December 11, 1986 

Re: Request for relief from registration as a commodity pool operator. 

Dear Mr. 

This is in response to your letter to the Division of Trading and 

Iv1arkets ("Division") dated June 24, 1986, as supplerrented by letters dated 

July 2, July 7 and July 25, 1986, and telephone conversations with Division 

staff on July 15, September 18, and November 19, 1986, on behalf of your 

client, "A", a New York limited partnership, in which you requested that the 

Division provide relief from commodity pool operator ("CPO") registration to 

"B", a general parb1er of "A". As discussed below, the Division has determined that it will not recorrm2nd that the Comnission take any enforcerre:nt 

action against "B" in the event he fails to register as a CPO in connect:ion 

with his serving as a general partner of "A". 

Based on your representations, the Division understands the facts to 

be as follows. "A" was formed in 1980 as a New York limited partnership. 

Its current capital is approx:imately $33 million. Limited partnership 

interests in "A" have been offered and sold in reliance on the exerrption for 

private place.rrents contained in Section 4 (2) of the Securities Act of 1933, 

as amended. "A" is not generally marketed as a commodity pool, and will not 

ccmuit rrore than five percent of the fair market value of its assets to be 

applied as margin for trading in corrm.:x:li ty interests • 

. "A" consists of four general partners and 54 limited partners. The 

"A" general partners, in addition to "B", are "C", "D" and "E", a New York 

general partnership. "B" and "C" are registered as CPOs in connection with 

"A".. The general partners of "E" currently are "C", "D", "F", who is 

registered as a CPO in cormection with the operation of another cornrodi ty 

pool, and "B", who becarre a general partner this year. 

Prior to the addition of "B" as a general partner, "C" and "D" were 

granted "substitute compliance" exerrptions by the Division on December 4, 

1984 from certain of the requirements applicable to registered CPOs under 

rules 4.21 and 4.22, 17 C.F.R §§4.21 and 4.22 (1986), in connection with 

"A"' s cornrodity interest trading. In cormection with that relief, the 
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Division also determined not to recorrm::md that the Corrrnission take any 

enforcerrent action against "E" for failure to register as a CPO. This 

determination was based on the fact that each general partner of "E" was 

registered as a CPO. 

Although "B" is a general partner of "A", pursuant to the limited 

partnership agreement, he is not authorized to exercise direction,supervision 

or control over: (i) the solicitation, acceptance, or receipt of funds or 

property to be used for purchasing, holding, selling or otherwise dealing in 

ccmrodity futures or options contracts; or (ii) the invest:m:mt, use or other 

disposition of such funds or property. In response to further staff inquiries, 

your finn informed Division staff that "B" had previously been registered 

with the Securities and Exchange Corrmission as an investrrent adviser, but 

that his registration had lapsed in 1980. Your finn also represented that 

"B" was not subject to a statutory disqualification under Section Sa of the 

Conm:::x:lity Exchange Act (tile "Act"), 7 u.s.c. §12a (1982). 

As you know, Section 2(a) (1) (A) of the Act, 7 u.s.c. §2(a) (1) (A) 

(1982), defines a CPO as: 

any person engaged in a business which is of the nature 

of an investrrent trust, syndicate, or similar fonn of 

enterprise, and who, in connection therewith, solicits, 

accepts or receives from others, funds, securities, or 

property, either directly or through capital contributions, the sale of stock or other fonns of securities 

or otherwise, for the purpose of trading in any commodity for future delivery .••. 

Section 4m(1) of the Act, 7 u.s.c. §6m(1) (1982), generally requires each 

person who comes within the statutory definition to register as a CPO with 

the Conmission. 

1~e Division's review of linuted partnership law indicates that 

pertinent state limited partnership statutes generally provide that a general 

partner of a limited parb1ership is jointly and severally liable for all 

partnership activities -- regardless of whether under the tenns of a particular· limited partnership agreement the obligation to perform any activity 

has been specifically delegated to, or rerroved from, any partic..'Ular general 

part:ner (s). "A" is a New York limited partnership. The rights, powers and 

liabilities of a general partner in a limited partnership formed under New 

York law are set forth in Section 98 (1) of the Unifonn Limited Partnership 

Act of the State of New York which provides, in pertinent part, that "[a] 

general partner shall have all the rights and powers and be subject to all 

the restrictions and liabilities of a partner in a partnership without 

general partners. • " Therefore, under the New York statute, each general 

partner may be held individually liable for all the obligations of the 
Page 3 

general partnership. 1/ With respect to the instant case, then, "B", as a 

general partner, would be jointly and severally liable for the C01.11IDdity 

interest trading activities of "A", notwithstanding the aforerrentioned 

restrictions upon his activities with "A". Therefore, "B", in his capacity 

as a general partner of "A", would be acting as a CPO. 

Based upon the foregoing facts, however, the Division has determined 

that relief from regulation as a CPO is appropriate. Specifically, the 

Division has determined that it will not recommend that the Commission take 

any enforcerrent action against "B" for his failure to register as a CPO based 

upon, arrong others, the facts that: (1) all other general partners of "A" 

are registered as a CPO (or, in the case of "E", have received relief from 

CPO registration); (2) "A" generally has not been and will not be marketed as 

a corrm:xlity pool; (3) "A" will not ccmnit IIDre than five percent of the fair 

market value of its assets to corrrocxlity interest trading; and (4) "B" is not 

subject to a statutory disqualification under Section Sa of the Act. 2/ 

This relief, however, is subject to the condition that "B" submit to the 

National Futures Association a Form 8-R and fingerprint card for clearance 

purposes. 

We note that "B" remains responsible for compliance with the anti-fraud 

provisions of Section 4o of the Act, 7 u.s.c. §6o (1982), and to the reporting 

requirenents for traders set forth in Parts 15 and 18 of the regulations, 17 

C.F .R. Parts 15 and 18 (1986). Finally, this "no-action" position is applicable to "B" solely in his capacity as a general partner of "A". 

This letter is based on the information that has been provided to us 

and is subject to compliance with the condition set forth above. Any different, changed or omitted facts or conditions might require us to reach a 

different conclusion. In this connection, we request that you notify us 

irmediately in the event "A"' s operation or "B"' s responsibilities thereto, 

including restrictions on corrmxlity interest trading, change in any way from 

1/ 

2/ 

FurtheriiDre, the New York statute is identical to Section 9 of the 

Uniform Limited Partnership Act (1916) ( "ULPA") • Previously, the ULPA 

had been adopted in every state except Louisiana. However, in 1976, the 

ULPA was revised m1d superseded by the Revised Uniform Limited Partnership 

·'Act (1976) ("RULPA"). RULPA subsequently has been adopted by several 

:jurisdictions including Arkansas, Connecticut, Maryland, Minnesota, 

Washington, West Virginia and Wyaning. CXlr review of Section 403 of 

RULPA indicates that it corresponds with, and is substantially similar 

to, Section 98 (1) of the New York law. 

Further, in light of these facts, the Division also has determined to 

extend so as to include "B" in the "no-action" position relating to "E"' s 

failure to register as a CPO taken jn our December 4, 1984 letter. 
Page 4 

that as represented to us. Should you have further questions, please feel 

free to contact Philip V. ~Guire, Esq., staff attorney, at (202) 254-8955. 

Very truly yours, 

Andrea M. Corcoran 

Director 

cc: Daniel A. Driscoll, National Futures Association