Qualified Eligible Participant – Defined

Excerpt from Code of Federal Regulations, Title 17 – Commodity and Securities Exchanges

§ 4.7 Exemption from certain part 4 requirements for commodity pool operators with respect to offerings to qualified eligible persons and for commodity trading advisors with respect to advising qualified eligible persons.

This section is organized as follows: Paragraph (a) contains definitions for the purposes of §4.7.

[Paragraphs (b) through (e) are not included below]

(a) Definitions. Paragraph (a)(1) of this section contains general definitions, paragraph (a)(2) of this section contains the definition of the term qualified eligible person with respect to those persons who do not need to satisfy the Portfolio Requirement and paragraph (a)(3) of this section contains the definition of the term qualified eligible person with respect to those persons who must satisfy the Portfolio Requirement. For the purposes of this section:

(1) In general —

(i) Affiliate of, or a person affiliated with, a specified person means a person that directly or indirectly through one or more persons,controls, is controlled by, or is under common control with the specified person.

(ii) Exempt account means the account of a qualified eligible person that is directed or guided by a commodity trading advisor pursuant to an effective claim for exemption under §4.7.

(iii) Exempt pool means a pool that is operated pursuant to an effective claim for exemption under §4.7.

(iv) Non-United States person means:

(A) A natural person who is not a resident of the United States;

(B) A partnership, corporation or other entity, other than an entity organized principally for passive investment, organized under the laws of a foreign jurisdiction and which has its principal place of business in a foreign jurisdiction;

(C) An estate or trust, the income of which is not subject to United States income tax regardless of source;

(D) An entity organized principally for passive investment such as a pool, investment company or other similar entity; Provided, That units of participation in the entity held by persons who do not qualify as Non-United States persons or otherwise as qualified eligible persons represent in the aggregate less than 10% of the beneficial interest in the entity, and that such entity was not formed principally for the purpose of facilitating investment by persons who do not qualify as Non-United States persons in a pool with respect to which the operator is exempt from certain requirements of part 4 of the Commission’s regulations by virtue of its participants being Non-United States persons; and

(E) A pension plan for the employees, officers or principals of an entity organized and with its principal place of business outside the United States.

(v) Portfolio Requirement means that a person:

(A) Owns securities (including pool participations) of issuers not affiliated with such person and other investments with an aggregate market value of at least $2,000,000;

(B) Has had on deposit with a futures commission merchant, for its own account at any time during the six-month period preceding either the date of sale to that person of a pool participation in the exempt pool or the date that the person opens an exempt account with the commodity trading advisor, at least $200,000 in exchange-specified initial margin and option premiums for commodity interest transactions; or

(C) Owns a portfolio comprised of a combination of the funds or property specified in paragraphs (a)(1)(v)(A) and (B) of this section in which the sum of the funds or property includable under paragraph (a)(1)(v)(A), expressed as a percentage of the minimum amount required thereunder, and the amount of futures margin and option premiums includable under paragraph (a)(1)(v)(B), expressed as a percentage of the minimum amount required thereunder, equals at least one hundred percent. An example of a composite portfolio acceptable under this paragraph (a)(1)(v)(C) would consist of $1,000,000 in securities and other property (50% of paragraph (a)(1)(v)(A)) and $100,000 in exchange-specified initial margin and option premiums (50% of paragraph (a)(1)(v)(B)).

(vi) United States means the United States, its states, territories or possessions, or an enclave of the United States government, its agencies or instrumentalities.

(2) Persons who do not need to satisfy the Portfolio Requirement to be qualified eligible persons. Qualified eligible person means any person, acting for its own account or for the account of a qualified eligible person, who the commodity pool operator reasonably believes, at the time of the sale to that person of a pool participation in the exempt pool, or who the commodity trading advisor reasonably believes, at the time that person opens an exempt account, is:

(i) A futures commission merchant registered pursuant to section 4d of the Act, or a principal thereof;

(ii) A broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934, or a principal thereof;

(iii) A commodity pool operator registered pursuant to section 4m of the Act, or a principal thereof; Provided, That the pool operator:

(A) Has been registered and active as such for two years; or

(B) Operates pools which, in the aggregate, have total assets in excess of $5,000,000;

(iv) A commodity trading advisor registered pursuant to section 4m of the Act, or a principal thereof; Provided, That the trading advisor:

(A) Has been registered and active as such for two years; or

(B) Provides commodity interest trading advice to commodity accounts which, in the aggregate, have total assets in excess of $5,000,000 deposited at one or more futures commission merchants;

(v) An investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 (“Investment Advisers Act”) or pursuant to the laws of any state, or a principal thereof; Provided, That the investment adviser:

(A) Has been registered and active as such for two years; or

(B) Provides securities investment advice to securities accounts which, in the aggregate, have total assets in excess of $5,000,000 deposited at one or more registered securities brokers;

(vi) A “qualified purchaser” as defined in section 2(a)(51)(A) of the Investment Company Act of 1940 (the “Investment Company Act”);

(vii) A “knowledgeable employee” as defined in §270.3c-5 of this title;

(viii)(A) With respect to an exempt pool:

( 1 ) The commodity pool operator, commodity trading advisor or investment adviser of the exempt pool offered or sold, or an affiliate of any of the foregoing;

( 2 ) A principal of the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing;

( 3 ) An employee of the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing (other than an employee performing solely clerical, secretarial or administrative functions with regard to such person or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of the exempt pool, other commodity pools operated by the pool operator of the exempt pool or other accounts advised by the trading advisor or the investment adviser of the exempt pool, or by the affiliate; Provided, That such employee has been performing such functions and duties for or on behalf of the exempt pool, pool operator, trading advisor, investment adviser or affiliate, or substantially similar functions or duties for or on behalf of another person engaged in providing commodity interest, securities or other financial services, for at least 12 months;

( 4 ) Any other employee of, or an agent engaged to perform legal, accounting, auditing or other financial services for, the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or any other employee of, or agent so engaged by, an affiliate of any of the foregoing (other than an employee or agent performing solely clerical, secretarial or administrative functions with regard to such person or its investments); Provided, That such employee or agent:

( i ) Is an accredited investor as defined in §230.501(a)(5) or (6) of this title; and

( ii ) Has been employed or engaged by the exempt pool, commodity pool operator, commodity trading advisorinvestment adviser or affiliate, or by another person engaged in providing commodity interest, securities or other financial services, for at least 24 months;

( 5 ) The spouse, child, sibling or parent of a person who satisfies the criteria of paragraph (a)(2)(viii)(A)( 1 ), ( 2 ), ( 3 )or ( 4 ) of this section; Provided, That:

( i ) An investment in the exempt pool by any such family member is made with the knowledge and at thedirection of the person; and

( ii ) The family member is not a qualified eligible person for the purposes of paragraph (a)(3)(xi) of this section;

( 6 )( i ) Any person who acquires a participation in the exempt pool by gift, bequest or pursuant to an agreementrelating to a legal separation or divorce from a person listed in paragraph (a)(2)(viii)(A)( 1 ), ( 2 ), ( 3 ), ( 4 ) or ( 5 ) ofthis section;

( ii ) The estate of any person listed in paragraph (a)(2)(viii)(A)( 1 ), ( 2 ), ( 3 ), ( 4 ) or ( 5 ) of this section; or

( iii ) A company established by any person listed in paragraph (a)(2)(viii)(A)( 1 ), ( 2 ), ( 3 ), ( 4 ) or(5) of thissection exclusively for the benefit of (or owned exclusively by) that person and any person listed in paragraph(a)(2)(viii)(A)( 6 )( i ) or ( ii ) of this section;

(B) With respect to an exempt account:

( 1 ) An affiliate of the commodity trading advisor of the exempt account;

( 2 ) A principal of the commodity trading advisor of the exempt account or of an affiliate of the trading advisor;

( 3 ) An employee of the commodity trading advisor of the exempt account or of an affiliate of the trading advisor(other than an employee performing solely clerical, secretarial or administrative functions with regard to such personor its investments) who, in connection with his or her regular functions or duties, participates in the investmentactivities of the trading advisor or the affiliate; Provided, That such employee has been performing such functionsand duties for or on behalf of the trading advisor or the affiliate, or substantially similar functions or duties for or onbehalf of another person engaged in providing commodity interest, securities or other financial services, for at least12 months;

( 4 ) Any other employee of, or an agent engaged to perform legal, accounting, auditing or other financial services for, the commodity trading advisor of the exempt account or any other employee of, or agent so engaged by, an affiliateof the trading advisor (other than an employee or agent performing solely clerical, secretarial or administrativefunctions with regard to such person or its investments); Provided, That such employee or agent:

( i ) Is an accredited investor as defined in §230.501(a)(5) or (a)(6) of this title; and

( ii ) Has been employed or engaged by the commodity trading advisor or the affiliate, or by another personengaged in providing commodity interest, securities or other financial services, for at least 24 months; or

( 5 ) The spouse, child, sibling or parent of the commodity trading advisor of the exempt account or of a person whosatisfies the criteria of paragraph (a)(2)(viii)(B)( 1 ), ( 2 ), ( 3 ) or ( 4 ) of this section; Provided, That:

( i ) The establishment of an exempt account by any such family member is made with the knowledge and at thedirection of the person; and

( ii ) The family member is not a qualified eligible person for the purposes of paragraph (a)(3)(xi) of this section

( 6 )( i ) Any person who acquires an interest in an exempt account by gift, bequest or pursuant to an agreementrelating to a legal separation or divorce from a person listed in paragraph (a)(2)(viii)(B)( 1 ), (2), ( 3 ), ( 4 ) or ( 5 ) ofthis section;

( ii ) The estate of any person listed in paragraph (a)(2)(viii)(B)( 1 ), ( 2 ), ( 3 ), ( 4 ) or ( 5 ) of this section; or

( iii ) A company established by any person listed in paragraph (a)(2)(viii)(B)( 1 ), ( 2 ), ( 3 ), ( 4 ) or (5) of thissection exclusively for the benefit of (or owned exclusively by) that person and any person listed in paragraph(a)(2)(viii)(B)( 6 )( i ) or ( ii ) of this section;

(ix) A trust; Provided, That:

(A) The trust was not formed for the specific purpose of either participating in the exempt pool or opening an exempt account; and

(B) The trustee or other person authorized to make investment decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a qualified eligible person;

(x) An organization described in section 501(c)(3) of the Internal Revenue Code (the “IRC”); Provided, That the trustee or other person authorized to make investment decisions with respect to the organization, and the person who has established the organization, is a qualified eligible person;

(xi) A Non-United States person;

(xii)(A) An entity in which all of the unit owners or participants, other than the commodity trading advisor claiming relief under this section, are qualified eligible persons;

(B) An exempt pool; or

(C) Notwithstanding paragraph (a)(3) of this section, an entity as to which a notice of eligibility has been filed pursuant to §4.5 which is operated in accordance with such rule and in which all unit owners or participants, other than the commodity trading advisor claiming relief under this section, are qualified eligible persons.

(3) Persons who must satisfy the Portfolio Requirement to be qualified eligible persons. Qualified eligible person means any person who the commodity pool operator reasonably believes, at the time of the sale to that person of a pool participation in the exempt pool, or any person who the commodity trading advisor reasonably believes, at the time that person opens an exempt account, satisfies the Portfolio Requirement and is:

(i) An investment company registered under the Investment Company Act or a business development company as definedin section 2(a)(48) of such Act not formed for the specific purpose of either investing in the exempt pool or opening anexempt account;

(ii) A bank as defined in section 3(a)(2) of the Securities Act of 1933 (the “Securities Act”) or any savings and loanassociation or other institution as defined in section 3(a)(5)(A) of the Securities Act acting for its own account or for theaccount of a qualified eligible person;

(iii) An insurance company as defined in section 2(13) of the Securities Act acting for its own account or for the account ofa qualified eligible person;

(iv) A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;

(v) An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974; Provided, Thatthe investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is a bank, savings and loan association, insurance company, or registered investment adviser; or that the employee benefit plan has total assets in excess of $5,000,000; or, if the plan is self-directed, that investment decisions are made solely by persons that are qualified eligible persons;

(vi) A private business development company as defined in section 202(a)(22) of the Investment Advisers Act;

(vii) An organization described in section 501(c)(3) of the IRC, with total assets in excess of $5,000,000;

(viii) A corporation, Massachusetts or similar business trust, or partnership, limited liability company or similar business venture, other than a pool, which has total assets in excess of $5,000,000, and is not formed for the specific purpose of either participating in the exempt pool or opening an exempt account;

(ix) A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of either his purchase in the exempt pool or his opening of an exempt account exceeds $1,000,000;

(x) A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

(xi) A pool, trust, insurance company separate account or bank collective trust, with total assets in excess of $5,000,000, not formed for the specific purpose of either participating in the exempt pool or opening an exempt account, and whose participation in the exempt pool or investment in the exempt account is directed by a qualified eligible person; or

(xii) Except as provided for the governmental entities referenced in paragraph (a)(3)(iv) of this section, if otherwise authorized by law to engage in such transactions, a governmental entity (including the United States, a state, or a foreign government) or political subdivision thereof, or a multinational or supranational entity or an instrumentality, agency, or department of any of the foregoing.