00-24984. Profile Documents for Commodity Pools

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Final rules.

SUMMARY:

The Commodity Futures Trading Commission (“CFTC” or “Commission”) is adopting amendments to its rules to permit commodity pool operators (“CPOs”) to provide a summary profile document to prospective commodity pool participants prior to giving them the pool's complete disclosure document. Certain technical changes to rules relating to CPOs and commodity trading advisors (“CTAs”) are also being adopted.

EFFECTIVE DATE:

November 1, 2000.

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:

On July 27, 2000, the Commission proposed to amend its rules to allow CPOs to use a profile document to solicit prospective commodity pool participants prior to providing them with the pool's Disclosure Document.^[1] The Commission also proposed amendments to Commission Rule 4.26 to establish procedures for the use, amendment and filing of profile documents that are parallel to those applicable to disclosure documents. The proposed rule changes are intended to accommodate National Futures Association's (“NFA”) proposed Compliance Rule 2-35(d). In addition, certain technical amendments related to filings by CPOs and commodity trading advisors (“CTAs”) were proposed.

The 30-day comment period expired on August 28, 2000. The Commission received one comment letter, from NFA, which supported the proposed rule changes. Accordingly, the Commission has determined to adopt the changes to Rules 4.2, 4.21, 4.26 and 4.36, essentially as proposed.

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.^[2] The Commission previously has determined that registered CPOs are not small entities for the purpose of the RFA.^[3] With respect to CTAs, the Commission has stated that it would evaluate within the context of a particular rule proposal which all or some affected CTAs would be considered to be small entities and, if so, the economic impact on them of any rule.^[4] In this regard, the Commission notes that the sole effect on CTAs of the rule revisions adopted herein is to reduce the filing requirement for disclosure documents. The Commission has previously determined that the disclosure requirements governing this category of registrant will not have a significant economic impact on a substantial number of small entities.^[5] Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that these regulations will not have a significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

This rule (Sections 4.31 and 4.33) contains information collection requirements. As required by the Paperwork Reduction Act of 1995,^[6] the Commission has submitted a copy of this rule to the Office of Management and Budget (OMB) for its review.^[7] In response to the Commission's invitation in the proposed rulemaking to comment on any potential paperwork burden associated with this regulation, no comments were received.

List of Subjects in 17 CFR Part 4

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

For the reasons stated in the preamble, the Commission amends 17 CFR Part 4 as follows:

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 4.2 is amended by revising paragraph (a) to read as follows:

§ 4.2

Requirements as to filing.

(a) All material filed with the Commission under this part 4 must be filed with the Commission at its Washington, DC office (Att: Managed Funds Branch, Division of Trading and Markets, CFTC, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581); Provided, however, that Disclosure Documents, profile documents, and amendments thereto may be filed at the following electronic mail address: [e-mail].

* * * * *

3. Section 4.21 is amended by revising paragraph (a) to read as follows:

§ 4.21

Required delivery of pool Disclosure Document.

(a)(1) No commodity pool operator registered or required to be registered under the Act may, directly or indirectly, solicit, accept or receive funds, securities or other property from a prospective participant in a pool that it operates or intends to operate unless, on or before the date it engages in that activity, the commodity pool operator delivers or causes to be delivered to the prospective participant a Disclosure Document for the pool containing the information set forth in § 4.24.

(2) Notwithstanding the requirements regarding solicitation specified in paragraph (a)(1) of this section, a commodity pool operator may provide to a prospective participant either of the following documents prior to delivery of a Disclosure Document, subject to compliance with rules promulgated by a registered futures association pursuant to section 17(j) of the Act:

(i) A profile document;

(ii) Where the prospective participant is an accredited investor, as defined in 17 CFR 230.501(a), a notice of intended offering and statement of the terms of the intended offering.

* * * * *

4. Section 4.26 is amended by revising paragraphs (a), (b) and (d) to read as follows:

§ 4.26

Use, amendment and filing of Disclosure Document.

(a)(1) Subject to paragraph (c) of this section, all information contained in the Disclosure Document and, where used, profile document, must be current as of the date of the Document; Provided, however, that performance information may be current as of a date not more than three months prior to the date of the Document.

(2) No commodity pool operator may use a Disclosure Document or profile document dated more than nine months prior to the date of its use.

(b)(1) If the commodity pool operator knows or should know that the Disclosure Document or profile document is materially inaccurate or incomplete in any respect, it must correct that defect and must distribute the correction to:

(i) All existing pool participants within 21 calendar days of the date upon which the pool operator first knows or has reason to know of the defect; and

(ii) Each previously solicited prospective pool participant prior to accepting or receiving funds, securities or other property from any such prospective participant.

(2) The pool operator may furnish the correction by any of the following means:

(i) An amended Disclosure Document or profile document;

(ii) With respect to a hard copy of the Disclosure Document, a sticker affixed to the Disclosure Document; or

(iii) Other similar means.

(3) The pool operator may not use the Disclosure Document or profile document until such correction has been made.

* * * * *

(d) Except as provided by § 4.8:

(1) The commodity pool operator must file with the Commission one copy of the Disclosure Document and, where used, profile document for each pool that it operates or that it intends to operate not less than 21 calendar days prior to the date the pool operator first intends to deliver such Document or documents to a prospective participant in the pool; and

(2) The commodity pool operator must file with the Commission one copy of the subsequent amendments to the Disclosure Document and, where used, profile document for each pool that it operates or that it intends to operate within 21 calendar days of the date upon which the pool operator first knows or has reason to know of the defect requiring the amendment.

5. Section 4.36 is amended by revising paragraph (d) to read as follows:

§ 4.36

Use, amendment and filing of Disclosure Document.

* * * * *

(d)(1) The commodity trading advisor must file with the Commission one copy of the Disclosure Document for trading program that it offers or that it intends to offer not less than 21 calendar days prior to the date the trading advisor first intends to deliver the Document to a prospective client in the trading program; and

(2) The commodity trading advisor must file with the Commission one copy of the subsequent amendments to the Disclosure Document for each trading program that it offers or that it intends to offer within 21 calendar days of the date upon which the trading advisor first knows or has reason to know of the defect requiring the amendment.

Issued in Washington, DC, on September 25, 2000 by the Commission.

Jean A. Webb,

Secretary of the Commission.

Footnotes

1.  65 FR 46122 (July 27, 2000).

2.  47 FR 18618-18621 (April 30, 1982).

3.  47 FR 18619-18620.

4.  47 FR 18618-18620.

5.  See 60 FR 38146, 38181 (July 25, 1995) and 48 FR 35248 (August 3, 1983).

6.  Pub. L. 104-13 (May 13, 1995).

7.  44 U.S.C. 3504(h).