U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5495 

Facsimile: (202) 418-5547 

tsmith@cftc.gov

Division of Clearing and 

Intermediary Oversight

Thomas J. Smith 

Deputy Director

 

 

March 31, 2006 

Re: “X”, a registered commodity pool operator for “Y” and “Z” 

Dear: 

 This is in response to your letter dated March 7, 2006, to the Division of Clearing and 

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

(“Commission”). You submitted the letter on behalf of “X”, a Commission-registered commodity 

pool operator (“CPO”) and commodity trading advisor. “X” operates several commodity pools, 

including “Y” and “Z” (together, the “Funds”). Among other things, your letter requested, 

pursuant to Commission Regulation 4.22(f), an extension of time to June 30, 2006 for the Funds’ 

audited Annual Reports for the year ending December 31, 2005 to be distributed to the Funds’ 

participants, and filed with National Futures Association (“NFA”). Absent this relief, these 

Annual Reports would need to be distributed to participants and filed with NFA by March 31, 

2006. 

 Based upon your letter, we understand the pertinent facts to be as follows. “Y” and “Z” are 

organized under the laws of the Cayman Islands. On _____, 2005, “X”, as sole voting shareholder 

of “Y” voted to place “Y” into voluntary liquidation pursuant to the laws of the Cayman Islands. 

On _____, 2005, “X”, as sole voting shareholder of “Z”, voted to place “Z” in voluntary 

liquidation pursuant to the laws of the Cayman Islands. Further, in accordance with Cayman 

Island law, “X” appointed “A” and “B” of the firm “C” as liquidators of the Funds (the 

“Liquidators”). Pursuant to Cayman Island law, the Liquidators are now in legal control of the 

Funds, including the Funds’ books and records. “X” no longer has legal control of the Funds. 

“X”, however, will remain a Commission-registered commodity pool operator. 

 In support of your request, your represent that: (1) the Funds are no longer engaged in 

commodity interest trading and have effectively ceased operations; (2) the Funds’ assets at 

December 31, 2005 consisted primarily of cash and cash equivalents, and certain receivable 

balances from “W”, an “X” affiliate that is currently involved in a bankruptcy proceeding in the 

United States;1

 and (3) the extension of time is necessary in order for the Liquidators, who were 

appointed in late _____ 2005, and the Funds’ public accountant to review the books and records 

1

 The Funds also had several open “E” positions that expired in _____ 2006. You have represented that the December 

31, 2005 Annual Reports will include as a “subsequent event” a discussion of the expiration of the “E” positions and 

the public accountant’s audit of the depositing of any funds associated with the “E” positions into appropriate cash 

accounts maintained by the Funds. 
Page 2 

and to prepare audited financial statements, including determining the value, and appropriate 

disclosure, for the receivable balances due from “W”. 

 

 In light of the representations made in your letter, the Division believes that granting the 

relief requested is neither contrary to the purposes of Regulation 4.22 nor to the public interest. 

Accordingly, pursuant to the authority delegated by Regulations 140.93(a)(1) and 4.12(a), the 

relief requested is hereby granted. Audited Annual Reports for “Y” and “Z” for the year ending 

December 31, 2005 must be distributed to the respective Fund’s participants and filed with NFA 

on or before June 30, 2006. 

 

 This relief is based upon the representations that you have made to the Division. Any different, 

changed or omitted facts may result in a different determination. Should you have any questions, 

please do not hesitate to Kevin Walek, Assistant Director, at (202) 418-5463. 

 

 Very truly yours, 

 Thomas J. Smith 

cc: Regina Thoele, Compliance 

 National Futures Association 
U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre 

1155 21st Street, NW, Washington, DC 20581 

Telephone: (202) 418-5495 

Facsimile: (202) 418-5547 

tsmith@cftc.gov

Division of Clearing and 

Intermediary Oversight

Thomas J. Smith 

Deputy Director

 

April 28, 2006 

Re: “X”, a registered commodity pool operator for “Y” and “Z” 

Dear : 

 This is in response to your letter dated March 7, 2006, to the Division of Clearing and 

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

(“Commission”), submitted on behalf of “X”, a Commission-registered commodity pool operator 

(“CPO”) and commodity trading advisor. “X” operates several commodity pools, including “Y” 

and “Z” (“Y” and “Z” are jointly referred to as the “Funds”). By your letter, you request that the 

Commission accept the Funds’ December 31, 2005 certified annual reports as final annual 

reports indicating that the Funds have permanently ceased trading operations in accordance with 

Regulation 4.22(c) and that commencing January 1, 2006, “X” not be subject to the reporting 

requirements of Part 4 of the Commission regulations pending the final distribution of the Funds’ 

assets to the participants. You further request relief from the requirement that “X” sign the oath 

or affirmation that is required to be filed with the Funds’ annual reports filed with NFA. 

 Based upon your letter and other communications with Division staff, we understand the 

facts to be as follows. “X” is a Delaware limited liability company, and an indirect, whollyowned subsidiary of “U”. The Funds are constituted under the laws of the Cayman Islands and 

are registered in the Cayman Islands as exempted companies pursuant to the Companies Law and 

as mutual funds pursuant to Section 4(3) of the Mutual Funds Law. Both Funds filed with the 

National Futures Association notices of exemption pursuant to Commission Regulation 4.7. 1 

 The Funds’ trading strategies included exchange-traded futures markets, forward markets 

and swap markets. The Funds appointed “V”, a Commission-registered futures commission 

merchant, and “W” as it clearing agents. On ____, 2005, “W” filed a bankruptcy petition under 

Chapter 11 of Title 11 of the United States Code in _____. The Funds had a substantial portion 

of their total assets on deposit with “W” in the form of cash and certain investments of offsetting forward contracts in foreign currency which settle in _____ 2006. “W” also is the largest 

investor in “Z”. 

 In ___ 2005, the Funds’ respective Boards of Directors ordered the Funds to cease all 

trading activities and to invest the Funds’ assets solely in cash, or cash equivalents, to be held in 

1

 Commission rules referred to herein are found at 17 C.F.R. Ch. I (2005). 
Page 2 

 

accounts with highly-capitalized banks.2 The Boards of Directors took this action in light of 

concerns arising in connection with the filing in bankruptcy by “T”, the ultimate parent of “X”. 

Neither the Funds themselves, nor “X”, were part of “T”’s bankruptcy filing. 

 However, as a direct result of the bankruptcy filing of “W”, you state that “X”, the sole 

voting shareholder of the Funds, voted to initiate voluntary liquidation procedures under the laws 

of the Cayman Islands for “Y” and “Z” on _____, 2005 and _____, 2005, respectively. Pursuant 

to Cayman law, “X” appointed “A” and “B” of “C” as liquidators of the Funds (the 

“Liquidators”). Further, you represent that with the initiation of the voluntary liquidation 

procedures, the Funds are no longer engaged in commodity interest trading and have effectively 

ceased operations. As the Liquidators have assumed legal responsibility of the Funds, they will 

be responsible for preparing, distributing to Fund participants, and filing with National Futures 

Association an audited financial report for the period ending December 31, 2005.3

 Further, you represent that you are aware of no pending litigation with respect to “X” or the 

Funds. Moreover, as discussed in the Request for Exemption, the Liquidators have 

communicated with the Funds’ investors regarding their appointment and have kept investors 

informed with respect to the progress of the liquidations. 

 In light of the representations made in your letter, including (1) that the Funds have ceased 

operations and are in voluntary liquidation under the laws of the Cayman Islands, and (2) that the 

Liquidators have assumed legal responsibility for the Funds under Cayman Island law, including 

the requirement to provide the Funds’ participants with periodic reporting on the status of the 

liquidation and the Funds’ assets, the Division believes that granting the relief requested is 

neither contrary to the purposes of Regulation 4.22 nor to the public interest. In addition, since 

“X” has been displaced by the Liquidators under Cayman law as the entity legally responsible 

for the books and records of the Funds since _____ 2005, the Division believes that permitting 

the Liquidators to sign the oath or affirmation regarding the accuracy and completeness of the 

financial statements, as required by Regulation 4.22(h), would not be contrary to the purposes of 

Regulation 4.22 nor to the public interest. Accordingly, pursuant to the authority delegated by 

Regulations 140.93(a)(1) and 4.12(a), the Division will accept “Y”’s and “Z”’s certified annual 

reports for the year ending December 31, 2005 as “close out” annual reports indicating the 

permanent cessation of trading in accordance with Regulation 4.22(c) and “X” will not be 

required to provide the Funds’ participants with periodic account statements pursuant to Part 4 of 

the regulations pending the final distribution of assets to the participants. The Division also will 

accept an oath or affirmation signed by the Liquidators for each Fund in lieu of an oath or 

affirmation signed by “X”. 

 

2

 Prior to _____ 2005, “Z”’s assets were held in customer-segregated accounts at “G” in the Cayman Islands and 

“Y”’s assets were held in customer-segregated accounts at “H” in the United States. Since _____ 2005, each Fund’s 

assets have been held in the Fund’s respective name in customer-segregated accounts at “J” in the Cayman Islands. 

3

 On March 31, 2006, the Division of Clearing and Intermediary Oversight granted an extension of time to June 30, 

2006 for the Funds’ audited financial statements to be distributed to the participants and filed with National Futures 

Association. 
Page 3 

 This exemption is based upon the representations that you have made to the Division including 

that the Liquidators will report to participants regarding the status of the Funds as required by 

Cayman Island Law and is contingent upon the distribution to participants and filing with National 

Futures Association certified annual reports for the Funds for the year ending December 31, 2005. 

Any different or omitted facts may result in a different determination. This exemption does not 

relieve the CPO from any other applicable requirements of the Commission’s regulations. Should 

you have any questions, please do not hesitate to contact me, or Kevin Walek, Assistant Director, at 

(202) 418-5463. 

 Very truly yours, 

 Thomas J. Smith 

cc: Regina Thoele, Compliance 

 National Futures Association