The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affi...

Summary: The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affiliated, registered CPO (“designee”) to serve as the CPO of the pool instead, where, among other things: (1) the general partner and the designee are under common ownership and control; (2) the general partner has delegated all of its management authority to the designee; (3) the general partner does not engage in the solicitation of investors for the pool and does not manage property of the pool; and (4) the general partner and designee executed and submitted to the Division a written acknowledgement of joint and several liability for any violation by either of them of the Act or the Commission’s regulations.

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5430

Facsimile: (202) 418-5547

aradhakrishnan@cftc.gov

Division of Clearing and

Intermediary Oversight

Ananda Radhakrishnan

Director

CFTC Letter No. 09-44

No-Action

August 21, 2009

Division of Clearing and Intermediary Oversight

Re:

Section 4m(1) – Request for CPO Registration Relief

Dear :

This is in response to your letter dated July 8, 2009, to the Division of Clearing and

Intermediary Oversight (the “Division”) of the Commodity Futures Trading Commission (the

“Commission” or “CFTC”), as supplemented by e-mail messages from your counsel, “A”, sent

July 27 and August 13, 2009 (collectively, the “correspondence”). By the correspondence, you

seek relief on behalf of “B”1 from the requirement to register with the Commission as a

commodity pool operator (“CPO”) under Section 4m(1) of the Commodity Exchange Act (the

“Act”)2 in connection with serving as the general partner of the Pool, such that “C”, a registered

CPO, may serve as the Pool’s CPO instead

ugust 13, 2009 (collectively, the “correspondence”). By the correspondence, you

seek relief on behalf of “B”1 from the requirement to register with the Commission as a

commodity pool operator (“CPO”) under Section 4m(1) of the Commodity Exchange Act (the

“Act”)2 in connection with serving as the general partner of the Pool, such that “C”, a registered

CPO, may serve as the Pool’s CPO instead.

Based upon the representations made in the correspondence, we understand the facts to

be as follows: The Pool is organized as a limited partnership. While “B” is its general partner,

“B” has delegated all of its management authority to “C”, the Pool’s investment manager and a

registered CPO. As is explained in the correspondence, this structure is intended to facilitate the

favorable tax treatment of performance allocations to the owners of “B”.3

In support of your request you represent that:

1

You are the managing member of “D”, which is the general partner of “B”.

2

7 U.S.C. §6m(1) (2006). The Act may be accessed through the Commission’s website, at

http://www.cftc.gov/lawandregulation/index.htm. The Commission’s regulations are found at 17

CFR Chapter I (2009) and similarly may be accessed through the Commission’s website at the

aforestated site.

3

The Division takes no position, however, regarding the advisability or legality of this

conclusion under federal or state law, or regulations issued by the Department of the Treasury.

at

http://www.cftc.gov/lawandregulation/index.htm. The Commission’s regulations are found at 17

CFR Chapter I (2009) and similarly may be accessed through the Commission’s website at the

aforestated site.

3

The Division takes no position, however, regarding the advisability or legality of this

conclusion under federal or state law, or regulations issued by the Department of the Treasury.

Page 2

1. “B” and “C” are under common ownership and control.4

2. Pursuant to the Pool’s limited partnership agreement and its investment management

agreement with “C”, “B” has delegated all of its management authority to “C”. “B” does not

engage in the solicitation of investors for the Pool, nor does it manage property of the Pool.

3. “C” is registered with the CFTC as a CPO, and the books and records of “B” will be

maintained at the offices of “C”.

4. “B” has no employees or other persons acting on its behalf, and it does not engage in any

other activities that are subject to the Act or CFTC regulations.

5. “B” is not subject to a statutory disqualification under Section 8a(2) or 8a(3) of the Act.

In further support of your request, “B” and “C” have executed in writing an undertaking

to be jointly and severally liable for any violation of the Act or Commission regulations.

Based upon the foregoing, and consistent with prior practice in this area,5

the Division

will not recommend that the Commission commence any enforcement action against “B” for

failure to register as a CPO under Section 4m(1) of the Act in connection with serving as the

general partner of the Pool. This position is, however, subject to the conditions that: (1) “C”

serve as the CPO of the Pool; and (2) “C” remain registered as a CPO.

The relief issued by this letter does not excuse “B” from compliance with any other

applicable requirements contained in the Act or in the Commission’s regulations issued

thereunder

f the Act in connection with serving as the

general partner of the Pool. This position is, however, subject to the conditions that: (1) “C”

serve as the CPO of the Pool; and (2) “C” remain registered as a CPO.

The relief issued by this letter does not excuse “B” from compliance with any other

applicable requirements contained in the Act or in the Commission’s regulations issued

thereunder. For example, it remains subject to all antifraud provisions of the Act6

and the

Commission’s regulations, as well as the reporting requirements for traders set forth in Parts 15,

18 and 19 of the Commission’s regulations, and all applicable provisions of Part 4, including

Regulations 4.20 and 4.41.

This letter, and the position taken herein, are based upon the representations made to us

and are subject to compliance with the conditions stated above. Any different, changed or

omitted material facts or circumstances might render this letter void. You must notify the

Division immediately in the event that the operations or activities of “B”, “C”, or the Pool

change in any material respect from those as represented to us. Further, this letter and the

4

“E” is the managing member, and the sole principal, of each of “B” and “C”.

5

See, e.g., CFTC Staff Letter 09-02 (May 21, 2009), which may be accessed on the

Commission’s website at

http://www.cftc.gov/stellent/groups/public/@lrlettergeneral/documents/letter/09-02.pdf.

6

See, e.g., Sections 4b and 4o, 7 U.S.C. §§6b and 6o.

Page 3

position taken herein represent the views of this Division only, and do not necessarily represent

the views of the Commission or of any other office or division of the Commission.

If you have any questions concerning this correspondence, please contact Barbara S.

Gold, Associate Director, at (202) 418-5450.

Very truly yours,

Ananda Radhakrishnan

Director