CFTC Staff Letters Archive

CFTC Staff Letters Archive provides Letters from 2007 and earlier. For Letters published 2008 or later visit the All Letters page.

There are no Advisory Letters or Other Written Communications for 2007 or earlier.

Date	PDF and Description
11/25/1996	96-86 ; Section 1.3(y);; No-Action FCM was not required to reclassify an account from customer to proprietary after the FCM's ultimate parent company acquired a minority interest in the parent company of a customer of the FCM where, among other things: (1) the FCM's ultimate parent is prohibited from acquiring a controlling interest in the customer's parent as a matter of law; (2) none of the customer's trading is funded or handled by the FCM's ultimate parent; and (3) the FCM does not hold customer funds at the customer, the customer's parent or any subsidiary of the customer's parent.
11/20/1996	96-83 ; Rule 4.21;; No-Action The Division of Trading and Markets took a "no-action" position permitting a registered commodity pool operator (CPO) to use summary disclosure materials containing more information than the notice of intended offering and statement of terms of offering contemplated by rule 4.21(a), but not containing all of the information required by rule 4.24, to solicit qualified eligible participants (QEP) for a pool in which non-QEPs also participate. A copy of the CPO's full Disclosure Document will be provided to each such solicited QEP upon request or at the time such solicited QEP elects to purchase an interest in the pool. In any event, a full Disclosure Document will be delivered before funds, securities or other property are received by the CPO from any such solicited QEP. The "no-action" relief was conditioned upon the QEP status of such prospective participants, and upon maintenance by the CPO of records substantiating the qualifications of such QEP prospects, which records will be made available to representatives of the Commission.
11/04/1996	96-82; ; Rule 4.21, 4.22(a) and (b), 4.24, 4.25, 4.26;; No-Action The Division of Trading Markets granted a request by a registered CPO and CTA for relief from the requirements of rules 4.21, 4.22(a) and (b), 4.24, 4.25 and 4.26 with regard to a commodity pool that invests primarily in United States securities and previously has been operated pursuant to the criteria of rule 4.12(b). The pool's limited partners are principals and employees of the CPO/CTA or the pool's co-investment manager, and certain members of their immediate families. They have received the documents required under rule 4.12(b) and will have access to the pool's books and records. In addition, the CPO/CTA will: (1) notify each limited partner that the pool is operated pursuant to exemptive relief granted by the Division; (2) explain the nature and purpose of such exemption; (3) obtain from each limited partner its written acknowledgment that it does not object to the pool's operation pursuant to exemptive relief; and (4) cause any limited partner who ceases to be a principal or employee, and any limited partner who is a family member of such principal or employee, to redeem or transfer its interests in the pool,
11/01/1996	96-81; ; Rule 4.7;; No-Action The Division of Trading and Markets granted an exemption to a commodity pool operator (CPO) under rule 4.7 allowing the CPO to file a notice of claim for exemption on behalf of a limited partnership when only the Class B unit holders of the limited partnership were qualified eligible participants (QEPs). The relief was based upon, among others, representations that: (1) the Class B unit holders would trade commodity interests solely through participation in other commodity pools; and (2) the Class A unit holders (a) were not permitted to trade commodity interests and (b) would not share in profits or be responsible for losses attributable to such trading. The relief was conditioned upon prohibiting non-QEPs from purchasing Class B units and notifying the Class A unit holders of the Class B unit holders' exemption and proposed activities,
11/01/1996	96-80 ; Rule 4.14(a)(6) and 4.31;; No-Action The Division of Trading and Markets denied an introducing broker's (IB) request for relief from registration as a commodity trading advisor (CTA) under rule 4.14(a)(6) where the IB offered a fee-based hotline service to potential and existing accounts, but made it possible for a non-client to continue to access the hotline without ever becoming a client. The IB was required to either cease providing the hotline service to non-clients or to register as a CTA. If he registered as a CTA, the Division stated that it would not recommend an enforcement action be brought against the IB under rule 4.31 based solely upon a failure to provide a Disclosure Document to existing clients for whom he directed or guided accounts, but if he solicited or entered into an agreement to direct or guide any new account, he would have to provide a Disclosure Document to that client, as well as to existing clients to whom he directed or guided accounts,
10/28/1996	96-78 ; Section 4d(2) of the Act; rules 1.20-1.29 thereunder; rule 1.55;; No-Action A contract market proposed the establishment of two separate limited liability company accounts, with an outside entity to act as custodian and investment manager. These accounts would allow clearing members on a voluntary basis to direct that customer funds and, separately, proprietary funds deposited with the clearing organization be placed in the limited liability company accounts. Although the investment guidelines for the program would limit investments by the limited liability companies to instruments generally permissible under section 4d(2) of the Act and rules promulgated thereunder with respect to customer funds, since interests in limited liability companies themselves are not specified in the Act or rules as permissible investments, the Division of Trading and Market issued the contract market a no-action letter concerning this program. This position was based upon, among other things, the contract market's guarantee of the return of principal invested by clearing members in the limited liability companies and the booking of its obligations to participants as a direct obligation of the contract market, and the participants booking the asset as a cash obligation rather than as a security, as well as other recordkeeping and reporting requirements.
10/22/1996	96-77; ; Section 4m(1);; No-Action The Division of Trading and Markets provided an interpretation on the registration of third party advisors. Generally, a person producing software which is marketed to persons for use in making trading decisions involving commodity interests is acting as a commodity trading advisor and must be registered as such. Knowledge by a registrant that a customer is receiving commodity trading advice from an unregistered third party advisor gives rise to a duty to disclose to the customer the unregistered status of such person. The unregistered status of a third party advisor would appear to be a material fact, and the knowing failure to disclose material information to customers constitutes fraud under section 4b and 4o of the Commodity Exchange Act.
10/21/1996	96-76 ; Section 4m(1) of the Act;; No-Action The Division of Trading and Markets provided relief to an investment adviser (IA) registered under the Investment Advisers Act of 1940 from the CPO and CTA registration requirements of section 4m(1) of the Commodity Exchange Act in connection with IA's limited operational role in providing commodity futures advisory services to an off-shore fund. No shares in the fund would be offered to United States persons as defined in regulation S under the Securities Act of 1933. Trading in commodity futures interests would be limited to trading in currency futures and options thereon for hedging purposes and consistent with criteria set forth in Commission rule 4.5.
10/21/1996	96-74; ; Rule 4.24;; No-Action The Division of Trading and Markets denied a commodity pool operator's request for relief from disclosing information about a principal in the disclosure document for certain pools where that principal did not participate in the trading, marketing, or other activities related to those pools. In addition, the Division of Trading and Markets advised the pool operator that an employee authorized to make trading decisions on behalf of one of the commodity pools operated by the pool operator and certain client accounts was a principal as specified in rule 4.10(e).
10/15/1996	96-72; ; section 4m(1);; No-Action The Division of Trading and Markets provided an explanation of exemptions from registration available to commodity trading advisors. CTAs located outside of the United States that do not have US citizens as clients are exempt from registration even if their advice concerns commodity contracts traded on US exchange. Furthermore, section 4(m)(l) provides a self-executing exemption for anyone who, during the proceeding twelve months, has not furnished commodity trading advice to more than fifteen people and has not held themselves out to the public as a CTA.