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.
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