DIVISION OF 

TRADING AND MARKETS 

Re: 

Dear 

• " < .l 

' COM~fODITY FUTURES TRADING cor~MISSION 

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

(202) 254-8955 

(202) 254-3534 FACSIMILE 

May 2 8, 19 91 

This is in response to your letter dated November 7, 1990 to 

the Division of Trading and Markets (the "Division"), in which you 

requested on behalf of the Board of Trustees (the "Board") of the 

(the "Fund") relief 

from regulation as a commodity pool operator ("CPO"). 

Based upon your letter and subsequent telephone conversations 

with Division staff, we understand the facts to be as follows. The 

Fund is a multiemployer, welfare benefit plan administered by the 

Board which is comprised of officials of 

and various local unions. 

The Fund provides health care and other benefits to employees on 

behalf of whom employers make contributions pursuant to collective 

bargaining agreements with the . The Board, on behalf of the 

Fund, desires to invest assets of the Fund in the trading of 

commodity interests solely for bona fide hedging purposes within 

the meaning and intent of Rule 1.3(z) (1). 1/ At no time will the 

Board enter into futures and options contracts for which the 

aggregate initial margin will exceed five percent (5%) of the fair 

market value of the Fund's assets, after taking into account 

unrealized profits and unrealized losses on any such contracts it 

has entered into. 

The Fund is a noncontributory plan. All contributions to the 

Fund are made by the employers whose employees receive benefits 

under the Fund. No payments into the Fund are solicited from or 

permitted by such employees. The Board has not offered nor does it 

propose to offer participation in the Fund to the public as or in 

a. commodity pool or otherwise as or in a vehicle for trading in the 

commodity futures and commodity options markets. 

1/ commission rules referred to herein are found at 17 c.F.R 

Ch • I ( 19 9 0 ) • 
Page 2 

The Fund 'is not a pension plan, since its main purpose is not 

to provide pension-related benefits. Nonetheless, like a pension 

plan, the Fund is subject to Title I of the Employee Retirement 

Income Security Act of 1974, as amended ("ERISA"), 29 u.s.c. § 1001 

et seg (1988). 

Specifically, ERISA requires, with respect to the Fund, 

preparation of a "summary plan description" which must be provided 

to employees receiving benefits under the Fund and filed with the 

Department of Labor. A separate "plan description" and "annual 

report," and information regarding changes in or modifications to 

the Fund, must also be filed with the Labor Department (a summary 

of the "annual report" is provided to employees) . These reporting 

and disclosure requirements are subject to criminal enforcement 

penalties under the law. The fiduciaries of .the Fund are likewise 

subject, in their capacities as fiduciaries, to the fiduciary 

responsibility provisions of ERISA, and are personally liable.for 

any losses the Fund suffers as a result of breaching such responsibilities. In general, these are the same reporting and disclosure 

requirements applicable to pension plans under ERISA. ~/ 

As you are aware, Rule 4.5(a) specifically excludes from the 

definition of a "pool" the following pension plans: 

(i) 

(ii) 

(iii) 

noncontributory plans covered under Title I of ERISA; 

contributory defined benefit plans covered under Title IV 

of ERISA, with certain limitations; 

governmental plans as defined in Section 3(32) of Title 

I of ERISA. 

In addition, by Rules 4.5(a) (4) and 4.5(b) (4), the commission 

has excluded from the definition of "commodity pool operator" set 

forth in Section 2 (a) ( 1) (A) of the Commodity Exchange Act (the 

"Act"), 7 u.s.c. § 2(a) (1) (A) (1988), the trustee or named 

fiduciary of any pension plan subject to Title I of ERISA provided 

that such trustee or named fiduciary files a notice of eligibility 

with the Commission representing that it will conduct its trading 

in commodity interests in accordance with certain requirements 

~/ Labor Department regulations under ERISA Section 104 provide 

some variance in these requirements for certain welfare 

benefit plans. The variance in these requirements exists 

because the relevant information for pension plans and 

employee welfare benefit plans is different. However, the 

scope of reporting and disclosure requirements is comparable 

for employee welfare benefit plans and pension plans. 
' '' 

Page 3 

specified in Rule 4.5(c) (2). Because the Fund is not among the 

foregoing trading vehicles specified in Rule 4. 5, the relief , available under the rule is not available to the Board and the 

Fund. 

However, based upon your representations, the Division has 

determined that it will not recommend that the Commission take any 

enforcement action for failure to register as a CPO against the 

Board in connection with its operation of the Fund. This no-action 

position is based upon your representations that: (1) although the 

Fund is not a pension fund eligible for relief under Rule 4.5, it 

is similar to such funds in that it is subject to Title I of ERISA; 

(2) the Fund intends to trade commodity interests solely for bona 

fide hedging purposes; (3) the Fund is a noncontributory plan; 

( 4) at no time will the Board enter into futures and options 

contracts for which the aggregate ini.tial margin and premiums 

exceed five percent (5%) of the fair market value of the Fund's 

assets, after taking into account unrealized profits and unrealized 

losses on any such contracts it has entered into; and (5) the Board 

has not offered nor does it propose to offer participation in the 

Fund to the public as or in a commodity ·pool or otherwise as or in 

a vehicle for trading in the commodity futures and commodity 

options markets. This no-action position is conditioned upon the 

Fund's making the disclosure required by Rule 4.5(c) (2) (iv) in the 

annual report to be filed with the Department of Labor and the 

summary of annual report to be provided to employees. This 

disclosure should include representations numbered ( 2) and ( 4) 

above. This no-action position is also conditioned upon the 

Board's submitting to such special calls as the Commission may 

make to demonstrate that the Fund is operating according to the 

representations set forth in this paragraph. 

We note that this letter does not excuse the Board from 

compliance with any otherwise applicable requiremeni:s contained in 

the Act or in the Commission 1 s regulations thereunder. For 

example, it remains subject to the antifraud provisions of Section 

4Q of the Act, 7 u.s.c. § 6Q (1988), and to the reporting requirements for traders set forth in Parts 15, 18 and 19 of the regula- tions. 

This letter is based upon the information that has been 

provided to us and is subject to the conditions stated above. Any 

different, changed or omitted facts or conditions might require us 

to reach a different conclusion. In this regard, we request that 

you notify us in the event that the Fund's op~rations, including 

membership composition and the source of· capital contributions, 

change in any way from those as represented to us. 
Page 4 

Finally, this position is that of the Division of Trading and 

Markets and does not necessarily represent the views of the Commission or any other office or division of the Commission. ·