1997 CFTC Letters

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					                                   1997 CFTC LETTERS

97-01; Interpretation; December 12, 1996; A financial planner that proposed to sell gold coins
and gold bullion to his clients was advised to carefully review all the facts and circumstances
relating to the transactions to determine whether such transactions would constitute futures
contracts or commodity options and thus be within the purview of the Commodity Exchange Act
and Commission regulations promulgated thereunder. [§4(a)] (T&M).

97-02; No-Action; January 10, 1997; The Division of Trading and Markets permitted a registered
CPO to claim relief under Rule 4.7(a), notwithstanding the presence of a non-QEP in its pool.
The non-QEP is an active participant in the pool's management, a portfolio manager for all of the
CPO's limited partnerships, a registered AP and an accredited investor. The relief is subject to
the conditions that the non-QEP consents in writing to being treated as a QEP and has access to
the pool's books and records. [Rule 4.7(a)] (T&M).

97-03; No-Action; January 15, 1997; The Division of Trading and Markets provided relief to a
Canadian person from the CPO registration requirements of section 4(m)(1) of the Commodity
Exchange Act in connection with its operation of an off-shore pool. Participants in the pool
would not be offered to any United States persons as defined in Rule 4.7(a). In addition, the
Division granted an exemption from the disclosure document requirements of Rule 4.31 for the
CTA of the foreign pool since the CTA and the operator of the pool are affiliated subsidiaries.
[Section 4(m)(1), Rule 4.31] (T&M).

97-04; No-Action; February 6, 1997; In connection with the solicitation of former limited
partners of a commodity pool, the Division of Trading and Markets granted a registered CPO's
request for relief from the prohibition in Rule 4.26(a)(2) against using a Disclosure Document
that is dated more than nine months prior to the date of its use. The CPO represented that the
commodity pool had not traded for 10 months, all former limited partners had redeemed their
interests in the pool and there were no material changes to the Disclosure Document. The
Division also granted the CPO's request for relief from providing the Account Statements
required by Rule 4.22(a) and Annual Report required by Rule 4.22(c) for the 10-month period
during which the pool suspended trading. [Rules 4.26(a)(2), 4.22(a) and 4.22(c)] (T&M).

97-05; Exemption; February 12, 1997; The Division of Trading and Markets permitted a
registered investment adviser to rely on an exemption from CTA registration provided by Rule
4.14(a)(8), despite the fact that the entity for which advice was being provided, an offshore fund
having no U.S. investors, was not a qualify entity under Rule 4.5. The adviser provided
commodity trading advice which was "solely incidental" to its business of providing securities
advice, agreed to employ only those strategies which were consistent with the eligibility status
under Rule 4.5(c)(2), and did not otherwise hold itself out as a CTA. [Rule 4.14(a)(8), Section
4m(1)] (T&M).

97-06; No-Action; February 14, 1997; The Division of Trading and Markets took a "no-action"
position permitting an employee investment trust formed as an investment vehicle for employees
and officers (and their families) of a registered CPO and its affiliates to be treated as a QEP/QEC
(notwithstanding that not all of its participants are QEPs) in the context of the investment trust's
participation in Rule 4.7 pools operated by the CPO and advised by the CPO and its affiliates.
The Division also took a "no-action" position such that the trustees of the investment trust need
not register as CPOs. [Rule 4.7 --- QEP/QEC treatment for an employee investment trust of a
registered CPO Section 4m(1) -- CPO registration relief for trustee of such employee investment
trust] (T&M).

97-07; Interpretation; February 5, 1997; The Division of Trading and Markets confirmed that a
limited partnership, formed for the purpose of investing in land rule estate, was not a commodity
pool within the meaning and intent of Rule 4.10(d) where interests in the limited partnership
were held by an individual and a family partnership solely consisting of immediate family
members of the individual. [Rule 4.10(d)] (T&M).

97-08; No-Action; January 28, 1997; The Division of Trading and Markets would not
recommend that the Commission bring an enforcement action against a commodity pool operator
(CPO) based upon the CPO's operation of a partnership as a Rule 4.7 exempt pool
notwithstanding the presence in the partnership of non-qualified eligible participant (QEP)
partners where all the non-QEP partners had been members of the partnership for at least three
years and all were accredited investors, members of the general partners' families or a trust
created for the benefit of a partner's families or a trust created for the benefit of a general
partner's family. The Division also would not recommend that an enforcement action be brought
based upon the CPO's investment of more than ten percent of the partnership's assets in Rule 4.7
exempt pools. Relief was conditioned upon each non-QEP limited partner consenting to being
treated as a QEP. [Rule 4.7] (T&M).

97-09; Exemption; February 6, 1997; The Division of Trading and Markets granted an
exemption to a commodity trading advisor (CTA) from the requirement that the CTA prepare
and deliver a Disclosure Document pursuant to Rule 4.31. The CTA was selected to be the
investment advisor for a foreign fund which accepted investments only from non-United States
persons. In an issue of first impression, although some of the CTA's clients were United States
persons, they were all qualified eligible clients for whom the CTA claimed relief from Rule 4.31.
The Division exempted the CTA from compliance with Rule 4.31 solely with respect to its
contemplated services on behalf of the fund. [Rule 4.31] (T&M).

97-10; No-Action; February 27, 1997; The Division of Trading and Markets took a "no-action"
position relieving CPOs of certain publicly offered commodity pools from the requirement in
Rule 4.26(b) to deliver a copy of the pool's most recent Annual Report at the same time as the
Disclosure Document is delivered to a prospective participant. The relief was conditioned upon:
(1) inclusion in the monthly Account Statement delivered within the Disclosure Document of
any material information required to be contained in the Annual Report; (2) disclosed availability
of net asset value per unit from the CPO or broker; (3) availability of a paper copy of the most
recent Annual Report upon request; (4) delivery of the most recent Annual Report within 21 days
of participant's purchase of units; and (5) right to redeem at least as frequently as monthly. [Rule
4.26(b)] (T&M).

97-11; No-Action; March 11, 1997; The Division of Trading and Markets would not recommend
that the Commission take any enforcement action against a commodity pool operator (CPO)
based upon the CPO's failure to register as a CPO in connection with its position as a co-general
partner of a partnership. The relief was conditioned upon the CPO not exercising discretion,
supervision or control over, or taking part in (a) the solicitation, acceptance or receipt of funds or
property to be used for purchasing interests in the partnership, or (b) the investment, use or other
disposition of funds or property of the partnership, and receipt by the Division of a copy of the
joint and several liability acknowledgments executed by the co-general partners. [Section 4m(1)]
(T&M).

97-12; No-Action; March 7, 1997; The Division of Trading and Markets would not recommend
that the Commission take any enforcement action against a commodity pool operator (CPO)
based upon the CPO's failure to register as a CPO in connection with the offering of a variable
annuity contract where the CPO was a mutual life insurance company subject to regulation under
state insurance law, the contract was offered by a registered broker-dealer subsidiary of the CPO,
the contract was offered only to a select group of investors with extensive business and finance
education and experience, investment in commodity interests was limited to investment in other
funds, and a registered CPO acted as Investment Manager and was delegated responsibility of
the preparation and distribution of annual reports and of books and records. The Division also
would not recommend that any enforcement action be brought: (1) against the registered CPO
based upon the CPO's operation of a partnership as Rule 4.7(a) exempt pool notwithstanding the
presence in the partnership of non-qualified eligible participant (QEP) partners; or (2) against the
registered CPO and the CPO of any Rule 4.7 exempt pool in which the subaccount invested
based upon the investment of more than ten percent of the subaccount's assets in Rule 4.7 exempt
pools. [Section 4m(1) and Rule 4.7(a)] (T&M).

97-13; No-Action; December 24, 1996; The Division of Trading and Markets would not
recommend that the Commission take any enforcement action against an introducing broker (IB)
based solely on the IB's failure to register as an FCM where the IB effects a customer's transfer
of funds from the customer's securities account to the customer's commodity interest account by
the IB drawing a check from the securities account payable to the commodity interest account
and depositing the check into the customer's commodity interest account. Relief was conditioned
upon the IB's ability to provide certain documentation to the Commission's and the National
Futures Association's auditors. [Section 4d(2)] (T&M).

97-14; No-Action; November 27, 1996; The Division of Trading and Markets would not
recommend that the Commission bring an enforcement action for failure to register against a
commodity trading advisor (CTA) that was organized in the United Kingdom and registered with
the Securities and Futures Authority. Two of the three owners of the no-actioned CTA were
listed with the Commission as principals of a registered CTA, and the third was in the process of
registering as an AP of the registered CTA. Relief was conditioned upon receipt by the Division
of joint and several liability acknowledgments executed by the no-actioned CTA and the
registered CTA. [Section 4m(1)] (T&M).

97-15; No-Action; March 24, 1997; The Division of Trading and Markets provided relief under
Rule 4.7(a) to a registered CPO, notwithstanding the presence of a non-QEP in its pool, where
the non-QEP is an employee of the CPO who performs as a trader and analyst for the pool. The
non-QEP has ready access to information pertinent to an investment in the pool and agrees to
being treated as QEP. [Rule 4.7(a)] (T&M).

97-16; No-Action; March 21, 1997; A charitable foundation may be treated as a QEP with
respect to a Pool where the charitable foundation's investment decisions are made by an
individual who: (1) established and is the sole source of funding of the charitable foundation; (2)
is registered as an associated person of the Pool's commodity pool operator; and (3) is a QEP
with a net worth exceeding twenty-five million dollars and more than twenty-five years of
investment experience. [Rule 4.7(a)] (T&M).

97-17; Exemption; March 21, 1997; The Division of Trading and Markets provided relief under
Rule 4.7(a) to a registered CPO, notwithstanding the presence of two non-QEPs in its pool,
where one non-QEP is a member of the CPO and affiliated CTA and the other non-QEP is an
employee of an affiliated CTA. Each non-QEP has ready access to information pertinent to an
investment in the pool and agrees to be treated as QEP. [Rule 4.7(a)] (T&M).

97-18; Exemption; March 24, 1997; The Division of Trading and Markets permitted a registered
CPO/CTA to continue to claim relief under Rules 4.21, 4.22(a) and (b), 4.24, 4.25, 4.26 from
certain disclosure and monthly reporting requirements despite the acceptance of additional
limited partners (New Limited Partners) as investors in a commodity pool that invests primarily
in U.S. securities. The CPO/CTA will: (1) provide each New Limited Partner with the pool's
Limited Partnership Agreement, Private Placement Memorandum, quarterly financial statements
and audited annual financial statements; (2) notify each New Limited Partner that the pool is
operated pursuant to exemptive relief granted by the Division; (3) explain the nature and purpose
of such exemption; (4) obtain from each New Limited Partner has written acknowledgment that
he does not object to the pool's operation pursuant to exemptive relief; and (5) cause any New
Limited Partner who ceases to be an employee of the CPO or the pool's co-investment manager
to redeem or transfer his interests in the pool. In addition, all limited partners will have access to
the pool's books and records. [Rules 4.21, 4.22(a) and (b), 4.24, 4.25, 4.26] (T&M).

97-19; Exemption; March 27, 1997; The Division of Trading and Markets provided exemptive
relief to a registered CPO and CTA from the books and records location requirements of Rules
4.23 and 4.33 such that the CPO/CTA may maintain its books and records at the main business
office of an affiliated company that was established primarily to provide operational support to
the CPO/CTA. [Rules 4.23 and 4.33] (T&M).

97-20; No-Action; March 21, 1997; The Division of Trading and Markets would not recommend
that the Commission bring an enforcement action against a commodity pool operator (CPO) in
connection with its operation of a pool as an exempt pool pursuant to Rule 4.7(a) solely based
upon the CPO continuing to permit the investment in the pool of several non-QEP investors. The
non-QEP investors included six employees of a management company that rendered services to
the pool, an accredited investor who served as general counsel for the pool and management
company for the past two and one-half years, and three trusts funded by a billionaire and
prominent investor for the benefit of his children and whose trustee was an attorney with over
twenty-five years of experience in advising clients in corporate, securities and investment
matters. Relief was conditioned upon each non-QEP investor consenting to being treated as a
QEP. [Rule 4.7(a)] (T&M).

97-21; No-Action; March 21, 1997; The Division of Trading and Markets would not recommend
that the Commission take any enforcement action based solely upon the failure to comply with
Rule 4.7 against the General Partner of a pool if it claimed relief pursuant to Rules 4.7(a) and
4.7(b), notwithstanding investment in the pool by four select investors. Each select investor had
vast work experience in the financial services industry, held one or more graduate degrees and
had complete access to information relating to the pool through their employment. The Division
also wold not recommend that the Commission take any enforcement action based solely upon
the failure to comply with Rule 4.7 against the General Partner or the CPO of any Rule 4.7(a)
exempt commodity pool in which the pool invested, if the pool invested more than ten percent of
the fair market value of its assets in Rule 4.7(a) exempt pools. [Rule 4.7] (T&M).

97-22; No-Action; March 21, 1997; The vice president of a CTA not registered as an AP worked
in the same office as a registered AP of the CTA. In response to a request for relief, the Division
of Trading and Markets determined not to recommend that the Commission take enforcement
action against the CTA or its vice president pursuant to Section 4k(3) of the Act based solely
upon the failure of the vice president to register as an AP in connection with his activities on
behalf of the CTA. The relief was subject to the conditions that the CTA's registered AP working
in the same office as the vice president become president of the CTA and remain in charge of all
futures-related activity of the company, no employee or agent of the CTA engage in, or supervise
any AP engaged in, the solicitation of any client or potential client on behalf of the CTA, and the
vice president remain listed as a principal of the CTA. [Section 4k(3)] (T&M).

97-23; No-Action; February 27, 1997; The Division of Trading and Markets permitted a
registered CPO to continue to claim relief under Rule 4.7(a), notwithstanding the admission of a
non-QEP individual into the Pool. The non-QEP had been a Managing Director of the Pool's
Analytical Arbitrage Operations for over a year and a half, was previously employed as a trading
strategist and, in that capacity, was responsible for developing new trading strategies for a $100
million proprietary fund, was fully familiar with the investment activities of the Pool and had
access to its books and records. [Rule 4.7(a)] (T&M).

97-24; No-Action; April 1, 1997; The Division of Trading and Markets permitted a registered
CPO to continue to claim relief under Rule 4.7(a), notwithstanding the admission of a non-QEP
Trust into the Pool. The sole beneficiary of the Trust is the grandniece of the beneficial owner of
the managing general partner of the Pool and the sole trustee of the Trust in a nephew of the
beneficial owner of the managing general partner, a QEP and a registered CPO with over twelve
years of investment experience. In addition, the Division permitted the registered CPO of the
Pool to claim relief from the restriction in Rule 4.7(a)(1)(ii)(B)(2)(xi) which would otherwise
have prevented the Pool, which itself qualified as a QEP but had non-QEP investors, from
investing more than ten percent of its assets in other Rule 4.7 exempt pools. [Rule 4.7(a)]
(T&M).

97-25; No-Action; March 27, 1997; The Division of Trading and Markets granted relief from
registration as a CPO to one general partner of a "fund or funds," for which a claim for
exemption pursuant to Rule 4.12(b) will be filed with the Commission where, among other
things: (1) a registration CPO would be added as a second general partner; (2) the registered
CPO and no-actioned CPO were affiliated; (3) the no-actioned CPO agreed to limit its activities:
and (4) both CPOs agreed to assume joint and several liability for any violations of the Act or
Commission regulations committed by the other as a general partner and CPO of the Fund.
[Section 4m(1)] (T&M).

97-26; Interpretation; March 26, 1997; In response to an inquiry concerning whether an
individual could claim an exemption from CTA registration under Section 4m(1), the Division of
Trading and Markets stated the two conditions were required in order to claim the exemption.
First, during the course of the preceding twelve months, the person has not furnished commodity
interest trading advice to more than fifteen persons, and secondly, the individual does not hold
himself out to the public as a CTA. [Section 4m(1)] (T&M).

97-27; No-Action; April 18, 1997; The Division of Trading and Markets granted no-action relief
to a registered CPO and CTA from the disclosure, reporting and recordkeeping requirements of
Rules 4.21-4.26 in connection with the CPO's operation of a commodity pool. The pool is
compromised of immediate family members and close personal friends of the CPO/CTA. In
addition, each limited partner of the pool shall have ready access to the books and records of the
pool. [Rules 4.21-4.26] (T&M).

97-28; No-Action; March 26, 1997; The Division of Trading and Markets permitted a registered
CPO/CTA to continue to claim relief under Rule 4.7(a), notwithstanding the presence of
additional non-QEPs in its pool. The non-QEPs all have significant investment experience, and
most are investment managers for an affiliate of the CPO/CTA that serves as co-investment
manager to the pool and is itself registered as a CPO/CTA. The relief is subject to the conditions
that each non-QEP: (1) consents in writing to being treated as a QEP; (2) has access to the pool's
books and records; and (3) redeems or transfers his interests in the pool if he is no longer
employed or listed as a principal of the CPO/CTA or its affiliate, if he was so employed or listed
upon his investment in the pool. [Rule 4.7(a)] (T&M).

97-29; Interpretation; March 21, 1997; The Division of Trading and Markets found that a
partnership consisting of a husband and wife, custodial accounts for their children, and trusts
established for the benefit of the husband or wife and their descendants was not a commodity
pool within the meaning and intent of Rule 4.10(d)(1) and, consequently, that the General
Partner was not a CPO thereof. Because the partnership qualified for treatment as a QEP under
Rule 4.7(a)(1)(ii)(B)(2)(viii), the Division did not address the request for relief from the ten
percent restriction imposed on the assets of a Rule 4.7(a) exempt pool that may be used to
purchase units in other Rule 4.7(a) exempt pools where not all the investors in the investor fund
will be QEPs. [Rule 4.10(d)(1) & Rule 4.7(a)(1)(ii)(B)(2)(viii)] (T&M).

97-30; No-Action; April 21, 1997; The Division of Trading and Markets gave "no-action" relief
from CPO registration requirements to the general partner of a registered securities broker-dealer
and member of the Chicago Board Option Exchange (CBOE), where the limited partners of the
broker-dealer were a registered floor broker, a trust for the benefit of the floor broker's father,
two former CBOE members and a registered floor trader. Relief was conditioned upon: (1) the
broker-dealer will remain registered as such; (2) no solicitation of additional limited partners of
the broker-dealers will be conducted and no new limited partners or investors will be admitted to
the broker-dealer or its general partner; and (3) the broker-dealer's trading of commodity
interests will be restricted to hedging and risk management in connection with its CBOE option
positions. [Section 4m(1)] (T&M).

97-31; No-Action; April 21, 1997; In response to a request by a registered CTA, the Division of
Trading and Markets gave "no-action" relief to the CPOs of pools advised by the CTA,
permitting each such CPO to identify by name and title in pool Disclosure Documents certain of
the CTA's principals without providing such principals' business backgrounds as required by
Rule 4.24(f). The CTA had represented that the marketing, accounting administrative and trading
functions performed by the specified principals are insignificant to the pool participants (for
whom such functions are performed, if at all, by the CPO or its agents). The CPOs would still be
required to disclose the business backgrounds of the CTA's sole shareholder and all of its
directors, senior officers and investment policy committee members. [Section 4m(1)] (T&M).

97-32; No-Action; April 23, 1997; The Division of Trading and Markets would not recommend
that the Commission take any enforcement action for failure to comply with Rule 4.7(a) against a
commodity pool operator (CPO) based upon the CPO's investment of more than ten percent of
the assets of any pool subject to the ten percent limitation (the Investor Pool) in a 4.7 exempt
pool operated by the same CPO (the Investee Pool). Relief from the ten percent limitation on
investment in Rule 4.7(a) exempt pools was granted only for investment in Investee Pools that
have the same general partner and CPO as the Investor Pools. Relief was conditioned upon all
investors and prospective investors in the Investor Pool receiving the same disclosures and
reports required under Part 4 and the CPO complying with the same recordkeeping requirements
applicable under Part 4 as if the Investee Pools were non-exempt pools. [Rule
4.7(a)(1)(ii)(B)(2)(xi)] (T&M).

97-33; No-Action; March 18, 1997; The CFTC's Off-Exchange Task Force has issued a no-
action letter recommending that the Commission not take enforcement action against certain
individuals for engaging in the offer and sale of certain trust securities that are linked to the
prices of individual equities. The Task Force has determined that such securities are not
inconsistent with the Commission's statutory interpretation on Hybrid Instruments. [Part 34 -
Regulation of Hybrid Instruments] (T&M).

97-34; No-Action; March 18, 1997; The CFTC's Off-Exchange Task Force has issued a no-
action letter recommending that the Commission not take enforcement action against certain
individuals for engaging in the offer and sale of certain trust securities that are linked to the
prices of individual equities. The Task Force has determined that such securities are not
inconsistent with the Commission's statutory interpretation on Hybrid Instruments. [Part 34 -
Regulation of Hybrid Instruments] (T&M).

97-35; Exemption; April 21, 1997; The Division of Trading and Markets granted a commodity
pool operator a permanent extension of time in which to comply with the quarterly report
requirements of Commission Rule 4.7(a)(2)(ii) in connection with the operation of two
commodity pools. Each commodity pool was organized as a fund of funds and relief was
conditioned on investors being informed of the extension of time granted to the commodity pool
operator. [Rule 4.22] (T&M).

97-36; Exemption; April 21, 1997; The Division of Trading and Markets granted a commodity
pool operator a permanent extension of time in which to comply with the annual report
requirements of Commission Rule 4.7(a)(2)(ii) in connection with the operation of four
commodity pools. Each commodity pool was organized as a fund of funds and relief was
conditioned on investors being informed of the extension of time granted to the commodity pool
operator. [Rule 4.22] (T&M)

97-37; No-Action; April 29, 1997; The Division of Trading and Markets took companion "no-
action" positions concerning the acquisition by two bank holding company subsidiaries of,
respectively, the general partner interest in a group of investment partnerships (one of which (A)
participates in commodity pools), and registered investment adviser affiliated with the outgoing
general partner of the investment partnerships. The subsidiary acquiring the general partner
interests (a newly-formed corporation) was relieved from registering as a CPO and the subsidiary
acquiring the investment adviser (a national bank) was relieved from registering as a CTA.
Relief was conditioned upon: (1) compliance by the bank holding company and its subsidiaries
with commitments made to the Federal Reserve Board in connection with the acquisition
transaction, and with operating restrictions set forth in the relief request; (2) notification of the
Division concerning the name of any additional investment partnership(s) when selected; (3) no
participation in commodity pools by investment partnerships that do not presently so invest,
absent further relief or registration of the general partner subsidiary as a CPO; (4) each pool
which "A" participates is operated by a registered CPO and advised by a registered CTA; and (5)
the holding company and acquiring subsidiaries submit to special calls. [Section 4m(1)] (T&M).

97-38; Interpretation; March 26, 1997; The Division advised that neither the Commodity
Exchange Act nor the Commission's rules promulgated thereunder would be violated if a
registered investment adviser (RIA) provided cash management services to futures commission
merchants (FCMs) with respect to segregated customer funds (provided that the RIA will have
limited power of attorney or comparable limited discretion, and provided that each FCM client
will maintain appropriate internal controls). Such services would include purchase and sale of
instruments permitted by Rule 1.25, execution of reverse repurchase agreements and
consummation of reverse repurchase transactions. The RIA would not handle customer funds,
securities purchased with such funds, or proceeds of sales of such securities. Each individual
FCM's customer funds would be separately accounted for, and the RIA's compensation would be
paid directly by its client FCM, without use of customer funds. The Division stated it did not
believe that the described activities would require the RIA to register with the Commission in
any capacity. [Act Section 4d; Rules 1.20 et seq. -- request for no-action relief for registered
investment adviser seeking to provide cash management services with respect to customer funds
held in segregation by futures commission merchants] (T&M).

97-39; No-Action; May 28, 1997; The Division of Trading and Markets granted "no-action"
relief in the case of a limited liability company (the Company) registered as a broker-dealer and
as a Chicago Board Options Exchange member. The members of the Company's management
committee were not required to register as CPOs and the Company's traders were not required to
register as CTAs. The Division's no-action positions were conditioned upon: (1) restriction of
membership eligibility in the Company to its traders and its managers having supervisory or
financial decisionmaking authority; (2) commodity interest trading on behalf of the Company is
restricted to S&P 500 futures contracts and options on S&P 500 futures; (3) written
representations that members' interests do not represent indirect investments by others; (4)
submission to special calls by the Division; and (5) floor broker registration for each Company
member trading commodity interests and executing commodity interest transactions. [Rule
4.10(d)(1)] (T&M).


97-40; No-Action; June 2, 1997; The Division of Trading and Markets took a CPO registration
no-action position against a co-general partner and CPO of a pool where the person was the sole
shareholder and would be registered as an associated person and listed as a principal of the other
general partner and CPO. [Section 4(m)(1) -- CPO Registration] (T&M).

97-41; No-Action; June 6, 1997; The Division of Trading and Markets provided relief under
Rule 4.7(a) to registered CPOs which operate Rule 4.7(a) exempt pools in order that they may
accept an investment of more than ten percent of the fair market value of the assets of an
insurance company separate account which itself qualifies as a QEP but has among its investors
several non-QEP irrevocable trusts. Each non-QEP trust: (1) was established primarily for estate
planning purposes; and (2) has as its grantor and its investment decision-maker a QEP. [Rule 4.7
(a)(1)(ii)(B)(2)(xi)] (T&M).

97-42; Exemption; May 28, 1997; The Division of Trading and Markets exempted a registered
CTA from compliance with Rule 4.31 in that it was not required to provide a disclosure
document to an offshore fund for which it had discretionary authority to trade commodity
interests. The registered CTA had only one client, which was the offshore fund. [Rule 4.31]
(T&M).


97-43; Interpretation; June 9, 1997; The Division of Trading and Markets addressed the
availability of the Rule 4.14(a)(6) exemption from registration as a commodity trading advisor
(CTA) to introducing brokers (IBs) which manage customers accounts based upon commodity
trading signals generated by systems developed by third parties (Third Party Advisors). The
Division confirmed that when IBs enter into such arrangements, the registration status of the
Third Party Advisor is a relevant factor to be considered in applying Rule 4.14(a)(6), but warned
that if the Third Party Advisor is not registered as a CTA (but should be so registered), it may not
be necessary to reach a determination under Rule 4.14(a)(6) since the IB may be violating the
Commodity Exchange Act by aiding and abetting the Third Party Advisor in a violation of the
CFTC's CTA registration requirements. [Rule 4.14(a)(6)](T&M).

97-44; No-Action; June 9, 1997; No-action relief was granted from the requirement to register as
an IB to a company selling a database of leads to registrants under the Commodity Exchange
Act. The Company compiled a database of 5,000 individuals who had invested in publicly
offered commodity pools and privately placed hedge funds from publicly available partnership
filings in various county government recorder offices throughout the country. The only data
added by the Company to the county records were telephone numbers obtained from a
computerized telephone directory. Due to changes in partnership registration and recording
requirements, no new names had been added to the database since 1992. The Company has no
contact with the general public nor does it advertise for new leads or purchase any additional
leads from other sources. [§§ 1a(14) and 4d(1) of the Act] (T&M).

97-45; No-Action; May 5, 1997; The Division of Trading and Markets provided "no-action"
relief with respect to an FCM's failure to obtain and retain an acknowledgment letter from a
clearing organization concerning the treatment of customer funds and the secured amount
deposited by the FCM with the clearing organization. This relief is subject to the condition that
the clearing organization depository of such funds has adopted and submitted for Commission
approval rules which provide for the segregation (as customer funds or the secured amount, as
appropriate, in accordance with all relevant provisions of the Commodity Exchange Act and the
Commission's rules and orders promulgated thereunder) of all funds held on behalf of customers.
[Section 4(b) and 4(d)(2) of the Act; Commission Rules 1.20, 1.41(a)(3), 30.7(c)] (T&M).

97-46; No-Action; June 12, 1997; The Division of Trading and Markets modified CFTC
Interpretive Letter No. 95-65, [1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26, 495
(July 26, 1995), to provide further no-action relief concerning the charge for short option value
positions carried for customers by FCMs. This relief will now (1) be available generally for any
customer account rather than only for the account of floor broker or floor trader (provided the
FCM's liability to that customer does not exceed five percent of the FCM's total liability to all
customers), and (2) require demonstration by an FCM that positions in issue are risk reducing
only when applying for relief and thereafter upon request, rather than at every month-end.
However, an FCM's DSRO must make sure a request (1) if the credit against the short option
value charge is materially altered, and (2) as part of any full scope financial audit, which must be
conducted every other year. [Rule 1.17(c)(5)(iii)] (T&M).

97-47; No-Action; June 16, 1997; The Division of Trading & Markets Financial and Segregation
Interpretation No. 12 provides, among other things, that an FCM may not hold in a customer
segregated account foreign currency deposited by a foreign-domiciled customer in connection
with trading on U.S. markets unless the customer signs a subordination agreement as set forth in
the Interpretation. The Division issued a no-action position concerning an FCM's failure to
obtain such a subordination agreement, subject to the conditions that the FCM (1) continue to
have no U.S. customers, and (2) provide notice to customers that in the event of the FCM's
bankruptcy, all property available for customers will be subject to pro rata distribution. [Section
4d(2) of the Act; Rule 190.10(c)] (T&M).

97-48; No-Action; May 16, 1997; The Division took a CPO registration no-action position with
respect to the foreign operator (Operator) of a foreign fund where, among other things: (1) an
affiliate of the Operator is a registered CPO and will serve as the CPO of the fund; (2) the
Operator is jointly owned by an affiliate of the CPO and a foreign firm; (3) the fund's Board of
Directors will consist of two U.S. persons who are registered as APs and listed principals of the
CPO; (4) the CPO will be responsible for hiring and firing the fund's CTA and selecting and
changing the fund's FCM; (5) within thirty days the CPO and the Operator provide the Division
with signed and dated acknowledgments therein each agrees to be jointly and severally liable
with the other for any violations of the Act and the Commission's regulations issued thereunder
applicable to CPOs in connection with the operation of the Fund. In addition, the Division
confirmed that a notice pursuant to Advisory 18-96 may be filed on behalf of a fund
notwithstanding the ownership therein of the fund's CTA, a U.S. person. [Section 4m(1) of the
Act; Advisory 18-96] (T&M).

97-49; No-Action; June 20, 1997; The Division of Trading and Markets was unable to conclude
a registered introducing broker (IB) could claim relief from registration as a commodity trading
advisor (CTA) pursuant to Rule 4.14(a)(6) in connection with commentaries on the cash and
futures agricultural markets which it provided through various media. The Division took this
position in part because the IB charged a separate quarterly fee for some of the commentary
services and offered the services generally to the public. Nevertheless, the Division took a CTA
registration no-action position so that the IB would not be required to register as a CTA. The
Division reasoned that since the IB did not exercise discretionary trading authority over any
customer accounts, was already registered with the Commission and was a NFA member, the IB
was already subject to most all regulatory requirements requirements that would be applicable to
it if it also registered as a CTA. The relief was conditioned on the IB's maintaining all applicable
records under Rule 4.33 that would have been required of it if it remained registered as a CTA.
[Section 4(m)(1), Rule 4.14(a)(6)] (T&M).

97-50; No-Action; June 23, 1997; The Division of Trading and Markets granted CPO registration
"no-action" relief to the managing general partner of a general partnership that trades commodity
futures contracts, where the investors are family members or business associates. [Section 4m(1)
of the Act] (T&M).

97-51; Exemption; June 24, 1997; The Division of Trading and Markets granted the CPO of a
commodity pool relief from the requirement of Rule 4.22(d) that the financial statements in the
Annual Report that a registered CPO must prepare and distribute be certified by an independent
public accountant. The CPO, who previously had claimed the exemption from CPO registration
in Rule 4.13(a)(2), is the president and sole principal of a corporation that subsequently
registered as a CPO. The commodity pool consists of eight limited partners who are all family
members of the CPO and who receive detailed unaudited monthly reports and annual tax returns
for the pool. [Rule 4.22(d)] (T&M).

97-52; Interpretation; June 24, 1997; The Division confirmed that a limited partnership (the
Partnership) formed solely to serve the investment purposes of the family of a QEP in which the
limited partners of the Partnership will be members of the family and trusts established for the
benefit of members of the family is not a commodity pool within the meaning and intent of Rule
4.10(d)(1) and, consequently, that the general partner of the Partnership is not a CPO thereof. In
addition, the Division confirmed that the Partnership will qualify as a QEP pursuant to Rule
4.7(a)(1)(ii)(B)(2)(viii) because the Partnership will have total assets in excess of $5 million, will
not be formed for the specific purpose of investing in a Rule 4.7(a) exempt pool and the
Partnership is not a pool. [Rules 4.10(d)(1) & 4.7(a)(1)(ii)(B)(2)(viii)] (T&M).

97-53; No-Action; June 24, 1997; The Division of Trading and Markets took a "no-action"
position relieving a state-regulated insurance company and two trust companies from CPO and
CTA registration requirements in connection with an estate planning device consisting of
insurance contracts held in trust, the premium payments for which are invested in an insurance
company separate account, a subaccount (the "LP Subaccount") of which may invest in
commodity pools. The Division further gave "no-action" relief to a registered CPO affiliated
with one of the trust companies, permitting such CPO to claim exemption under Rule 4.7(a) with
respect to the LP Subaccount, notwithstanding that the trusts contributing funds to the LP
Subaccount are not QEPs. Finally, the Division gave "no-action" relief to such CPO and the
operator of any Rule 4.7 exempt pool in which the LP Subaccount invests from compliance with
the ten percent investment limitation in Rule 4.7(a)(1)(ii)(B)(2)(xi). [Section 4m(1); Rule 4.7(a)]
(T&M).

97-54; No-Action; June 10, 1997; The Division of Trading and Markets took a no-action position
regarding CPO registration relief for the sole general partner of two U.S. funds to be operated as
Rule 4.7(a) pools where the CTA for both funds will also serve as the funds' CPO, the general
partner and the CPO/CTA are affiliated companies, the general partner will limit its activities
with regard to the two funds, and the CPO/CTA and the general partner accepted joint and
several liability with each other for any violation of the Act or Commission regulations
thereunder applicable to CPOs in connection with the two funds. In addition, the Division took a
no-action position such that the CPO/CTA for the two U.S. funds, which also served as the CPO
for an offshore fund organized as a Rule 4.7(a) pool, could claim exempt status under Rule 4.7(a)
for all three funds despite the participation of eight non-QEP individuals in the three funds,
where the eight non-QEPs are high level employees and sophisticated investors, and where the
Division previously had deemed seven of them to be QEPs in connection with their investment
in other funds not the subject of this letter. [§4m(1), 4.7(a)] (T&M).

97-55; Exemption; June 23, 1997; The Division of Trading and Markets exempted a CPO from
the requirements of Rule 4.7(a)(2)(iv) to maintain the original books and records for a pool at its
main business office in the United States (U.S.) based upon the conditions that: (1) the CPO
maintain duplicates of the pool's books and records at its main business office; and (2) within 72
hours after a request by a duly qualified representative of the Commission, the National Futures
Association or the Department of Justice, the CPO make available originals of the pool's books
and records to the representative at a place located in the U.S. as specified by the representative.
The CPO maintained the pool's original books and records offshore to comply with the
requirements of Irish law, under which the pool had been formed. [Rule 4.7(a)(2)(iv)] (T&M).

97-56; No-Action; June 26, 1997; The Division of Trading and Markets granted CPO registration
"no-action" relief to the sole general partner of a limited partnership that will trade commodity
interests for speculative purposes. The partnership has four limited partners: two U.S. citizens, a
corporation organized under the laws of France, and a family trust. The four limited partners
have all had long-standing business and/or personal relationships with the general partners, and
each of the limited partners (in the case of the trust, the trustee) is a "qualified eligible
participant" as defined in Rule 4.7(a). The aggregate subscribed capital of the Partnership will be
$275,000. [§4m(1)] (T&M).

97-57; No-Action; July 2, 1997; The Division will not recommend that the Commission take any
enforcement action against a registered CPO based solely upon: (1) its operation of a fund as an
exempt pool under Rule 4.7(a) notwithstanding the participation in the fund by a principal of the
fund's CTA who does not qualify as a QEP; or (2) its investment of more than ten percent of the
fair markets value of the fund's assets in Rule 4.7(a) exempt pools. In addition, the Division will
not recommend the Commission take any enforcement action against the CPO of any Rule 4.7(a)
exempt pool in which the fund is or becomes a participant based solely upon the fund's
investment of more than ten percent of the fair market value of its assets in the Rule 4.7(a)
exempt pool. [Rule 4.7(a)] (T&M).

97-58; No-Action; May 8, 1997; The Division of Trading and Markets (T&M) permitted an
employee limited partnership (EE L.P. II) to be treated as a QEP for the purpose of investing in a
pool operated by an affiliate of the employees' employer. T&M also issued CPO and CTA
registration "no-action" relief to the operator/advisor of EE L.P. II, based upon, among other
things, representations that participants in EE L.P. II would be restricted to senior management
officials who were "accredited investors." [Rule 4.7(a), §4M(1)] (T&M).

97-59; Exemption; July 2, 1997; The Division of Trading and Markets exempted a registered
CPO and CTA from the location requirements of Rule 4.7(a)(2)(iv) and (b)(2)(ii) permitting it to
maintain the original books and records specified by those rules at the main business office of the
entity that performs administrative services for the CPO/CTA. The exemption is subject to the
conditions that the registered CPO/CTA: (1) maintains copies of the books and records at its
office; and (2) remains responsible for the maintenance of all required books and records, and for
assuring their availability to the Commission, the National Futures Association and any other
agency authorized to inspect such books and records. [Rule 4.7(a)(2)(iv)&(b)(2)(ii)] (T&M).

97-60; No-Action; July 1, 1997; The Division of Trading and Markets took a no-action position
regarding CPO registration relief for the sole general partner of two U.S. funds to be operated as
Rule 4.7(a) pools where the CTA for both funds will also serve as the fund's CPO, the general
partner and the CPO/CTA are affiliated companies, the general partner will limit its activities
with regard to the two funds, and the CPO/CTA and the general partner accepted joint and
several liability with each other for any violation of the Act or Commission regulations
thereunder applicable to CPOs in connection with the two funds. In addition, the Division took a
no-action position such that the CPO/CTA for the two U.S. funds, which also served as the CPO
for an offshore fund organized as a Rule 4.7(a) pool, could claim exempt status under Rule 4.7(a)
for all three funds despite the participation of six non-QEP individuals in the three funds, where
the six non-QEPs are high level employees and sophisticated investors. [§4m(1), 4.7(a)] (T&M).

97-61; Exemption; July 1, 1997; The Division of Trading and Markets permitted a registered
CPO to claim relief under Rule 4.7(a) with respect to Class B units of a limited liability company
(LLC), notwithstanding the presence in the LLC of non QEP unitholders; the LLC may invest in
exempt pools without regard to the ten percent limitation of Rule 4.7(a). [Rule 4.7(a)] (T&M).

97-62; Exemption; July 15, 1997; The Division of Trading and Markets (Division) granted an
exemption from Rule 4.21 to the CPO and general partner of a commodity pool "master" fund
with respect to delivering a Disclosure Document to prospective participants in the master fund.
These prospective participants were two commodity pool "feeder" funds of which the CPO and
general partner was also the CPO and general partner of the master fund. The Division also
granted an exemption from Rule 4.23(a) concerning the location of the original books and
records of the master fund. [Rule 4.21, Rule 4.23(a)] (T&M).

97-63; Interpretation; July 15, 1997; The Division of Trading and Markets confirmed that a news
wire service which wished to provide a listing of daily estimated rates of return and information
on the net asset values of publicly offered pools would be excluded from the definition of a
commodity trading advisor and would not appear to be otherwise violating the Commodity
Exchange Act or Commission rules in publishing the listing. The news service represented that it
would offer the listing in a manner that was solely incidental to its general financial reporting
services. The information contained in the listing would be calculated by the pools' commodity
pool operators (CPOs) and any calculations would be done in a manner consistent with
Commission rules. Only data from pools operated by registered CPOs would be used. The
Division emphasized that the CPOs remained subject to all applicable regulations and could be
subject to enforcement action if they submitted false or misleading information to the news
service. The news service also affirmed that it would print certain disclaimers in connection with
the listing, including statements that the information contained therein may be estimated and was
not independently verified. [Section 4m(1) of the Act] (T&M).

97-64; Interpretation; July 15, 1997; The Division of Trading and Markets addressed the
applicability of Rules 4.7, 4.31, and 4.33 to a registered commodity trading advisor (CTA)
located in Germany that wished to expand its client base to include qualified eligible clients in
the United States. The Division explained the relief from the disclosure and recordkeeping
requirements of Rules 4.31 and 4.33 made available to qualifying CTAs by Commission Rule
4.7(b). Regarding a question concerning the sufficiency of the CTA's recordkeeping
arrangements for a particular client, the Division noted that Rule 4.33 requires that a registered
CTA maintain at its main business office the books and records specified in the rule, but
explained that the Division had granted relief from the location requirement of Rule 4.33 where a
CTA has demonstrated a need to maintain its books and records at a location other than its main
business office. [Rule 4.7, 4.31, 4.33] (T&M).

97-65; No-Action; July 31, 1997; General partner of a Cayman Islands limited partnership to be
operated as a Rule 4.7(a) pool not required to register as a CPO where the general partner is a
wholly owned subsidiary of a registered CPO, who requested, and the Division deemed, to be the
CPO of the pool. The general partner agreed to limit its activities with regard to the pool, no
principal of the general partner was subject to a statutory disqualification under the Commodity
Exchange Act, and the registered CPO and the general partner accepted joint and several liability
with each other for any violation of the Act or Commission regulations thereunder applicable to
CPOs in connection with the operation of the pool. [§4m(a)] (T&M).

97-66; Exemption; July 9, 1997; A registered CPO and CTA was exempted from the books and
records location requirements of Rules 4.7(a)(2)(iv) and (b)(2)(ii) such that the CPO/CTA may
maintain the books and records of a pool containing United States persons as investors at the
offshore offices of the pool's administrator. This relief is subject to the condition, among others,
that the CPO/CTA will cooperate in any information sharing arrangements between the country
where the books and records are to be kept and the United States. [Rules 4.7(a)(2)(iv) and
(b)(2)(ii)] (T&M).
97-67; No-Action; August 6, 1997; A register CPO could continue to claim relief under Rule
4.7(a), notwithstanding the admission of a non-QEP trust into the Pool. The trust had been
created by the will of a QEP, the sole trustee and the individual responsible for making
investment decisions for the trust was the grantor's widow and a QEP, and the sole income
recipient for fifteen years was a QEP. In addition, although not all participants in the Pool were
QEPs, the CPO could invest more than ten percent of the fair market value of the Pool's assets in
other pools for which the CPOs thereof had claimed relief pursuant to Rule 4.7(a). [Rule 4.7(a)]
(T&M).

97-68; Exemption; August 6, 1997; The Division of Trading and Markets confirmed that a
registered commodity trading advisor could continue to claim relief from the disclosure
document requirement of Rule 4.31 in connection with providing commodity interest trading
advice to an offshore fund which would have as participants non-United States persons as well as
qualified eligible clients. [Rule 4.31] (T&M).

97-69; Exemption; August 21, 1997; The CPO of a commodity pool was exempted from
preparing and distributing the quarterly statements and Annual Reports required under Rules
4.7(a)(2)(ii) and (iii) in connection with a commodity pool whose sole limited partner is the
Individual Retirement Account (IRA) of an attorney who is a senior partner at a law firm that
provides counsel to the CPO. [Rules 4.7(a)(2)(ii) and (iii)] (T&M).

97-70; Exemption; August 19, 1997; The CPO of a commodity pool was exempted from the
disclosure, reporting and recordkeeping requirements of Rules 4.21, 4.22 and 4.23(a)(10) and
(a)(11) in connection with a commodity pool whose interests will be offered exclusively to
members of the CPO's immediate family and his wife's immediate family. Limited partners
receive detailed unaudited monthly reports and annual tax returns for the pool. [Rules 4.21, 4.22
and 4.23(a)(10) and (a)(11)] (T&M).

97-71; No-Action; August 29, 1997; No-Action letter allowing the Singapore International
Monetary Exchange's futures contract based on the Morgan Stanley Capital International Taiwan
Stock Index to be offered or sold in the United States. [Section 2(a)] (OGC).

97-72; No-Action; August 28, 1997; A registered CPO could continue to claim under Rule
4.7(a), notwithstanding the Pool's admission of a non-QEP joint account, which was owned by a
husband and wife. The husband was the sole proprietor of a registered CTA that served as the
Pool's CTA, and his wife was an accredited investor and attorney who had practiced corporate
and rule estate law and who had assisted her husband in forming the CTA. [Rule 4.7(a)] (T&M).

97-73; No-Action; August 20, 1997; Directors of "X", a commodity pool, not required to register
as CPOs in connection with their operation of X where, among other things: (1) X's investment
manager is registered as a CPO; (2) X's participants are QEPs; (3) the Directors are all "non-
United States" persons who either (a) own or have family members who own interests in X or (b)
is an officer and director of a participant of X; (4) the Directors delegate to the investment
manager the sole responsibility for the operation of X and the solicitation of investors for X; and
(5) the Directors and the investment manager are jointly and severally liable for any violations of
the Act or the Commission's regulations thereunder. The Division also granted the investment
manager relief from the requirements of Rule 4.23(a) with respect to the location of original
books and records. [Section 4m(1) of the Act; Rule 4.23(a)] (T&M).

97-74; Interpretation; August 25, 1997; The Division of Trading and Markets provided
interpretative advice regarding the regulatory requirements under the Commodity Exchange Act
for forming an FCM or IB. The staff advised that Rule 3.10 requires that certain documents be
submitted to NFA, and that Rule 3.34 requires that registrants attend ethics training as specified
in the rule. The staff noted that nothing in the Act or Commission rules prohibits a bank from
registering as an FCM or IB, although due to certain financial requirements as well as restrictions
imposed by banking regulators, banking enterprises generally create a subsidiary or affiliate to
act as an FCM or IB. [Rule 3.10] (T&M).

97-75; No-Action; September 25, 1997; The Division of Trading and Markets provided relief
under Rule 4.7(a) to a registered CPO, notwithstanding the presence of a non-QEP in its pool,
where the non-QEP is a trust established by the Chairman of the CPO for the sole benefit of the
Chairman's two teenage sons. The non-QEP trust has ready access to information pertinent to an
investment in the pool and agrees to being treated as a QEP. [Rule 4.7(a)] (T&M).

97-76; No-Action; September 24, 1997; The Division of Trading and Markets provided relief
under Rule 4.7(a) to a registered CPO, notwithstanding the presence of non-QEPs in its pool,
where the non-QEPs are employees of the CPO who hold high level director or officer positions
with the CPO and who perform as analysts and portfolio managers for the pool. The non-QEPs
have ready access to information pertinent to an investment in the pool and agree to being treated
as QEPs. [Rule 4.7(a)] (T&M).

97-77; No-Action; September 16, 1997; CPO registration relief was provided to the operator of a
partnership that traded commodity interests based upon, among others, representations that
participants were Commission registrants, certain of their current and former employees and
certain of their current and former family members. [Section 4m(1) -- Requirement to register as
a CPO] (T&M).

97-78; No-Action; September 24, 1997; The Division of Trading and Markets found that a
partnership consisting of a wife and her ex-husband, two trusts for the benefit of their children, a
trust for the benefit of the wife, the ex-husband's current spouse, the wife's sister-in-law and a
trust for her benefit, the sister-in-law's children and trusts for their benefit, the sister of the sister-
in-law and the sister-in-law's grandson was not a commodity pool within the meaning and intent
of Rule 4.10(d)(1) and, consequently, that the General Partners were not CPOs thereof. Because
the partnership qualified for treatment as a QEP under Rule 4.7(a)(1)(ii)(B)(2)(viii), the Division
did not address the request for relief from the ten percent restriction imposed on the assets of a
Rule 4.7(a) exempt pool that may be used to purchase units in other Rule 4.7(a) exempt pools
where not all investors in the investor fund will be QEPs. [Rule 4.10(d)(1) and Rule
4.7(a)(1)(ii)(B)(2)(viii)] (T&M).

97-79; No-Action; September 29, 1997; The Division of Trading and Markets provided a CPO
registration no-action position for a general partner of a fund where: the general partner was
affiliated with a registered FCM; the CTA for the fund was also affiliated with the general
partner; each investor in the fund was and would be an accredited investor; the fund would
commit no more than two percent of its net asset value to establish commodity interest positions;
the minimum investment in the fund was $500,000; the fund would trade commodity interests
solely for bona fide hedging purposes; the fund would not be marketed as a commodity pool;
and, the general partner did not and would not serve as the CPO to any other commodity pool.
The Division conditioned the relief by requiring the general partner and the CTA of the fund to
provide the Division with a signed acknowledgment whereby each party accepts joint and
several liability with the other for any violation of the Act or the Commission's rules issued
thereunder applicable to CPOs. [Section 4(m)(1) -- CPO Registration] (T&M).

97-80; Interpretation; September 10, 1997; The Division of Trading and Markets provided
interpretative guidance in response to any inquiry concerning whether a futures commission
merchant (FCM) needed to register as a commodity trading advisor (CTA) if it solicited and
managed retail customer accounts. The Division noted that Section 1a(5) of the Commodity
Exchange Act provides a statutory exclusion from the CTA definition for certain categories of
persons, among which are FCMs, who provide commodity interest trading advice in a manner
"solely incidental" to the conduct of their business or profession. The Division noted that as a
general rule, the Commission has not required an FCM which manages a customer's commodity
interest account to register as a CTA so long as the firm is acting as an FCM with respect to the
account, i.e. carrying the account on its books and accepting customer funds in a connection with
commodity interest transactions. [§ 1a(5)] (T&M).

97-81; No-Action; September 24, 1997; The Division of Trading and Markets denied the request
of an individual that he not be required to be listed as a principal of two affiliated firms for which
his title was "senior vice president." The Division noted that the Commission had previously
interpreted the term "principal" to include "any vice president." In addition, since the individual
was already registered as an associated person of both firms, the Division stated that the only
additional step required would be for the two firms to each file a Form 3-R to amend their
respective Form 7-Rs to add the individual as a principal. [Rule 3.1] (T&M).

97-82; No-Action; September 23, 1997; Trust investment manager not required as a CPO or
CTA and Trustee not required to register as a CPO where, among other things: (1) the Trust
would trade in compliance with the trading requirements of Rule 4.5(c)(2); (2) the Trust
contained only two United States persons as investors, an investment vehicle operated pursuant
to Rule 4.7 and a subsidiary of public cooperation; and (3) the two United States persons would
not own, in the aggregate, more than two percent of the Trusts outstanding shares. [Section
4m(1) of the Act] (T&M).

97-83; No-Action; September 5, 1997; The Division of Trading and Markets granted "no-action"
relief from the requirement to register as a CPO with respect to the Board of Managers of a
commodity pool organized as a limited liability company, and with respect to a registered CTA
and registered investment adviser (RIA) that acted as the pool's investment manager (and to
which the Board of Managers had delegated extensive authority regarding the management and
operation of the pool). Participants in the pool were all existing accredited investor clients of the
CTA/RIA and a registered broker-dealer that acted (with the CTA/RIA) as the pool's co-
placement agent. Relief was conditioned upon: (1) the CTA/RIA remaining registered as a CTA
and as an RIA: (2) the pool being closed to new participants and having as participants only
exiting clients of the co-placement agents; (3) participants having purchased their interests by
contributing securities encumbered by transfer restrictions or with substantial unrealized capital
gain; (4) the pool was constructed to mirror the performance of the S&P 500 index; and (5)
commodity interest trading was limited pursuant to Rule 4.5(c)(2)(I). [Section 4m(1)] (T&M).

97-84; No-Action; October 17, 1997; The Division of Trading and Markets granted continued
relief under Rule 4.7(a) to a registered CPO/CTA notwithstanding the admission of a non-QEP
into a Pool operated by the CPO. The non-QEP, who has more than 30 years of investment
experience, is the father of the CPO's president, sole shareholder, and sole director. The Division
granted the relief subject to the condition that the non-QEP consent in writing to being treated as
a QEP. [Section 4.7(a) -- Exemptive Relief for CPO's] (T&M).

97-85; No-Action; October 8, 1997; Separately incorporated affiliates of a bank affiliate FCM
that refers business to the FCM not required to register as IBs or otherwise where, among other
things: (1) each affiliate was subject to regulation by regulatory authorities other than the
Commission; (2) all employees of the affiliates engaged in referring commodity business to the
FCM will be registered as APs of the FCM; (3) each office of each affiliate will be identified as a
branch office of the FCM for registration purposes; (4) existing principals or APs of the FCM
will supervise the commodity interest-related activities of affiliate's employees; and (5) the
affiliates agree to be jointly and severally liable with the FCM for any violations of the Act or
regulations committed by the affiliate's employees. [Section 4d of the Act] (T&M).

97-86; No-Action; September 15, 1997; The Division of Trading and Markets granted "no-
action" relief permitting the registered CPO of a Rule 4.7 exempt pool to admit as a participant
an investor pool composed entirely of five employees of the Rule 4.7 exempt pool, each of
whom (1) had a least five years' relevant employment experience in the financial services
industry, (2) was an accredited investor and/or had an annual income of at least $100,000, and
(3) consented to QEP treatment. The investor pool was formed to enable employees to
participate in profits with favorable tax treatment. A no-action position was also taken with
respect to failure of the investor pool's CPO (who was also the sole principal of the Rule 4.7
exempt pool's CPO) to comply with the requirements of Rules 4.21 through 4.26 in operating the
investor pool. Both no-action positions were taken on condition that no additional participants
would be admitted to the investor pool without prior approval of the Division. Among the factors
considered in granting relief was the representation by the CPO that the five employees were
"knowledgeable employees" of the Rule 4.7 exempt pool (as the term "knowledgeable
employee" is defined in new Rule 3c-5(a)(4) under the Investment Company Act of 1940). [Rule
4.7(a) and Rules 4.21 - 4.26] (T&M).

97-87; No-Action; October 29, 1997; The Division of Trading and Markets granted relief from
the disclosure and reporting requirements of Rules 4.21, 4.22, 4,24, 4.25, and 4.26 to a registered
CPO with regard to its operation of a newly-established Fund comprised exclusively of
principals and/or employees of the CPO or an entity affiliated with the CPO as advisor to the
Fund where all but one of the participants in the Fund have duties with respect to the day-to-day
trading and/or operation of the Fund, all of the participants adequately understand the risks of
futures trading, and all of the participants will have access to the books and records of the Fund.
The one participant who does not have daily duties with respect to the Fund is himself a QEP and
the controlling principal of both the CPO and its affiliate. [Rules 4.21, 4.22(a) and 4.22(b), 4.24,
4.25, and 4.26 -- Exemptive Relief for CPO] (T&M).

97-88; Exemption; October 10, 1997; The Division of Trading and Markets permitted a
registered investment adviser to rely on an exemption from CTA registration provided by Rule
4.14(a)(8), despite the fact that the entities for which the advice was being provided, two
Canadian funds having no U.S. investors, were not qualifying entities under Rule 4.5. The
advisor provided commodity trading advice which was "solely incidental" to its business of
providing securities advice, agreed to employ only those strategies which were consistent with
the eligibility status under Rule 4.5(c)(2), and did not otherwise hold itself out as a CTA.
[Section 4m(1)] (T&M).

97-89; No-Action; October 27, 1997; The Division of Trading and Markets took a CPO and CTA
registration no-action position with respect to the managing member of a pool that was
established for the estate planning purposes of a single family. The pool was not marketed to the
public and the managing member's commodity interest trading advice was solely incidental to his
provision of securities advice to the pool. [Section 4(m)(1) -- CPO Registration] (T&M).

97-90; No-Action; October 29, 1997; The Division granted relief from the disclosure and
reporting requirements of Rules 4.21, 4.22, 4.25, and 4.26 to a CPO in connection with its
operation of a pool with respect to the participation of two employees of the CPO's advisory
affiliate, each of whom had substantial experience in the financial services industry and was
involved in the trading or management of the pool, and a third person who was an accredited
investor and had been the executive vice-president of the CPO's advisory affiliate. The Division
also granted relief from the QEP criteria of Rule 4.7 to the CPO where the proposed participants
in the pool included two persons who were accredited investors and a third person who was
employed as controller for both the CPO and its advisory affiliate. One of the two accredited
investors was the friend and neighbor of the controlling principal of the CPO and had a net worth
of $5 million. The other accredited investor was a limited partner in another pool operated by the
CPO and had been the executive vice-president of the CPO's advisory affiliate. [Rules 4.7(a),
4.21, 4.22(a) and 4.22(b), 4.25, and 4.26 -- Exemptive Relief for CPO. (T&M).

97-91; No-Action; November 24, 1997; The Division of Trading and Markets declined to
provide relief to a company that offered an agricultural marketing service from the requirement
that it register as a commodity trading advisor (CTA). The Division stated that to the extent that
the company recommend the use of commodity futures or options contracts to achieve it clients'
marketing goals, the company was register as such. The company was also informed that if it
intended to solicit discretionary authority over its clients commodity interest trading accounts,
even if such authority was only sought to carry out the agreed upon marketing plans, or if it
guided client accounts, the company would first have to provide its clients with a Disclosure
Document pursuant to Rule 4.31. [Section 4(m)(1)] (T&M).

97-92; No-Action; November 21, 1997; The Division of Trading and Markets provided relief
under Rule 4.7(a) to a registered CPO, notwithstanding the presence of a non-QEP in its pools,
where the non-QEP is an employee of the CPO who holds a high level officer position with the
CPO. The non-QEP is investing in the pools on behalf of the CPO in order to act as the "Tax
Matters Partner" for the pools in proceedings before the Internal Revenue Service. The non-QEP
has ready access to information pertinent to an investment in the pool and agrees to being treated
as a QEP. [Rule 4.7(a)] (T&M).

97-93; No-Action; June 3, 1997; The CFTC's Off-Exchange Task Force has issued a no-action
letter recommending that the Commission not take enforcement action against certain individuals
for operating, or participating in, a physical delivery electronic natural gas trading system.
Trading on the system is limited to qualified commercial participants and transactions executed
on the system impose binding physical delivery obligations on the participants. The Task Force
has determined that the operation of this physical delivery trading system does not require
designation as a contract market, registration under the Commodity Exchange Act (Act), or
compliance with the Act or Commission Regulations except such parts thereof that relate to
manipulation. [Sections 1a, 2(a)(1)(A), 4, 5, and 6 of the Commodity Exchange Act] (T&M).

97-94; No-Action; November 21, 1997; The Division of Trading and Markets granted CPO
registration "no-action" relief to an insurance company (that was also a registered investment
adviser) in connection with acting as sponsor and fiduciary of a group trust comprised of assets
of employee pension or profit-sharing plans or of governmental plans, on the condition that the
insurance company would comply with the requirements of Rule 4.5. The Division also granted
CTA registration "no-action" relief in connection with the insurance company providing
commodity interest trading advice to the group trust, upon the additional conditions that the
insurance company would not hold itself out as a CTA and that it would comply with the notice
requirement of Rule 4.14(a)(8). Finally, the Division granted CPO registration "no-action" relief
with respect to the failure of the trust company acting as the group trust's trustee and custodian,
since the trust company would have minimal contact with participants, would have no
investment discretion with respect to group trust assets, would not make investment
recommendations or review the insurance company's investment decisions, and would have no
authority to hire or fire the group trust's fund managers or its FCMs. [Section 4m(1)] (T&M).

97-95; No-Action; September 17, 1997; The CPO of an employee limited partnership (the Fund)
which consisted of sophisticated, senior management employee could claim relief pursuant to
Rule 4.7(a) with respect to the operation of the Fund, could treat the Fund as a QEP for the
purpose of investing more than ten percent of the Fund's assets in other Rule 4.7(a) Exempt
Pools, and was not required to provide quarterly reports to Fund participants. In addition, the
CTA for the Fund could treat the Fund as a qualified eligible client pursuant to Rule 4.7(b). This
relief was based upon, among others, representations that all Fund participants were
sophisticated investors, had ready access to information regarding the Fund's operation and
investments, and would be provided with a detailed offering memorandum and annual report.
[Rule 4.7(a)] (T&M).

97-96; No-Action; November 18, 1997; CPO and CTA registration no-action relief issued to a
registered investment adviser in connection with the operation and advisement of an offshore
fund based upon, among others, representation that: (1) the adviser was not a sponsor of the
fund; (2) interests in the fund would be held solely by non-U.S. persons; (3) the primary
responsibility for managing the fund rested with its Board and officers: (4) information provided
by the adviser to existing and prospective participants would be limited to publicly available
information; and (5) any U.S. contact would be minimal and would not be initiated by the
adviser. In addition, no-action relief from certain of the criteria of Rule 4.14(a)(8) issued to the
adviser such that it could continue to claim exemption from CTA registration with respect to
certain of other funds for which it previously had filed a Rule 4.14(a)(8) notice of exemption.
[Section 4m(1)--Requirement to Register as a CPO or as a CTA. Rule 4.14(a)(8)--Exemption
from CTA registration for certain registered investment advisers.] (T&M).

97-97; Interpretation; November 18, 1997; The Division of Trading and Market provided
interpretative guidance in response to an inquiry concerning the ability of a registered futures
commission merchant (FCM) also to be registered as a commodity trading advisor (CTA) or
commodity pool operator (CPO). The Division noted that nothing in the Act or in the
Commission's rules prohibited an FCM from also being registered as a CPO or CTA. The
Division explained that pursuant to Rule 4.13(a)(2), an FCM could claim an exemption from
CPO registration if the aggregate gross value for all commodity pools operated by the FCM did
not exceed $200,000 and none of the pools contained more than fifteen participants at any time.
Furthermore, Section 1a(5) of the Act provides a statutory exclusion from the CTA definition for
certain categories of persons which includes, among others, banks, teachers and FCMs who
provide commodity trading advice in a manner "solely incidental" to the conduct of their
business or profession. The Division explained that, as a general rule, the Commission has not
required an FCM which manages a customer's commodity interest account to register as a CTA
so long as the firm is acting as an FCM with respect to the account, i.e., carrying the account on
its books and accepting customer funds in connection with commodity interest transactions. [§
1a(4) and § 1a(5)] (T&M).


97-98; No-Action; November 10, 1997; CPO provided relief from the ten percent investment
limitation of Rule 4.7(a)(1)(ii)(B)(2)(xi) notwithstanding an investment in the pool operated by
the CPO by a limited partnership (LP) containing certain trusts that are not QEPs. Registration
relief also was provided to the general partners of the LP based upon, among other things, the
familial relationship among the trust beneficiaries. [Rule 4.7(a); Section 4m(1) of the Act]
(T&M).

97-99; No-Action; December 29, 1997; The Division of Trading and Markets provided relief
under Rule 4.7(a) to registered CPO, notwithstanding the presence of non-QEPs in its pools,
where the non-QEPs are employees of a wholly-owned subsidiary of the CPO that was
established solely to provide research to the CPO. The non-QEPs are employed as analysts and
traders for the subsidiary research company. However, relief was denied to one employee based
on his brief experience working in the securities industry and his relative lack of financial
resources compared to the QEP standards. The non-QEPs that were granted relief have ready
access to information pertinent to an investment in the pool and agree to being treated as QEPs.
[Rule 4.7(a)] (T&M).