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
06/26/1996	96-53 ; Rule 4.7(a);; No-Action The Division of Trading and Markets permitted a registered CPO to claim relief under Rule 4.7(a), notwithstanding the presence of non-QEPs in its pool, where the non-QEPs were established for the purpose of estate planning for QEPs. The QEPs would make all investment decisions for the non-QEPs they had established.
06/17/1996	96-51; ; Rule 4.10(d)(1) and Section la(4) of the Act;; No-Action The Division of Trading and Markets confirmed that a limited partnership is not a commodity pool as defined in Rule 4.10(d)(1), and the partnership's sole general partner is not a CPO as defined in Section la(4) of the Commodity Exchange Act. The sole investors in the partnership are, and will be, members of the general partner's family and entities wholly owned by the general partner. The general partner makes all trading decisions on behalf of the partnership and will not receive any compensation for his activities on behalf of the partnership.
06/14/1996	96-66 ; 4m(1), 4.7(a);; No-Action The Division of Trading and Markets granted releif from registration as a CPO to the sole general partner of several U.S. Funds to be operated as 4.7 pools where the Funds' CTA will also register as a CPO and serve in both capacities, the general partner and the CPO/CTA are affiliated companies, the general partner will limit its activities with regards to the Funds, and the CPO/CTA and general partner accepted joint and several liablity for each other's action. In addition, the Division pemitted the CPO/CTA to claim exempt status for the Funds despite the participation of three non-QEP individuals in a Fund, where the non-QEPs are high level employees of the CPO/CTA and sophisticated investors.
06/13/1996	96-50; ; Rule 4.7(a)(2)(iv);; No-Action The Division of Trading and Markets granted a registered CPO an exemption from Rule 4.7(a)(2) (iv) with respect to the CPO's responsibility to maintain original books and records at its main business office in connection with the operation of five offshore commodity pools, subject to the condition that, within 72 hours after a request by a duly qualified representative of the Commission, originals of the Funds' books and records will be made available to the Commission at a place located in the United States as specified by the Commission representative. The CPO did not seek to claim relief under the Division's recent Advisory regarding, among other things, the located of the books and records of offshore commodity pools because the Funds maintain their original books and records offshore to comply with requirements of the Central Bank of Ireland, not with Internal Revenue Service requirements.
06/12/1996	96-55 ; Section 2, 5, 6, of the Commodity Exchange Act;; No-Action Regarding questions concerning the characterization of certain contracts in foreign currency interests under Section 2 of the Commodity Exchange Act (Act) and the legality of trading in such contracts under Section 5 and 6 of the Act, the Division of Trading and Markets decline to provide any definitive response. Rather, the Division referred the request to various Commission interpretative statements (such as Characteristics Distinguishing Cash and Forward Contracts and ``Trade'' Options) and recent judicial precedent.
06/05/1996	96-48 ; Section 4m(1) of the Act;; No-Action CPO registration relief issued to general partners of 3 commodity pools where, among other things: (1) the general partners were registered as investment advisers and the general partner who would direct the pools' commodity interest trading would be registered as a CTA; (2) the limited partners met a $1 million net worth or $500,000 assets under management requirement; (3) the pools' commodity trading would be incidental to their securities trading; and (4) no pool would commit more than one percent of its assets to establish commodity interest positions. Additional limited partners would need to be either qualified eligible participants or, among other things, have a QEP make its investment decision.
06/04/1996	96-49; ; Section 4c(b) and 4d(2) of the Act; Rule 1.3(gg), 1.3(hh), 1.16(d), 1.55(b)(1), 1.56, 33.4 and 33.7;; No-Action In response to an inquiry whether it is a violation of the Commodity Exchange Act (Act) for a futures commission merchant (FCM) to fail to demand or receive from a customer funds in payment of premiums for the purchase of commodity options and, if so, whether such violation relieves the customer from the duty to pay an unsecured debit balance which has arisen as a result of unprofitable commodity option transactions ordered by the customer. The Division of Trading and Markets (Division) explained that while a customer's funds are not required to be in the account prior to the purchase of a commodity option, prompt payment is required. The Division stated that FCMs are required to collect option premiums and margin under Rule 1.56 and 1.16(d). The Division also explained that responsibilities of the FCM and the customer are set forth in the account agreement, and that violations of the Act or the Commission's regulations do not necessarily give rise to liability on the part of the FCM to its customers. Finally, the Division noted that in a number of cases a customer has been held liable for losses on trades he authorized notwithstanding the fact that the FCM did not close out the customer's account or prevent the customer from making new trades once the level of the account funding became insufficient to support the customer's commodity futures or options positions.
05/31/1996	96-47; ; Rules 4.35(b), 4.10(f);; No-Action The Division of Trading and Markets declined to provide relief from the past performance disclosure requirements of Rule 4.35(b) for ten accounts directed by the sole principal of a registered CTA pursuant to five different trading systems developed and sold by an unrelated, third party trading advisor. The Division reasoned that the principal was directing accounts within the meaning and intent of Rule 4.10(f) once he obtained a power of attorney that allowed him to enter trades on behalf of clients without first obtaining a client's permission notwithstanding the fact that this trading authority was limited to entering trades indicated by a third party trading system independently chosen by the client. The Division reasoned that the clients would not necessarily be aware of the trades being entered on their behalf but would receive the protections afforded by the Commission's past performance disclosure rules only if the party directing the accounts provided such disclosure. The third party advisor who developed the systems was under no obligation pursuant to Rule 4.31 to disclose past performance for the systems since he did not direct or guide accounts.
05/30/1996	96-46 ; Section 4m(1);; No-Action The Division of Trading and Markets granted relief from registration: (1) as a commodity pool operator (CPO) to "X," and (2) as a commodity trading advisor (CTA) to "Y." The relief was granted in connection with "X's" and "Y's" activities with respect of a fund ("Fund"), which invests in certain other investment funds that trade a small portion of their assets in commodity interests ("Investee Funds"). "X" and "Y" were granted relief based upon the following: (1) the four Fund participants are "qualified eligible participants" (QEPs), as defined in Rule 4.7(a)(l)(ii); (2) neither "X," with respect to CPO activities, nor "Y," with respect to CTA activities, engages in such activities in connection with any other funds, pool or account; (3) the Fund will deposit no more than an aggregate of ten percent of Fund net assets in Investee Funds and no Investee Fund will deposit, as initial margin or option premiums for commodity futures or option contracts, more than ten percent to its net assets; (4) "X" will disclose in an offering memorandum the extent of the Fund's participation in commodity futures and options markets, the general risks of such trading and the additional layer of fees payable by Fund participants as a result of the use of the "fund-of-funds" structure; (5) Fund participants will receive quarterly unaudited reports and annual audited reports containing the information required to be given to QEPs under Rule 4.7; and (6) "X" and "Y" agree to make their records pertaining to the Fund available to the Commission.
05/17/1996	96-44 ; Act, Section 4m(1);; No-Action The Division of Trading and Markets took a "no-action" position relieving (1) the corporate general partners of two pools organized as Bermuda limited partnership; (2) the directors of such corporate general partners; and (3) the directors of a third pool organized as a British Virgin Islands corporation from the requirement to register as a CPO, where a United Kingdom-registered investment management company (also registered as a CPO and as a CTA) performed the CPO and CTA functions for the pools. The no-action position was conditioned upon maintenance of the management company's CPO and CTA registration, marketing and sale of pool interests only to QEPs (and only by a registered IB and FCM) , and execution of cross-acknowledgments of joint and several liability among the directors, general partners and the management company for violations of the Act and Commission rules.