the Act or Commission rules. The Division also granted the affiliated CPO an exemption permitting it to treat as a QEP a trust for the benefit of the mother of a QEP participant in the pool, where the trust and the beneficiary were both accredited investors, the beneficiary's son was also the trustee of the trust and the trust's investment in the pool would represent no more than 15% of the beneficiary's net assets. Finally, the Division took the position that notice and comment rulemaking is the appropriate means to evaluate whether persons who are "knowledgeable employees," as defined by Investment Company Act Rule 3c-5, may be treated as QEPs without meeting the specific criteria in Commission Rule 4.7(a). The Division invited the requesters to file a petition for rulemaking and stated that in the interim requests would be considered on a case-by-case basis.
;
Section 4m(1), Rule 4.7(a), Rule 4.7(a);
No-Action; Exemption
The Division of Trading and Markets took a "no-action" position with respect to the failure of the general partner of a commodity pool to register as a CPO where an affiliated registered CPO conducted all of the pool's CPO functions and the affiliated CPO acknowledged joint and several liability with the pool's general partner for any violation of the Act or Commission rules. The Division also granted the affiliated CPO an exemption permitting it to treat as a QEP a trust for the benefit of the mother of a QEP participant in the pool, where the trust and the beneficiary were both accredited investors, the beneficiary's son was also the trustee of the trust and the trust's investment in the pool would represent no more than 15% of the beneficiary's net assets. Finally, the Division took the position that notice and comment rulemaking is the appropriate means to evaluate whether persons who are "knowledgeable employees," as defined by Investment Company Act Rule 3c-5, may be treated as QEPs without meeting the specific criteria in Commission Rule 4.7(a). The Division invited the requesters to file a petition for rulemaking and stated that in the interim requests would be considered on a case-by-case basis.
03/31/1998
98-25 ;
4m(l);
No-Action
The Division of Trading and Markets denied a request for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act by a general partner of two securities investment limited partnerships where the request was based on representations that the amount used by the partnerships for commodity interest trading would not exceed 2% of the fair market value of the partnership's assets, that all commodity interest trading would be for bona fide hedging purposes, and that any commodity interest trading would be solely incidental to the securities trading of the partnership. The Division stated that there currently is no exception to the obligation to register as a commodity pool operator based on the fact that a partnership makes only de minimis investments in commodity interests and took the position that the notice and comment rulemaking process, rather than a request for a no-action position, is the appropriate method by which to evaluate whether such an exception would be consistent with the Act and in the public interest. The requestor was invited to file a petition for rulemaking.
;
4m(l);
No-Action
The Division of Trading and Markets denied a request for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act by a general partner of two securities investment limited partnerships where the request was based on representations that the amount used by the partnerships for commodity interest trading would not exceed 2% of the fair market value of the partnership's assets, that all commodity interest trading would be for bona fide hedging purposes, and that any commodity interest trading would be solely incidental to the securities trading of the partnership. The Division stated that there currently is no exception to the obligation to register as a commodity pool operator based on the fact that a partnership makes only de minimis investments in commodity interests and took the position that the notice and comment rulemaking process, rather than a request for a no-action position, is the appropriate method by which to evaluate whether such an exception would be consistent with the Act and in the public interest. The requestor was invited to file a petition for rulemaking.
04/07/1998
98-26 ;
4m(l);
No-Action
The Division of Trading and Markets denied a request for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act by the managing member of a limited liability company (LLC) where the request was based primarily on the representation that the amount of the LLC' s cash reserves used by the LLC for commodity interest trading would be modest. The Division stated that there currently is no exception to the obligation to register as a commodity pool operator based on the fact that a partnership makes only de minim investments, in commodity interests and took the position that the notice and comment rulemaking process, rather than a request for a no-action, is the appropriate method by which to evaluate whether such an exception would be consistent with the Act and in the public interest. The requestor was invited to file a petition for rulemaking.
;
4m(l);
No-Action
The Division of Trading and Markets denied a request for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act by the managing member of a limited liability company (LLC) where the request was based primarily on the representation that the amount of the LLC' s cash reserves used by the LLC for commodity interest trading would be modest. The Division stated that there currently is no exception to the obligation to register as a commodity pool operator based on the fact that a partnership makes only de minim investments, in commodity interests and took the position that the notice and comment rulemaking process, rather than a request for a no-action, is the appropriate method by which to evaluate whether such an exception would be consistent with the Act and in the public interest. The requestor was invited to file a petition for rulemaking.
04/01/1998
98-29 ;
Rules 3.1, 4.36;
No-Action
The Division of Trading and Markets denied the request of a CTA for no-action relief from listing sixteen of its employees as principals or for relief from amending its Disclosure Document each time a personnel change occurs with regard to one of its employees who qualifies as a principal. The Division noted that under the current Commission rules, it was unable to grant the CTA's request and further stated that the appropriate procedure for addressing the issues raised by its request would be through notice and comment rulemaking. The Division advised the CTA that it may recommend that the Commission initiate a rulemaking in the near future to address which employees in organizations like the CTA's should be considered "principals" for listing purposes.
;
Rules 3.1, 4.36;
No-Action
The Division of Trading and Markets denied the request of a CTA for no-action relief from listing sixteen of its employees as principals or for relief from amending its Disclosure Document each time a personnel change occurs with regard to one of its employees who qualifies as a principal. The Division noted that under the current Commission rules, it was unable to grant the CTA's request and further stated that the appropriate procedure for addressing the issues raised by its request would be through notice and comment rulemaking. The Division advised the CTA that it may recommend that the Commission initiate a rulemaking in the near future to address which employees in organizations like the CTA's should be considered "principals" for listing purposes.
05/05/1998
98-33 ;
Rule 4d(l) of the Act - No-action Position Concerning Receipt of Finder's Fees by Unregistered IB;
No-Action
The Division of Trading and Markets issued a no-action position to an unregistered IB and its sole principal to enable the IB to continue to receive finder's fees from a CTA to whom the IB had introduced clients when it was registered as an IB. The IB was no longer acting as an IB and its sole business activities was limited to accepting fees from its former CTA-clients. The principal was registered as an AP of one of these former CTA-clients. The Division previously had permitted the unregistered IB and its principal to receive these fees for a period of two years. The IB requested a continuation of this position for an additional one year. The no-action position was issued on condition that the IB's principal continue to be registered during the period the IB receives fees, the IB continue to comply with the previous letter granting no-action relief, and all fees would cease to be paid to the IB after the additional year.
;
Rule 4d(l) of the Act - No-action Position Concerning Receipt of Finder's Fees by Unregistered IB;
No-Action
The Division of Trading and Markets issued a no-action position to an unregistered IB and its sole principal to enable the IB to continue to receive finder's fees from a CTA to whom the IB had introduced clients when it was registered as an IB. The IB was no longer acting as an IB and its sole business activities was limited to accepting fees from its former CTA-clients. The principal was registered as an AP of one of these former CTA-clients. The Division previously had permitted the unregistered IB and its principal to receive these fees for a period of two years. The IB requested a continuation of this position for an additional one year. The no-action position was issued on condition that the IB's principal continue to be registered during the period the IB receives fees, the IB continue to comply with the previous letter granting no-action relief, and all fees would cease to be paid to the IB after the additional year.
06/03/1998
98-41 ;
Section 2(a);
No-Action
No-action letter allowing the OM Stockholm AB futures contract based on the OMX Stock Index to be offered or sold in the United States.
;
Section 2(a);
No-Action
No-action letter allowing the OM Stockholm AB futures contract based on the OMX Stock Index to be offered or sold in the United States.
06/03/1998
98-42 ;
4(a), 4(b), and 5 of the Commodity Exchange Act;
No-Action
The Division of Trading and Markets (Division) issued a follow-up letter to the Deutsche Terminbosre (DTB) regarding the status of the Division's February 29, 1996, no-action letter permitting the placement of DTB computer terminals in the U.S. This new letter was issued in light of the pending merger between the DTB and the Swiss Options and Financial Futures Exchange (SOFFEX) to create a futures exchange organization called Eurex. The Division confirmed that eleven firms pending DTB membership, which were identified by the DTB to the Division, will be eligible to rely on the 1996 no-action position with respect to DTB terminal placement once they become DTB members and otherwise satisfy the conditions set forth in the 1996 letter. Other new DTB members, including current or future SOFFEX members, are not eligible to take advantage of the 1996 no-action position with respect to DTB terminal placement unless they receive separate written approval from the Division. The Division also clarified that the 1996 letter by its terms applies only to the execution by DTB members of transactions involving DTB futures and options products, and it does not extend to SOFFEX products or to new DTB/Eurex products unless the DTB receives separate written approval from the Division.
;
4(a), 4(b), and 5 of the Commodity Exchange Act;
No-Action
The Division of Trading and Markets (Division) issued a follow-up letter to the Deutsche Terminbosre (DTB) regarding the status of the Division's February 29, 1996, no-action letter permitting the placement of DTB computer terminals in the U.S. This new letter was issued in light of the pending merger between the DTB and the Swiss Options and Financial Futures Exchange (SOFFEX) to create a futures exchange organization called Eurex. The Division confirmed that eleven firms pending DTB membership, which were identified by the DTB to the Division, will be eligible to rely on the 1996 no-action position with respect to DTB terminal placement once they become DTB members and otherwise satisfy the conditions set forth in the 1996 letter. Other new DTB members, including current or future SOFFEX members, are not eligible to take advantage of the 1996 no-action position with respect to DTB terminal placement unless they receive separate written approval from the Division. The Division also clarified that the 1996 letter by its terms applies only to the execution by DTB members of transactions involving DTB futures and options products, and it does not extend to SOFFEX products or to new DTB/Eurex products unless the DTB receives separate written approval from the Division.
06/12/1998
98-57 ;
Section 4d of the Act;
No-Action
The Division of Trading and Markets declined to take a no-action position as requested by an introducing broker (IB), concerning the ability of the IB to split commissions with grain elevators, based upon the futures and options trades placed by the grain elevators' customers, without the grain elevators first registering as IBs. The IB which made the request was wholly-owned by a farmers cooperative and the grain elevators in question, although separately incorporated entities, were members of the cooperative. The IB was willing to establish separate branch offices at the elevators and have at least one employee at each elevator register as an associated person of the IB. Nevertheless, the Division expressed concern about the ability of the IB properly to supervise futures-related activities at the proposed branch offices and concluded that it would not be an unwarranted hardship for each grain elevator to register as an IB.
;
Section 4d of the Act;
No-Action
The Division of Trading and Markets declined to take a no-action position as requested by an introducing broker (IB), concerning the ability of the IB to split commissions with grain elevators, based upon the futures and options trades placed by the grain elevators' customers, without the grain elevators first registering as IBs. The IB which made the request was wholly-owned by a farmers cooperative and the grain elevators in question, although separately incorporated entities, were members of the cooperative. The IB was willing to establish separate branch offices at the elevators and have at least one employee at each elevator register as an associated person of the IB. Nevertheless, the Division expressed concern about the ability of the IB properly to supervise futures-related activities at the proposed branch offices and concluded that it would not be an unwarranted hardship for each grain elevator to register as an IB.
06/12/1998
98-58 ;
Rules 4.7, 4.21, 4.22 and 4.23;
No-Action; Exemption
The Division confirmed that a limited liability company that succeeded to the business of a corporation could claim the relief from certain Part 4 rules that the Division previously had issued to the corporation where, among other things, the management, personnel and trading strategies remained the same.
;
Rules 4.7, 4.21, 4.22 and 4.23;
No-Action; Exemption
The Division confirmed that a limited liability company that succeeded to the business of a corporation could claim the relief from certain Part 4 rules that the Division previously had issued to the corporation where, among other things, the management, personnel and trading strategies remained the same.
09/18/1998
98-68 ;
4m(l);
No-Action
The Division of Trading and Markets denied a request for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act by the managing member and the solicitor of two securities investment limited liability companies where the request was based on representations that the amount used by the companies for commodity interest trading would not exceed 5% of the fair market value of the companies' assets. The Division stated that there currently is no exception to the obligation to register as a commodity pool operator based on the fact that a fund makes only de minimis investments in commodity interests and took the position that the notice and comment rulemaking process, rather than a request for a no-action position, is the appropriate method by which to evaluate whether such an exception would be consistent with the Act and in the public interest. The requestor was invited to file a petition for rulemaking. In addition, the requestor was reminded of the commodity pool operator registration requirement for any personal operating any investment trust, syndicate or similar form of enterprise for the purpose of trading commodity interests.
;
4m(l);
No-Action
The Division of Trading and Markets denied a request for relief from the commodity pool operator registration requirement of Section 4m(1) of the Act by the managing member and the solicitor of two securities investment limited liability companies where the request was based on representations that the amount used by the companies for commodity interest trading would not exceed 5% of the fair market value of the companies' assets. The Division stated that there currently is no exception to the obligation to register as a commodity pool operator based on the fact that a fund makes only de minimis investments in commodity interests and took the position that the notice and comment rulemaking process, rather than a request for a no-action position, is the appropriate method by which to evaluate whether such an exception would be consistent with the Act and in the public interest. The requestor was invited to file a petition for rulemaking. In addition, the requestor was reminded of the commodity pool operator registration requirement for any personal operating any investment trust, syndicate or similar form of enterprise for the purpose of trading commodity interests.
09/29/1998
98-72 ;
Section 4d of the Act;
No-Action
The Division of Trading and Markets declined to reconsider its denial of a no-action request by an introducing broker (IB) that the IB be allowed to split commissions with grain elevators, based upon the futures and options trades placed by the grain elevators' customers, without the grain elevators first registering as IBs. The requesting IB had indicated that it would register as APs any employee of a grain elevator who handled any customer's futures or options trades. The Division cited concerns about the requesting IB's ability to supervise potential associated persons who were operating away from the IB's principal place of business and who would not be employees of the IB in declining to reconsider its previous position on this request.
;
Section 4d of the Act;
No-Action
The Division of Trading and Markets declined to reconsider its denial of a no-action request by an introducing broker (IB) that the IB be allowed to split commissions with grain elevators, based upon the futures and options trades placed by the grain elevators' customers, without the grain elevators first registering as IBs. The requesting IB had indicated that it would register as APs any employee of a grain elevator who handled any customer's futures or options trades. The Division cited concerns about the requesting IB's ability to supervise potential associated persons who were operating away from the IB's principal place of business and who would not be employees of the IB in declining to reconsider its previous position on this request.
10/08/1998
98-73 ;
Section 4d of Act;
No-Action
The Division of Trading and Markets declined a request for a no-action position with respect to future commission merchant (FCM) registration requirements from a party who intended to buy and sell gold bars with members of the public. The Division stated that the transactions in question may implicate more than the FCM registration requirements and could be subject to the exchange-trading requirements of the Act as well as to other provisions governing the offer or sale of futures contracts to members of the public.
;
Section 4d of Act;
No-Action
The Division of Trading and Markets declined a request for a no-action position with respect to future commission merchant (FCM) registration requirements from a party who intended to buy and sell gold bars with members of the public. The Division stated that the transactions in question may implicate more than the FCM registration requirements and could be subject to the exchange-trading requirements of the Act as well as to other provisions governing the offer or sale of futures contracts to members of the public.
11/18/1998
98-76 ;
Section 4m(l) & 4d(l);
No-Action
The Division of Trading and Markets declined a request for a no-action position with respect to introducing broker (IB) and commodity trading advisor (CTA) registration requirements from a firm that intended to offer a service that would refer members of the public seeking to trade commodity interest products to registered associated persons of CFTC registrants. The Division stated that the firm, through its operation of the referral service, would be soliciting for compensation since its ultimate goal is to introduce members of the public to CFTC registrants for the purpose of instituting a trading relationship.
;
Section 4m(l) & 4d(l);
No-Action
The Division of Trading and Markets declined a request for a no-action position with respect to introducing broker (IB) and commodity trading advisor (CTA) registration requirements from a firm that intended to offer a service that would refer members of the public seeking to trade commodity interest products to registered associated persons of CFTC registrants. The Division stated that the firm, through its operation of the referral service, would be soliciting for compensation since its ultimate goal is to introduce members of the public to CFTC registrants for the purpose of instituting a trading relationship.
12/30/1998
99-04 ;
Rule 4.14(a)(8);
No-Action
The Division confirmed a prior no-action position it had issued to a registered investment adviser, such that the adviser could continue to claim an exemption from CTA registration under Rule 4.14(a)(8), notwithstanding the fact that it could not meet all of the criteria of the rule because it was operating a pool for key, senior employees pursuant to Rule 4.13(a)(1).
;
Rule 4.14(a)(8);
No-Action
The Division confirmed a prior no-action position it had issued to a registered investment adviser, such that the adviser could continue to claim an exemption from CTA registration under Rule 4.14(a)(8), notwithstanding the fact that it could not meet all of the criteria of the rule because it was operating a pool for key, senior employees pursuant to Rule 4.13(a)(1).
12/22/1998
99-08 ;
Regulation 30.4;
No-Action
The Division of Trading and Markets (Division) issued a no-action position to a foreign firm with a U.S. branch regarding its clearing activities for an electronic foreign exchange with terminals located in the United States. The firm requested the Division to confirm that it would not recommend an enforcement action against the firm for failing to register as an FCM or to obtain confirmation of Rule 30.10 relief if the firm cleared the proprietary trades of exchange members who were not FCMs, as well as trades placed by FCMs for their own account and on behalf of United States foreign futures and foreign options customers. The Division confirmed a no-action position with regard to clearing the trades for FCM customer omnibus accounts in accordance with prior interpretative letters. The Division also declined to address the issue of clearing proprietary trades of registered FCMs. In addition, the Division declined to issue a no-action position with regard to clearing trades for non-FCM exchange members' proprietary accounts.
;
Regulation 30.4;
No-Action
The Division of Trading and Markets (Division) issued a no-action position to a foreign firm with a U.S. branch regarding its clearing activities for an electronic foreign exchange with terminals located in the United States. The firm requested the Division to confirm that it would not recommend an enforcement action against the firm for failing to register as an FCM or to obtain confirmation of Rule 30.10 relief if the firm cleared the proprietary trades of exchange members who were not FCMs, as well as trades placed by FCMs for their own account and on behalf of United States foreign futures and foreign options customers. The Division confirmed a no-action position with regard to clearing the trades for FCM customer omnibus accounts in accordance with prior interpretative letters. The Division also declined to address the issue of clearing proprietary trades of registered FCMs. In addition, the Division declined to issue a no-action position with regard to clearing trades for non-FCM exchange members' proprietary accounts.
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