Insights & News

CFTC Staff Permits Registered CPO to Treat Certain Employees as Qualified Eligible Persons

May 20, 2024
Client Alert

The Market Participants Division (Division) of the U.S. Commodity Futures Trading Commission (CFTC) issued CFTC Letter 24-05 on May 7, providing exemptive relief to Two Sigma Investments LP and its affiliates (collectively, Two Sigma), a registered commodity pool operator (CPO), pursuant to which certain employees of Two Sigma may be considered qualified eligible persons (QEPs) under CFTC Regulation 4.7(a)(2)(viii)(A)(4) (the QEP tenure conditions).

Two Sigma sought the exemptive relief so that it could continue to operate commodity pools that are “employees’ securities companies” (ESCs) pursuant to CFTC Regulation 4.7 while accepting investments from certain senior employees who do not currently meet QEP tenure conditions, which require an employee or agent to be (1) an accredited investor and (2) to have “been employed or engaged by the exempt pool, commodity pool operator, commodity trading adviser, investment adviser or affiliate, or by another person engaged in providing commodity interest, securities or other financial services, for at least 24 months.” Two Sigma could not deem the employees to be QEPs by virtue of being “knowledgeable employees,” pursuant to CFTC Regulation 4.7(a)(2)(vii), because neither of the employees (1) was an executive officer, director, trustee, general partner, advisory board member or person serving in a similar capacity or (2) participated in the investment activities of Two Sigma, or engaged in substantially similar activities for another company, for at least 12 months.

Read the full article here.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

© 2024 Stradley Ronon Stevens & Young, LLP. All rights reserved.

Related Resources

back to top