CFTC Letter 03-23

CFTC letter No. 03-23

May 5, 2003

Exemption

Division of Clearing and Intermediary Oversight

Re: Request for Exemption from Rules 4.7(b)(1), 4.7(b)(2) and 4.7(b)(3) 

Dear : 

This is in response to your letter dated March 25, 2003, to the Division of Clearing and Intermediary 

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

supplemented by emails dated April 10, 2003, April 24, 2003 and telephone conversations with Division 

staff. By your correspondence, you request that “X”, a registered commodity pool operator ("CPO") and 

the CPO of “Master Fund”, be granted an exemption from the disclosure and the periodic and annual 

reporting requirements of Rules 4.7(b)(1), 4.7(b)(2) and 4.7(b)(3).[1]

Based upon the representations made in your correspondence, we understand the facts to be as follows. 

In addition to the Master Fund, “X” serves as the CPO of “Feeder Fund I”, and an affiliate of “Y”, with 

the same ownership and management as “X”, serves as the CPO of Feeder Fund II” (collectively, the 

“Feeder Funds”). The Feeder Funds (and other feeder funds that may be formed by “X” or “Y” at a 

future date for which “X” or “Y” will be the sole CPOs) are the only investors in the Master Fund. “X”

has previously claimed relief pursuant to Rule 4.7 with respect to the Master Fund and Feeder Fund I 

and “Y” has claimed relief with respect to Feeder Fund II pursuant to the same rule. 

Rules 4.7(b)(1), 4.7(b)(2) and 4.7(b)(3) require that a CPO comply with certain disclosure requirements 

and periodic and annual reporting requirements, as set forth in those rules. Therefore, absent the 

requested exemption “X” as the CPO of the Master Fund: (i) would be required to provide certain 

disclosures and periodic and annual reports to itself as the CPO of Feeder Fund I; and (ii) with respect to 

Feeder Fund II, would effectively be required to provide certain disclosures and periodic and annual 

reports to itself since the owners and management of of “X” and “Y”, the CPO of Feeder Fund II, are the 

same. 

Based upon the representations contained in your letter, the Division believes that granting the requested 

exemption would not be contrary to the public interest and the purposes of Rules 4.7(b)(1), 4.7(b)(2) and 

4.7(b)(3).[2] Accordingly, by the authority delegated to it under Rule 140.93(a)(1), the Division hereby 

exempts “X” from the disclosure and the periodic and annual reporting requirements of Rules 4.7(b)(1), 

4.7(b)(2) and 4.7(b)(3) in connection with “X’s” operation of the Master Fund. This relief is subject to 

the conditions that: (i) “X” remains the CPO of the Master Fund and Feeder Fund I; (ii) “Y” Remains 

the CPO of Feeder Fund II; (iii) participation in the Master Fund is limited to the Feeder Funds, and any 

fund for which “X” or “Y” is the sole CPO; and (iv) the annual reports of the Feeder Funds contain 

financial statements that include, among other information, detailed income and fees associated with the 

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CFTC Letter 03-23

operation of the Master Fund expressed in dollars.[3]

The exemption granted by this letter does not excuse “X” from compliance with any other applicable 

requirements contained in the Commodity Exchange Act (the “Act”),[4] or in the Commission’s 

regulations issued thereunder. For example, “X” remains subject to all antifraud provisions of the Act[5]

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 other applicable provisions of Part 4. Finally, this letter is 

applicable to “X” solely in connection with its operation of the Master Fund. 

This letter, including the exemptions provided herein, are based upon the representations you have made 

to the Division. Any different, changed or omitted material facts or circumstances might render this 

exemption void. You must notify the Division immediately in the event the activities or operations of 

“X”, “Y”, the Master Fund or the Feeder Funds change in any material way from those represented to 

the Division. 

If you have any questions concerning this correspondence, please contact Peter Sanchez, an attorney on 

my staff, at (202) 418-5432. 

Very truly yours, 

Jane Kang Thorpe 

Director 

[1] Commission rules referred to herein are found at 17 C.F.R. Ch. I (2002). 

[2] See CFTC Interpretive Letter No. 01-86, [2000-2002 Transfer Binder] Comm. Fut. Law. Rep. (CCH) 

¶28961 (Nov. 21, 2001). See also, Additional Registration and Other Regulatory Relief for Commodity 

Pool Operators and Commodity Trading Advisors, 68 Fed. Reg. 12622, 12638-39 (March 17, 2003) 

(proposing to amend Rules 4.21 and 4.22 to exclude from the definition of “participant” commodity 

pools that are operated by a pool operator that is the same as, or that controls, is controlled by, or is 

under common control with, the pool operator of a pool in which the commodity pool has invested. If 

this proposal were to be adopted by the Commission, “X” would not be required to distribute disclosure 

and periodic and annual financial reports for the Master Fund to the Feeder Funds). 

[3] See letter from Jane Kang Thorpe, Director, Division of Clearing and Intermediary Oversight, to all 

CPOs (March 6, 2003) (http://www.cftc.gov/files/tm/tmcpoannualreport2002.pdf) (stating that "detailed 

income, fee and liquidity information for material investee pools and in total for all investee pools [are] 

'material information,' " required to be disclosed in a pool's annual report). 

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[4] 7 U.S.C. §1 et seq. (2000) 

[5] See, e.g., 7 U.S.C §§6b and 6o. 

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