. . .. -----~ ... -·-·-·------- --~---·--·----------·----- -··-- -· ··------------- ·-' 

COMMOD.ITY FUTURES TRADING COMMISSION 

2033 K STREET, N.W., WASHINGTON, D.C. 20581 

David R. Sawyier, Esquire Sidley & Austin 

One First National Plaza 

Chicago, IL 60603 

Dear·Mr. Sawyier: 

(202) 254-9880 

(202) 254-3535 FACSIMILE 

May 30, 1991 

· This is in response to your letter dated December 14, 1990 to 

Joanne T. Medero, ·co-Chairman of the Commodity FUtures Trading Commission's Off-Exchange Ta~k Force, submitted on behalf· of your client, Gaiacorp u.s. Limited ("Gaiacorp"), as supplemented by a . meeting with Commission staff held on February 20, 1991. In your letter you state that Gaia Corp, which we understand is in the 

process of registering as a commodity trading atlvisor and commodity pool operator under the Commodity Exchange Act ("Act"), requests 

confirmation that the staff would not recommend that the Commission 

initiate enforcement action against it if it acted as the general 

partner and trading manager of a privately offered "institutional 

investors only" fund (the "FUnd") which would trade in off-exchange transactions for the future delivery of foreign currencies2/ as 

well as off-exchange foreign currency option transa_ctions. 

Based upon the_ representations set ~orth in your December 14, 

1990 letter, we understand the facts to b~ as follows: 

.GaiaCorp would limit the prospective investors' in the Fund to 

institutions which meet the criteria for being "qualified 

institutional buyers" under Securities and Exchange commission 

("SEC") Rule 144A,A/. None of the institutions permitted to .. 

l../To the extent that transactions described in your December i4, 

1990 letter and the subsequent meeting with the staff are cash 

forward contracts, such transactions have been and continue to be ~eluded from the coverage of the Commodity Exchange Act. See 7 

u.s.c·. 52. 

2/PUrsuant to· SEC Rule 144A, qualified institutional buyers 

generally include: (1) certain· entities, acting . for their own 

account or the accounts of other qualified institutional buyers, that in the aggregate own and invest on a discretionary basis at 

least $100 million in securities of issuers that are not affiliated 

with the entity; (2) registered dealers, acting f.or their own 
. ' 

" . 

David R. Sawyier, Esquire 

Page 2 

invest in the Fund would itself be· a pool, or would be an 

investment fund formed principally for the purpose of investing in 

the Fund or whose assets consist solely of interests in the Fund. 

Further, prior to accepting any subscriptions, Gaia corp would 

satisfy· itself that the prospective investor is sufficiently financially sophisticated in the specialized fiel~ of off-exchange foreign currency transactions to ~derstand the risks of trading in 

such transactions.3/ 

' . Bas~d upon the representations in your letter, tbe staff will 

not recommend to the Commission any enforcement action under 

Sections 4(a) or 4c of the Act, 7 u.s·.c. S 6(a) or S 6c, or Part 4 

of the commission's regulations, 17 c.F .. R. Part 4, based· upon Gaiacorp•s offering of the FUnd which will trade in off-exchange· 

transactions for the future delivery of foreign currencies as well 

as off-exchange foreign currency option transactions, without 

compliance with Part 4 of the Commission's regulations, provided ·the Fund is made up solely of institutional investors as described 

above.4/ This position does not excuse Gaiacorp from complying with any otherwise applicable provisions of the Commodity Exchange 

Act or the Commission regulations; nor does it address any other 

proposed instrument. Any different, omitted or changed facts or 

conditions might require a different conclusion. :It should also be 

accounts or the accounts of other qualified, institutional buyers, 

provided that certain a~ditional criteria are ~et; (3) any ·registered investment company aci::,ing for its own account or for the 

accounts.of other qualified instituti9nal buyers, provided. that 

certain additional criteria are met; (4) any entity, all of the 

equity owners of which are qualified institutional'buyers, acting for its own account or the account of other qualified institutional 

buyers; and (5) certain banks and savings and loan associations, 

acting for their own accounts or the accounts of other qualified 

institutional ~uyers, that in the aggregate own a.nd invest on. a ~iscretionary basis at least $100 million in securities of issuers 

that are not affiliated with it, provided that certain additional 

criteria are met. See 17 C.F.R. S230.144A. 

3JYou have also inaicated that Gaiacorp, for its own purposes, .has 

found it appropriate to limit in~titutional investment in the Fund 

to 10% or less of the subscribing institution's liquid net worth • . 4/l:n adopting this .no-action position, the staff does not intend to 

suggest that only persons or entities which meet the definition of 

"qualified institutional investor" under SEC Rule 144A may engage in transactions of the type proposed to be entered into by the 

Fund. ··. 

• .. 1 .. 
David R. Sawyler, Esquire 

Page 3 · · 

noted. that this position is that of the staff and is not binding 

upon the Commission. ... 

Sincerely, 

Joanne T. Med·ero 

Andrea M. Corcoran 

co-Chairmen 

Off-Exchange Task Force 

·. 

; 

•. 

. "