U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5430 

Facsimile: (202) 418-5547 

jcarley@cftc.gov

Division of Clearing and 

Intermediary Oversight

CFTC letter No. 05-13 

August 15, 2005 

Interpretation 

Division of Clearing and Intermediary Oversight 

Re: Rule 4.14(a)(8): “X” – Request for an Interpretation that an SEC-registered 

investment adviser relying upon the CTA registration exemption provided by Section 4m(3) 

may also advise clients pursuant to a claim of relief under Rule 4.14(a)(8). 

Dear : 

This is in response to your letter dated June 15, 2004, to the Division of Clearing and 

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

“Commission”). By your correspondence, you request, on behalf of “X”, confirmation that “X”, 

while relying upon the commodity trading advisor (“CTA”) registration exemption provided by 

Section 4m(3) of the Commodity Exchange Act (the “Act”)1 with respect to certain of its 

advisory activities, may simultaneously claim exemption from CTA registration pursuant to 

Commission Rule 4.14(a)(8)2 with respect to certain of its other advisory activities. 

Based upon the representations made in your letter, we understand the relevant facts to be 

as follows. “X” is registered with the Securities and Exchange Commission (“SEC”) as an 

investment adviser. In 2003, “X” withdrew from registration as a CTA with the Commission 

based upon its reliance on Section 4m(3) of the Act, a provision that was added to the Act by the 

Commodity Futures Modernization Act of 2000. Section 4m(3) provides that CTA registration 

is not required for an SEC-registered investment adviser “whose business does not consist 

primarily of acting as a commodity trading advisor”, as defined in the Act, “to any investment 

trust, syndicate, or similar form of enterprise that is engaged primarily in trading any commodity 

for future delivery on or subject to the rules of any contract market or registered derivatives 

transaction execution facility.” 

 

1

 7 U.S.C. §6m(3) (2000). 

2

 Commission rules referred to herein are found at 17 C.F.R. Ch. I (2005). 

 James L. Carley 

 Director 
Page 2 

“X” now intends to advise a commodity pool (the “Fund”) for which it will not be able to 

rely upon exemption from CTA registration under Section 4m(3), but will be eligible to claim 

exemption from CTA registration under Rule 4.14(a)(8).3 In this regard, then, “X” has asked the 

Division to confirm that it may simultaneously rely upon the statutory exemption from CTA 

registration under Section 4m(3) with respect to certain of its activities and file a claim for 

exemption under Rule 4.14(a)(8) with respect to certain of its other activities. 

The Commission previously considered a similar issue in connection with its adoption of 

Rule 4.14(a)(8), i.e., whether a CTA relying on Section 4m(1) of the Act could also claim 

exemption under the newly adopted rule.4

 In response to the comments received on that 

rulemaking, the Commission stated: 

[T]he Commission wishes to make clear that the relief provided by [Rule] 

4.14(a)(8) is mutually exclusive from that provided by section 4m(1) – that is, 

depending upon the nature of its activities a CTA may be exempt from 

registration as such under either or both provisions. Thus, the fact that a CTA 

who is claiming exemption under [Rule] 4.14(a)(8) has more than 15 clients for 

the purpose of that rule will not affect the CTA’s ability to claim exemption under 

section 4m(1) for a different set of clients – i.e., clients who are other than [Rule] 

4.5 trading vehicles.5

Like Section 4m(1), Section 4m(3) provides a statutory exemption from CTA 

registration, if specified conditions are met. As you point out in your correspondence, in the case 

of Section 4m(3), the CTA relying upon that statutory registration exemption is also subject to 

regulation by the SEC as an investment adviser. The Division sees no reason why the 

Commission’s reasoning with respect to simultaneous reliance upon Section 4m(1) and Rule 

 

3

 Specifically, “X” will meet the criteria for exemption under either Rule 4.14(a)(8)(i)(A) 

and (B) or Rule 4.14(a)(8)(i)(D), which concern providing commodity interest trading advice, 

respectively, to “qualifying entities” and “non-pools” under Rule 4.5 or to pools for which the 

CPOs thereof have claimed an exemption from registration under Rule 4.13(a)(3) or Rule 

4.13(a)(4). The latter two rules provide exemption, respectively, where the CPO observes 

specified limits for the pool’s commodity interest trading and admits as participants generally 

only accredited investors or where the CPO admits only certain classes of generally more 

sophisticated persons. 

4

 Section 4m(1) provides an exemption from CTA registration where a CTA advises no 

more than fifteen persons in a twelve-month period and does not hold itself out generally to the 

public as a CTA. 

5

 52 Fed. Reg. 41975, 41978 (November 2, 1987). 
Page 3 

4.14(a)(8) should not also apply where a CTA seeks to rely simultaneously upon Section 4m(3) 

and Rule 4.14(a)(8). 

Accordingly, the Division believes that if the activities of an SEC-registered investment 

adviser (such as “X”) meet the requirements of Section 4m(3), and the investment adviser desires 

to advise a commodity pool in a manner consistent with the requirements of Rule 4.14(a)(8), the 

investment adviser should be able simultaneously to rely on the CTA registration exemption 

provided by Section 4m(3) and to claim exemption from CTA registration under Rule 

4.14(a)(8).6

 This letter does not excuse a CTA relying on exemption from registration provided by 

Section 4m(3) while also claiming exemption under upon Rule 4.14(a)(8) from compliance with 

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

thereunder. For example, the CTA remains subject to all antifraud provisions of the Act7 and the 

Commission’s regulations, to the reporting requirements for traders set forth in Parts 15, 18 and 

19 of the Commission’s regulations, and to all applicable provisions of Part 4. 

 This letter is based upon the representations made to us. Any different, changed or 

omitted material facts or circumstances might render this interpretation void. Further, this letter 

represents the position of this Division only. It does not necessarily represent the position of the 

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

 If you have any questions concerning this correspondence, please contact me or 

Christopher W. Cummings, Special Counsel, at (202) 418-5445. 

 Very truly yours, 

 James L. Carley 

 Director 

 

6

 For the purpose of this letter, it has not been necessary for the Division to define or 

otherwise interpret the criteria of Section 4m(3), or to make any determination whether “X” 

meets these criteria in connection with its other activities, and this letter should not be read as 

providing any such definition, interpretation or determination. 

7

 See, e.g., Sections 4b and 4o, 7 U.S.C. §§6b and 6o (2000).