02-15994. Profile Documents for Commodity Pools; Correction

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Correcting amendments.

SUMMARY:

This document contains corrections to the final regulations that were published in the Federal Register of October 2, 2000 (65 FR 58648). The regulations related to accommodating National Futures Association's (“NFA”) Rule 2-35(d) regarding profile documents for commodity pools and establishing procedures for the use, amendment and filing of profile documents that are parallel to those applicable to disclosure documents.

DATES:

Effective July 25, 2002.

FOR FURTHER INFORMATION CONTACT:

Eileen R. Chotiner, Futures Trading Specialist, [phone], electronic mail: “[e-mail],” Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Commission regulation 4.26(b), which was adopted in 1995,^[1] required a commodity pool operator (“CPO”) to attach the most current account statement and annual report for the pool to the disclosure document used to solicit prospective participants. As an alternative to attaching the account statement, the COP was permitted to provide information concerning the performance of the pool that was current within 60 days of the date the disclosure document was distributed.

In July 2000, the Commission proposed changes to its rules to permit CPOs to use a summary or “profile” comment prior to delivery of the pool's disclosure document, in accordance with rules proposed by NFA.^[2] The sole change the Commission proposed to Rule 4.26 was to extend to profile documents the provision requiring correction of a materially inaccurate or incomplete disclosure document. The Commission received only one comment letter on the proposed changes, which supported the amendments. The comment letter did not address the proposed change to Rule 4.26.

The commission adopted final rules that were essentially the same as those proposed.^[3] Subsequent to publication of these rules, it has come to the Commission's attention that the revised text was inadvertently substituted for section 4.26(b) rather than 4.26(c). Today's amendment restores the text of 4.26(b), which requires that the most recent account statement and annual report be attached to commodity pool disclosure documents, and deletes the text of 4.26(c) that was intended to be replaced.

Section 553(b) of the Administrative Procedure Act (“APA”), 5 U.S.C. 553(b), generally requires that notice of proposed rulemaking be published in the Federal Register and that an opportunity for public comment be provided when an agency promulgates new rules. APA § 553(b)(B) provides an exception to this requirement “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefore in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.” Commission staff have been advised by National Futures Association, the designated self-regulatory association (“DSRO”) for CPOs, that despite the inadvertent amendment of Rule 4.26(b), CPOs have been following the rule as though the requirement for the most current account statement and annual report had not been eliminated. Thus, the Commission has determined that publication of this correction for comment is unnecessary because CPOs, the entities subject to the rule, have been operating as though the rule had been in effect.

Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601-611 (1994), requires that agencies, in proposing rules, consider the impact of those rules on small businesses. The Commission has previously established certain definitions of “small entities” to be used by the Commission in evaluating the impact of its rules on such entities in accordance with the RFA.^[4] The Commission previously has determined that registered CPOs are not small entities for the purpose of the RFA.^[5] Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein will not have a significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

This rule does not contain information collection requirements. Filing requirements regarding the disclosure document and information that must be distributed with it are included in section 4.21 and 4.22, which are part of an approved paperwork collection [OMB Control No. 3038-0005].

C. Cost-Benefit Analysis

Section 15 of the Commodity Exchange Act, as amended by section 119 of the CFMA, requires the Commission, before promulgating a new regulation under the Act, to consider the costs and benefits of the Commission's action. Section 15 further specifies that costs and benefits shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. The Commission may, in its discretion, give greater weight to any one of the five enumerated areas of concern and may, in its discretion, determine that, notwithstanding its costs, a particular regulation was necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

The main area of concern relevant to this rulemaking is the first set forth in the Act, “protection of market participants and the public.” The other factors are inapplicable to this rule. The Commission concludes that the benefit to the public of receiving the financial information specified above outweighs the costs of providing the information.

List of Subjects in 17 CFR Part 4

• Brokers
• Commodity futures Commodity pool operators
• Commodity trading advisors

Accordingly, 17 CFR part 4 is corrected by making the following correcting amendments:

PART 4—COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

1. The authority citation for Part 4 continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m, 6n, 6o, 12a, and 23.

2. Section 4.26 is amended by removing paragraph (c), redesignating paragraph (b) as paragraph (c), and adding a new paragraph (b) to read as follows:

§ 4.26

Use, amendment and filing of Disclosure Document.

(a) * * *

(b) The commodity pool operator must attach to the Disclosure Document the most current Account Statement and Annual Report for the pool required to be distributed in accordance with § 4.22; provided, however, that in lieu of the most current Account Statement the commodity pool operator may provide performance information for the pool current as of a date not more than sixty days prior to the date on which the Disclosure Document is distributed and covering the period since the most recent performance information contained in the Disclosure Document.

* * * * *

Issued in Washington, DC on June 19, 2002 by the Commission.

Jean A. Webb,

Secretary of the Commission.

Footnotes

1.  46 FR 38146 at 38189 (July 25, 1995).

2.  65 FR 46122 (July 27, 2000).

3.  65 FR 58648 (October 2, 2000).

4.  47 FR 18618-18621 (April 30, 1982).

5.  47 FR 18619-18620.