Institutional Asset Management
17 CFR § 4.7(a), as published by the eCFR. Paragraph (a)(6) is the QEP definition. Paragraphs (a)(5), (a)(4), (a)(1) and (a)(7) define the terms it uses.
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 included in the following list of persons that is divided into two categories: Persons who are not required to satisfy the Portfolio Requirement defined in paragraph (a)(5) of this section to be qualified eligible persons, and those persons who must satisfy the Portfolio Requirement in paragraph (a)(5) to be qualified eligible persons.
(i) Persons who need not satisfy the Portfolio Requirement to be qualified eligible persons.
(A) A futures commission merchant registered pursuant to section 4d of the Act, or a principal thereof;
(B) A retail foreign exchange dealer registered pursuant to section 2(c)(2)(B)(i)(II)(gg) of the Act, or a principal thereof;
(C) A swap dealer registered pursuant to section 4s(a)(1) of the Act, or a principal thereof;
(D) A broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934, or a principal thereof;
(E) A commodity pool operator registered pursuant to section 4m of the Act, or a principal thereof; Provided, That the pool operator:
(1) Has been registered and active as such for two years; or
(2) Operates pools which, in the aggregate, have total assets in excess of $5,000,000;
(F) A commodity trading advisor registered pursuant to section 4m of the Act, or a principal thereof; Provided, That the trading advisor:
(1) Has been registered and active as such for two years; or
(2) 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;
(G) 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:
(1) Has been registered and active as such for two years; or
(2) 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;
(H) A "qualified purchaser" as defined in section 2(a)(51)(A) of the Investment Company Act of 1940 ("Investment Company Act");
(I) A "knowledgeable employee" as defined in § 270.3c-5 of this title;
(J) 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 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 advisor, investment 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)(6)(i)(J)(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 the direction of the person; and
(ii) The family member is not a qualified eligible person for the purposes of paragraph (a)(6)(ii)(K) of this section;
(6) Any person who acquires a participation in the exempt pool by gift, bequest or pursuant to an agreement relating to a legal separation or divorce from a person listed in paragraph (a)(6)(i)(J)(1), (2), (3), (4), or (5) of this section;
(7) The estate of any person listed in paragraph (a)(6)(i)(J)(1), (2), (3), (4), or (5) of this section; or
(8) A company established by any person listed in paragraph (a)(6)(i)(J)(1), (2), (3), (4), or (5) of this section exclusively for the benefit of (or owned exclusively by) that person and any person listed in paragraph (a)(6)(i)(J)(6) or (7) of this section;
(K) 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 commodity 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 person or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of the trading advisor or the affiliate; Provided, That such employee has been performing such functions and duties for or on behalf of the trading advisor or the 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 commodity trading advisor of the exempt account or any other employee of, or agent so engaged by, an affiliate of the trading advisor (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 commodity trading advisor or the 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 the commodity trading advisor of the exempt account or of a person who satisfies the criteria of paragraph (a)(6)(i)(K)(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 the direction of the person; and
(ii) The family member is not a qualified eligible person for the purposes of paragraph (a)(6)(ii)(K) of this section;
(6) Any person who acquires an interest in an exempt account by gift, bequest or pursuant to an agreement relating to a legal separation or divorce from a person listed in paragraph (a)(6)(i)(K)(1), (2), (3), (4), or (5) of this section;
(7) The estate of any person listed in paragraph (a)(6)(i)(K)(1), (2), (3), (4), or (5) of this section; or
(8) A company established by any person listed in paragraph (a)(6)(i)(K)(1), (2), (3), (4), or (5) of this section exclusively for the benefit of (or owned exclusively by) that person and any person listed in paragraph (a)(6)(i)(K)(6) or (7) of this section;
(L) A trust; Provided, That:
(1) The trust was not formed for the specific purpose of either participating in the exempt pool or opening an exempt account; and
(2) 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;
(M) 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;
(N) A Non-United States person;
(O) 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;
(P) An exempt pool; or
(Q) Notwithstanding paragraph (a)(6)(ii) 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.
(ii) Persons who must satisfy the Portfolio Requirement to be qualified eligible persons.
With respect to the persons listed in paragraphs (a)(6)(ii)(A) through (L) of this section, the commodity pool operator must reasonably believe, at the time of the sale to such person of a participation in the exempt pool, or the commodity trading advisor must reasonably believe, at the time such person opens an exempt account, that such person satisfies the Portfolio Requirement in paragraph (a)(5) of this section:
(A) An investment company registered under the Investment Company Act or a business development company as defined in section 2(a)(48) of such Act not formed for the specific purpose of either investing in the exempt pool or opening an exempt account;
(B) A bank as defined in section 3(a)(2) of the Securities Act of 1933 (the "Securities Act") or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act acting for its own account or for the account of a qualified eligible person;
(C) An insurance company as defined in section 2(13) of the Securities Act acting for its own account or for the account of a qualified eligible person;
(D) 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;
(E) An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974; Provided, That the 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;
(F) A private business development company as defined in section 202(a)(22) of the Investment Advisers Act;
(G) An organization described in section 501(c)(3) of the IRC, with total assets in excess of $5,000,000;
(H) 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;
(I) 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 would qualify him as an accredited investor as defined in § 230.501(a)(5) of this title;
(J) A natural person who would qualify as an accredited investor as defined in § 230.501(a)(6) of this title;
(K) 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
(L) Except as provided for the governmental entities referenced in paragraph (a)(6)(ii)(D) 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.
Portfolio Requirement means that a person:
(i) Owns securities (including pool participations) of issuers not affiliated with such person and other investments with an aggregate market value of at least $4,000,000;
(ii) 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 $400,000 in exchange-specified initial margin and option premiums, together with any required minimum security deposits for retail forex transactions (defined in § 5.1(m) of this chapter), for commodity interest transactions; or
(iii) Owns a portfolio comprised of a combination of the funds or property specified in paragraphs (a)(5)(i) and (ii) of this section, in which the sum of the funds or property includable under paragraph (a)(5)(i) of this section, expressed as a percentage of the minimum amount required thereunder, and the amount of initial margin, option premiums, and minimum security deposits includable under paragraph (a)(5)(ii) of this section, 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)(5)(iii) would consist of $2,000,000 in securities and other property (50% of paragraph (a)(5)(i)) and $200,000 in initial margin, option premiums, and minimum security deposits (50% of paragraph (a)(5)(ii)).
Non-United States person means:
(i) A natural person who is not a resident of the United States;
(ii) 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;
(iii) An estate or trust, the income of which is not subject to United States income tax regardless of source;
(iv) 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 this part by virtue of its participants being Non-United States persons; and
(v) A pension plan for the employees, officers or principals of an entity organized and with its principal place of business outside the United States.
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.
United States means the United States, its states, territories or possessions, or an enclave of the United States government, its agencies or instrumentalities.
Source: 17 CFR § 4.7(a), eCFR. Reproduced for convenience. The official text controls.