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CFTC Clarifies Applicability of “Letters” Definitions

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The Staff of the Commodity Futures Trading Commission ("CFTC") recently issued an advisory clarifying that the following definitions and corresponding distinctions as to the scope and effect of exemptive, no-action and interpretive letters apply only to letters issued on or after January 11, 1999:

  • An exemptive letter is a written grant by the staff of a division of the CFTC or its Office of the General Counsel of exemption from a specific provision of the Commodity Exchange Act (the "CEA") or CFTC regulations. An exemptive letter binds the CFTC and its staff with respect to the specific fact situation and persons addressed by the letter. Exemptive letters may not be relied upon by third parties.
  • A no-action letter is a written statement by the staff of a division of the CFTC or its Office of the General Counsel that such staff will not recommend enforcement action to the CFTC for failure to comply with a specific provision of the CEA or CFTC regulation. A no-action letter only binds the division that issued the letter with respect to the specific fact situation and persons addressed by the letter. No-action letters may not be relied upon by third parties.
  • An interpretative letter is written advice or guidance issued by the staff of a division of the CFTC or its Office of the General Counsel. An interpretative letter only binds the staff of the division that issued the letter. Interpretative letters may be relied upon by third parties.

The CFTC Staff further stated that the label it ascribes to a letter is controlling; labels ascribed by industry publications — which often refer to letters generically as "interpretive" — have "no legal effect." With respect to letters issued prior to the effective date of the above definitions, the CFTC Staff advised that the text of the letter should be reviewed to determine "the nature of the letter, whom it binds and who may rely upon it," or that further CFTC Staff guidance should be sought. *

Applicability of New Definitions of "Exemptive," "No-Action" and "Interpretative" Letters, CFTC Advisory 16-99 (Apr. 19, 1999); see also Cadwalader Counsellor, Vol. 1, Issue 2 (Jan. 1999).

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