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2011-11551

  • Federal Register, Volume 76 Issue 96 (Wednesday, May 18, 2011)[Federal Register Volume 76, Number 96 (Wednesday, May 18, 2011)]

    [Rules and Regulations]

    [Pages 28641-28645]

    From the Federal Register Online via the Government Printing Office [www.gpo.gov]

    [FR Doc No: 2011-11551]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 4

    RIN 3038-AC46

    Commodity Pool Operators: Relief From Compliance With Certain

    Disclosure, Reporting and Recordkeeping Requirements for Registered

    CPOs of Commodity Pools Listed for Trading on a National Securities

    Exchange; CPO Registration Exemption for Certain Independent Directors

    or Trustees of These Commodity Pools

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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    SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)

    is adopting amendments to its regulations as they affect certain

    commodity pool operators (CPOs) of commodity pools whose units of

    participation are listed and traded on a national securities exchange

    (Amendments). Specifically, this action codifies the relief from

    certain disclosure, reporting, and recordkeeping requirements that

    Commission staff previously had issued to these CPOs on a case-by-case

    basis. It also codifies relief from the CPO registration requirement

    for certain independent directors or trustees of actively-managed

    commodity pools that Commission staff similarly has issued.

    DATES: Effective date: June 17, 2011.

    FOR FURTHER INFORMATION CONTACT: Christopher W. Cummings, Special

    Counsel, Division of Clearing and Intermediary Oversight, or Barbara S.

    Gold, Associate Director, Division of Clearing and Intermediary

    Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW.,

    Washington, DC 20581, telephone number: (202) 418-5450; facsimile

    number: (202) 418-5528; and electronic mail: ccummings@cftc.gov, or

    bgold@cftc.gov, respectively.

    SUPPLEMENTARY INFORMATION:

    I. Background

    In order to make generally available the relief that Commission

    staff previously had issued on a case-by-case basis to individual CPOs

    of publicly-offered, exchange-listed pools, on September 9, 2010, the

    Commission published in the Federal Register proposed amendments to its

    Regulations 4.12 and 4.13 \1\ (Proposing Release).\2\ The Proposing

    Release commenced by explaining the history and background of the

    regulation of CPOs by the Commission under the Commodity Exchange Act

    (Act) \3\ and the background and development of various statutory and

    regulatory provisions granting relief from CPO regulation. With respect

    to this relief the Commission stated:

    \1\ 17 CFR 4.12 and 4.13. Commission regulations may be accessed

    through the Commission's Web site, at http://www.cftc.gov.

    \2\ 75 FR 54794.

    \3\ 7 U.S.C. 1 et seq. (2006), as amended by The Dodd Frank Wall

    Street Reform and Consumer Protection Act. Public Law 111-203, 124

    Stat. 1376 (2010). The Act similarly may be accessed through the

    Commission's Web site.

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    In implementing its statutory mandate to regulate the activities

    of CPOs, the Commission has endeavored to refine its regulations as

    appropriate to respond to changing market conditions in a manner

    consistent with customer protection. In addition to the issuance of

    relief by Commission staff on a case-by-case basis to facilitate

    application of regulatory requirements to new market conditions, the

    Commission has provided certain exemptions for registered CPOs from

    various of the requirements of Part 4 of its regulations, and where

    appropriate, it has provided exemptions from the CPO registration

    requirement itself.\4\

    \4\ 75 FR 54794.

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    The Proposing Release then went on to discuss the relatively recent

    development of publicly-offered commodity pools with units of

    participation listed on a national securities exchange (Commodity ETFs)

    \5\ and to describe the numerous similar requests for relief from CPOs

    of Commodity ETFs that Commission staff had received, and to which they

    had favorably responded (Prior Relief Letters).\6\ Because the requests

    for relief and the Prior Relief Letters the staff had issued in

    response thereto had become fairly standardized and routine, the

    Commission proposed to amend the relevant regulations so as to make the

    relief generally available to all CPOs who meet the requisite criteria.

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    \5\ See 75 FR 54794, at 54794-95. The Commission explained the

    origin and use of the term ``Commodity ETF''.

    \6\ Id. at 54795-96.

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    Thus, the Commission proposed adding new paragraph (c) to

    Regulation 4.12 that, subject to specified conditions, would permit the

    CPO of a Commodity ETF to claim relief from the specific Disclosure

    Document delivery and acknowledgment requirements of Regulation 4.21,

    the monthly Account Statement delivery requirement of Regulation 4.22,

    and the requirement to keep the CPO's books and records at its main

    business address in Regulation 4.23. In addition, the Commission

    proposed, subject to certain conditions, to exempt from CPO

    registration an independent director or trustee of a Commodity ETF,

    where that person was required to serve as a director or trustee solely

    for purposes of constituting and maintaining the audit committee

    required for actively-managed public companies (including actively-

    managed Commodity ETFs) under provisions of the Sarbanes-Oxley Act of

    2002 \7\ (and Securities and Exchange Commission rules and exchange

    listing requirements adopted pursuant thereto) by adding new paragraph

    (a)(5) to Regulation 4.13.

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    \7\ Public Law 107-204, 116 Stat. 745, enacted July 30, 2002.

    See Section 10A(m) of the Securities Exchange Act of 1934 (Exchange

    Act), 78j-1(m) (2006), and Rule 10A-3 under the Exchange Act, 17 CFR

    240.10A-3 (2010).

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    As the Proposing Release explained, then, the Commission's actions

    were intended to respond to financial market developments in the

    limited context of CPOs whose units of participation in the pools they

    operated were listed for trading on a national securities exchange.\8\

    The specific changes that the Commission proposed, as well as the

    rationale for those proposed changes, are set forth in the Proposing

    Release.\9\

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    \8\ 75 FR at 54795.

    \9\ See 75 FR at 54796-98.

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    In light of the generally favorable comments it received (discussed

    in Section II below), the Commission is adopting the Amendments

    essentially as proposed. In this regard, however, and

    [[Page 28642]]

    as the Commission stated in the Proposing Release, it is important to

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    note that:

    [R]egardless of registration status, all persons who come within

    the CPO definition are subject to certain operational and

    advertising requirements under Part 4, to all other provisions of

    the Act and the Commission's regulations prohibiting fraud that

    apply to CPOs, and to all other relevant provisions of the Act and

    the Commission's regulations that apply to all commodity interest

    market participants, such as the general antifraud provisions,

    prohibitions against manipulations, and the trade reporting

    requirements.\10\

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    \10\ 75 FR 54794 (footnotes omitted).

    Accordingly, while the regulations being published by this Federal

    Register release provide an exemption from registration for certain

    CPOs, these persons nonetheless remain subject to the Commission's

    jurisdiction.

    Consistent with past practice, in a separate document published

    elsewhere in today's Federal Register, the Commission is issuing a

    Notice and Order that authorizes the National Futures Association to

    process: (1) Claims of exemption from certain Part 4 requirements for

    CPOs with respect to Commodity ETFs; and (2) notices of exemption from

    registration as a CPO filed by independent directors or trustees of

    Commodity ETFs.

    II. The Comments on the Proposing Release

    The Commission received five comment letters on the Proposing

    Release, as follows: Two from CPOs of Commodity ETFs; one from a

    registered futures association; one from a national securities

    exchange; and one from a bar association.\11\ The commenters were

    uniformly in support of the amendments to the Commission's regulations

    set forth in the Proposing Release. In the words of the registered

    futures association, for example, the proposed amendments would

    ``provide the appropriate relief without materially impacting customer

    protection,'' and they would serve as an appropriate modification of

    the Commission's existing requirements by ``promot[ing] innovation in

    the marketplace.'' The national securities exchange provided similar

    comments, stating that the Proposing Release would ``provide[]

    appropriate regulatory relief in response to the developing financial

    marketplace consistent with the goal of customer protection.''

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    \11\ These comment letters are available on the Commission's Web

    site at: http://comments.cftc.gov/PublicComments/CommentList.aspx?id=761.

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    Commenters nonetheless requested certain clarifications and

    enhancements of the proposed amendments to the Commission's

    regulations.

    A. Clarification of Relief From the Disclosure Document Delivery and

    Acknowledgment Requirements of Regulation 4.21

    Several commenters asked whether the Disclosure Document delivery

    and acknowledgment requirements would apply under proposed Regulation

    4.12(c) in various circumstances, including: Secondary market

    transactions not involving a direct purchase from the CPO; secondary

    market transactions not involving an underwriter or distributor; sales

    or resales by Authorized Participants;\12\ and purchases and resales of

    Commodity ETF shares by an underwriter or distributor.

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    \12\ In the case of many Commodity ETFs, one or more registered

    broker dealers (Authorized Participants) contract with the CPO to

    purchase or redeem large blocks of Commodity ETF units as necessary

    to ensure that the unit price and the Commodity ETF's net asset

    value do not diverge and create arbitrage opportunities. See e.g.,

    CFTC Staff Letter 05-19 [2005-2007 Transfer Binder] Comm. Fut. L.

    Rep. (CCH) ]30,164 (Nov. 10, 2005).

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    As a general principle, the Commission believes that secondary

    market transactions to which a CPO or any person acting as the agent of

    the CPO is not a party do not trigger the requirement for the CPO to

    deliver a Disclosure Document or to obtain a signed acknowledgment of

    receipt.\13\ For a CPO of a Commodity ETF who has claimed an exemption

    under Regulation 4.12(c), the Disclosure Document delivery and

    acknowledgment requirements also do not apply in the case of

    transactions involving Authorized Participants or transactions

    involving the underwriters or distributors (acting as the CPO's agents)

    of the Commodity ETF's securities offering. Nevertheless, the CPO

    claiming relief under Regulation 4.12(c) is obligated to keep the

    Commodity ETF's Disclosure Document current and posted on the CPO's Web

    site, regardless of whether the CPO of the Commodity ETF has

    characterized its pool as an ``open-end'' or ``closed-end'' fund.\14\

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    \13\ See 44 FR 25658 (May 2, 1979), where in interpreting newly-

    adopted Regulation 4.21 the Commission stated:

    The operator of a commodity pool is not required to provide a

    Disclosure Document [rule 4.21] to a person who purchases a unit of

    participation or interest in the pool from a pool participant if the

    pool operator did not solicit the purchase.

    \14\ See, e.g., CFTC Staff Letter 05-19 [2005-2007 Transfer

    Binder] Comm. Fut. L. Rep. (CCH) ] 30,164 (Nov. 10, 2005), where the

    CPO in making its request characterized its pool as an ``open end''

    fund, and CFTC Staff Letter 10-06 [Current Transfer Binder] Comm.

    Fut. L. Rep. (CCH) ] 31,557 (Mar. 29, 2010), where the CPO

    characterized its pool as a ``closed-end'' fund.

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    B. Requirement To Clearly Inform Prospective Participants of the CPO's

    Internet Web Site

    One commenter sought guidance on the requirement in proposed

    Regulation 4.12(c)(2)(i)(C) to``[c]learly inform prospective pool

    participants of the Internet address of such Web site'' on which the

    CPO has posted the Commodity ETF's Disclosure Document. The commenter

    pointed out that, in the context of a pool whose shares are traded on a

    national securities exchange, the CPO typically does not know the

    identities of many prospective pool participants.

    In response, the Commission has revised the text of Regulation

    4.12(c)(2)(i)(C) to make clear that the CPO is required to clearly

    inform those prospective pool participants with whom it has contact of

    the Web site address. Additionally, and as proposed, the regulation

    requires the CPO to direct brokers, dealers and other selling agents to

    so inform prospective pool participants. Based on the representations

    made by the CPOs to whom the Prior Relief Letters were issued, and the

    Commission's understanding of the Federal securities laws applicable to

    the sale of publicly-offered, exchange-listed securities, the

    Commission expects that persons will purchase shares in a Commodity ETF

    through a registered broker or dealer.

    C. Request To Expand Relief From Regulation 4.22 To Include Annual

    Reports

    Another commenter asked that the CPO of a Commodity ETF claiming

    relief under proposed Regulation 4.12(c) be permitted to satisfy the

    Annual Report requirement under Regulation 4.22(c) by providing the

    Commodity ETF's Form 10-K on the same Web site where the CPO makes

    available the Commodity ETF's Disclosure Document and monthly Account

    Statements.

    The Commission did not include such an amendment to Regulation 4.22

    in the Proposing Release, and it is not including one in the

    Amendments. This is because the Commission believes that the benefits

    to Commodity ETF participants of a familiar, standardized, certified,

    annual report of the Commodity ETF's financial condition outweigh the

    burden of, for example, ascertaining the names and addresses of

    participants at year-end and preparing and delivering the Annual Report

    (all of which the CPO has 90 days to accomplish). Accordingly, the CPO

    of a Commodity ETF claiming exemption

    [[Page 28643]]

    under Regulation 4.12(c) remains subject to the Annual Report

    requirements of Regulation 4.22(c).\15\

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    \15\ Regulation 4.22(c) sets forth the basic requirement for

    distribution of the Annual Report. Regulations 4.22(d) through (i)

    contain additional provisions concerning the Annual Report, all of

    which remain applicable to the CPO.

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    D. Filing Requirement for Statement by an Alternate Recordkeeper

    The Commission also received a comment recommending that instead of

    filing with the National Futures Association (NFA), as proposed, the

    statement required of an alternate recordkeeper by proposed Regulation

    4.12(c)((2)(iii)(C), the CPO should be required ``to maintain the

    statement as a business record and make it available to NFA'' upon

    NFA's request.

    In response, the Commission notes that the statement, whereby an

    alternate recordkeeper acknowledges its role, agrees to carry it out in

    compliance with Regulation 1.31, and agrees to keep the records it

    keeps open to inspection by Commission or Department of Justice

    representatives and available to pool participants, is a pre-requisite

    and condition precedent to effectiveness of relief from Regulation

    4.23. Moreover, if for some reason, the books and records kept at the

    CPO's main business address are unavailable, the statement would be

    inaccessible as well. Accordingly, the Commission is retaining the

    filing requirement of Regulation 4.12(c)(2)(iii)(C).

    E. Clarification of Effect on Recipients of Prior Relief Letters

    In the Proposing Release the Commission stated that, after adoption

    of final regulations, a recipient of a Prior Relief Letter could

    continue to rely upon the Prior Relief Letter without taking any

    further action (such as filing a notice under Regulation 4.12(d)), so

    long as the requirements of the final regulations were no more

    restrictive than the requirements of the Prior Relief Letter to which

    the recipient was subject. One of the commenters asked for

    clarification of the words ``no more restrictive.''

    Inasmuch as the requirements of Regulations 4.12(c) and 4.13(a)(5)

    as adopted are no more restrictive than those of any of the Prior

    Relief Letters, by this Federal Register release the Commission

    confirms that each recipient of a Prior Relief Letter may continue to

    rely upon that letter without taking any further action. Nevertheless,

    and as the Commission stated in the Proposing Release:

    [I]f the facts and representations upon which a Prior Relief

    Letter was based materially change, the [recipient of that Prior

    Relief Letter] will be required to file a [n]otice under the final

    rule, or cease engaging in the activities that prompted the request

    for the Prior Relief Letter.\16\

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    \16\ 75 FR 54794, 54798.

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    III. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \17\ 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.\18\ With respect to CPOs, the Commission has previously

    determined that a CPO is a small entity if it meets the criteria for

    exemption from registration under current Regulation 4.13(a)(2).\19\

    Therefore, the requirements of the RFA do not apply to CPOs who do not

    meet those criteria. The Commission believes that the Amendments will

    not place any burdens, whether new or additional, on CPOs who would be

    affected hereunder. This is because the certain of the Amendments

    provide disclosure, reporting and recordkeeping relief for more CPOs,

    and another Amendment provides registration relief. The Commission did

    not receive any comments relative to its analysis of the RFA in the

    Proposing Release.

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    \17\ 5 U.S.C. 601 et seq.

    \18\ 47 FR 18618 (Apr. 30, 1982).

    \19\ Id. at 18619-20.

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    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

    The final rule affects information collection requirements. As

    required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)),

    the Commission has submitted a copy of this section to the Office of

    Management and Budget for its review. The information collection

    burdens created by the Commission's proposed rules, which were

    discussed in detail in the Proposing Release, are identical to the

    collective information collection burdens of the final rules.

    The Commission invited the public and other Federal agencies to

    comment on any aspect of the information collection requirements

    discussed above. The Commission received no comment on its burden

    estimates or on any other aspect of the information collection

    requirements contained in its proposing release. The affected

    collection is Collection 3038-0005 (part 4 of the Commission's

    regulations).

    C. Cost-Benefit Analysis

    Section 15(a) of the Act requires the Commission to consider the

    costs and benefits of its action before issuing a new regulation under

    the Act. By its terms, Section 15(a) does not require the Commission to

    quantify the costs and benefits of a new regulation or to determine

    whether the benefits of the proposed regulation outweigh its costs.

    Rather, Section 15(a) simply requires the Commission to ``consider the

    costs and benefits'' of its action.

    Section 15(a) 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. Accordingly, the Commission could in its

    discretion give greater weight to any one of the five enumerated areas

    and could in its discretion determine that, notwithstanding its costs,

    a particular rule 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 Commission has considered the costs and benefits of these new

    regulations in light of the specific provisions of Section 15(a) of the

    Act. The Commission has determined that the costs of the Amendments are

    not significant. While the Amendments are expected to lessen the burden

    that would otherwise be imposed upon CPOs of Commodity ETFs, market

    participants and members of the public will nonetheless be protected

    because any exemption of persons from regulatory requirements would be

    based on such factors as substituted compliance with other similar

    requirements. The Commission has determined that the benefits of the

    Amendments are substantial. The Amendments will promote efficiency in

    the markets by providing uniform standards for CPOs and by reducing

    duplicative regulation.

    The Commission requested comment on its application of these

    factors in the Proposing Release. No such comments were received.

    After considering the costs and benefits, the Commission has

    determined to adopt the Amendments.

    [[Page 28644]]

    List of Subjects in 17 CFR Part 4

    Advertising, Brokers, Commodity futures, Commodity pool operators,

    Commodity trading advisors, Consumer protection, Reporting and

    recordkeeping requirements.

    For the reasons presented above, the Commission hereby amends

    Chapter I of Title 17 of the Code of Federal Regulations as follows:

    PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

    0

    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

    0

    2. Section 4.12 is amended by:

    0

    a. Revising the heading of paragraph (b);

    0

    b. Revising the introductory text of paragraph (b)(1);

    0

    c. Amending paragraph (b)(2) by adding a heading;

    0

    d. Redesignating paragraphs (b)(3) through (b)(6) as paragraphs (d)(1)

    through (d)(4) and revising newly redesignated paragraphs (d)(1)

    introductory text, (d)(1)(iii)(A), (d)(1)(iii)(B), (d)(1)(iv), and

    (d)(2)(ii); and

    0

    e. Adding new paragraph (c), to read as follows:

    Sec. 4.12 Exemption from provisions of part 4.

    * * * * *

    (b) Exemption from Subpart B for certain commodity pool operators

    based on amount and nature of commodity interest trading. (1)

    Eligibility. Subject to compliance with the provisions of paragraph (d)

    of this section, any person who is registered as a commodity pool

    operator, or has applied for such registration, may claim any or all of

    the relief available under paragraph (b)(2) of this section if:

    * * * * *

    (2) Relief available to pool operator. * * *

    * * * * *

    (c) Exemption from Subpart B for certain commodity pool operators

    based on listing of pool participation units for trading on a national

    securities exchange. (1) Eligibility. Subject to compliance with the

    provisions of paragraph (d) of this section, any person who is

    registered as a commodity pool operator, or has applied for such

    registration, may claim any or all of the relief available under

    paragraph (c)(2) of this section if the units of participation in the

    pool for which it makes such claim:

    (i) Will be offered and sold pursuant to an effective registration

    statement under the Securities Act of 1933; and

    (ii) Will be listed for trading on a national securities exchange

    registered as such under the Securities Exchange Act of 1934.

    (2) Relief available to pool operator. The commodity pool operator

    of a pool whose units of participation meet the criteria of paragraph

    (c)(1) of this section may claim the following relief:

    (i) In the case of Sec. 4.21, exemption from the Disclosure

    Document delivery and acknowledgment requirements of that section,

    Provided, however, that the pool operator:

    (A) Cause the pool's Disclosure Document to be readily accessible

    on an Internet Web site maintained by the pool operator;

    (B) Cause the Disclosure Document to be kept current in accordance

    with the requirements of Sec. 4.26(a);

    (C) Clearly inform prospective pool participants with whom it has

    contact of the Internet address of such Web site and direct any broker,

    dealer or other selling agent to whom the pool operator sells units of

    participation in the pool to so inform prospective pool participants;

    and

    (D) Comply with all other requirements applicable to pool

    Disclosure Documents under Part 4. The pool operator may satisfy the

    requirement of Sec. 4.26(b) to attach to the Disclosure Document a

    copy of the pool's most current Account Statement and Annual Report if

    the pool operator makes such Account Statement and Annual Report

    readily accessible on an Internet Web site maintained by the pool

    operator.

    (ii) In the case of Sec. 4.22, exemption from the Account

    Statement distribution requirement of that section; Provided, however,

    that the pool operator:

    (A) Cause the pool's Account Statements, including the

    certification required by Sec. 4.22(h), to be readily accessible on an

    Internet Web site maintained by the pool operator within 30 calendar

    days after the last day of the applicable reporting period and

    continuing for a period of not less than 30 calendar days; and

    (B) Cause the Disclosure Document for the pool to clearly indicate:

    (1) That the information required to be included in the Account

    Statements will be readily accessible on an Internet Web site

    maintained by the pool operator; and

    (2) The Internet address of such Web site.

    (iii) In the case of Sec. 4.23, exemption from the requirement to

    keep the books and records specified by that section at the pool

    operator's main business office; Provided, however, that:

    (A) The books and records that the pool operator will not keep at

    its main business office will be maintained by one or more of the

    following: The pool's administrator, distributor or custodian, or a

    bank or registered broker or dealer acting in a similar capacity with

    respect to the pool;

    (B) At the time it files electronically with the National Futures

    Association the notice required under paragraph (d) of this section,

    the pool operator files a statement that:

    (1) Identifies the name, main business address, and main business

    telephone number of the person(s) who will be keeping required books

    and records in lieu of the pool operator;

    (2) Sets forth the name and telephone number of a contact for each

    person who will be keeping required books and records in lieu of the

    pool operator;

    (3) Specifies, by reference to the respective paragraph of Sec.

    4.23, the books and records that such person will be keeping; and

    (4) Contains representations from the pool operator that:

    (i) It will promptly amend the statement if the contact information

    or location of any of the books and records required to be kept by

    Sec. 4.23 changes, by identifying in such amendment the new location

    and any other information that has changed;

    (ii) It remains responsible for ensuring that all books and records

    required by Sec. 4.23 are kept in accordance with Sec. 1.31;

    (iii) Within forty-eight hours after a request by a representative

    of the Commission, it will obtain the original books and records from

    the location at which they are maintained, and provide them for

    inspection at the pool operator's main business office; Provided,

    however, that if the original books and records are permitted to be,

    and are maintained, at a location outside the United States, its

    territories or possessions, the pool operator will obtain and provide

    such original books and records for inspection at the pool operator's

    main business office within seventy-two hours of such a request; and

    (iv) It will disclose in the pool's Disclosure Document the

    location of its books and records that are required under Sec. 4.23.

    (C) At the time it files the notice required under paragraph (d) of

    this section, the pool operator files electronically with the National

    Futures Association a statement from each person who will be keeping

    required

    [[Page 28645]]

    books and records in lieu of the pool operator wherein such person:

    (1) Acknowledges that the pool operator intends that the person

    keep and maintain required pool books and records;

    (2) Agrees to keep and maintain such required books and records in

    accordance with Sec. 1.31 of this chapter; and

    (3) Agrees to keep such required books and records open to

    inspection by any representative of the Commission or the United States

    Justice Department in accordance with Sec. 1.31 of this chapter and to

    make such required books and records available to pool participants in

    accordance with Sec. 4.23 of this chapter.

    * * * * *

    (d)(1) Notice of claim for exemption. Any registered commodity pool

    operator, or applicant for commodity pool operator registration, who

    desires to claim the relief available under paragraph (b) or (c) of

    this Sec. 4.12 must file electronically a claim of exemption with the

    National Futures Association through its electronic exemption filing

    system. Such claim must:

    * * * * *

    (iii) * * *

    (A) The pool will be operated in compliance with paragraph

    (b)(1)(i) of this section and the pool operator will comply with the

    requirements of paragraph (b)(1)(ii) of this section; or

    (B) The pool will be operated in compliance with paragraph (c)(1)

    of this section;

    (iv) Specify the relief sought under paragraph (b)(2) or (c)(2) of

    this section, as the case may be, and

    * * * * *

    (2)(i) * * *

    (ii) The claim of exemption shall be effective upon filing;

    Provided, however, That any exemption claimed hereunder:

    (A) Will not be effective unless and until the notice required by

    this paragraph (d) contains all information called for herein and any

    statements required under paragraph (c)(2)(iii) have been provided; and

    (B) Will cease to be effective upon any change which would render

    the representations made pursuant to paragraph (d)(1)(iii) of this

    section inaccurate or the continuation of such representations false or

    misleading.

    * * * * *

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    3. Section 4.13 is amended by:

    0

    a. Removing the word ``or'' at the end of paragraph (a)(3)(iv);

    0

    b. Removing the period at the end of paragraph (a)(4)(ii)(B) and adding

    ``; or'';

    0

    c. Redesignating paragraph (a)(5) as paragraph (a)(6), and revising

    newly redesignated paragraph (a)(6)(i) introductory text;

    0

    d. Adding new paragraph (a)(5); and

    0

    e. Revising paragraphs (b)(1)(ii) and (b)(2), to read as follows:

    Sec. 4.13 Exemption from registration as a commodity pool operator.

    * * * * *

    (a) * * *

    (5) The person is acting as a director or trustee with respect to a

    pool whose operator is registered as a commodity pool operator and is

    eligible to claim relief under Sec. 4.12(c) of this chapter, Provided,

    however, that:

    (i) The person acts in such capacity solely to comply with the

    requirements under section 10A of the Securities Exchange Act of 1934,

    as amended, and any Securities and Exchange Commission rules and

    exchange listing requirements adopted pursuant thereto, that the pool

    have an audit committee comprised exclusively of independent directors

    or trustees;

    (ii) The person has no power or authority to manage or control the

    operations or activities of the pool except as necessary to comply with

    such requirement; and

    (iii) The registered pool operator of the pool is and will be

    liable for any violation of the Act or the Commission's regulations by

    the person in connection with the person's serving as a director or

    trustee with respect to the pool.

    (6)(i) Eligibility for exemption under paragraph (a)(1), (a)(2),

    (a)(3) or (a)(4) of this section is subject to the person furnishing in

    written communication physically delivered or delivered through

    electronic transmission to each prospective participant in the pool: *

    * *

    * * * * *

    (b)(1) * * *

    (ii) Contain the section number pursuant to which the operator is

    filing the notice (i.e., Sec. 4.13(a)(1), (a)(2), (a)(3), (a)(4) or

    (a)(5), or both (a)(3) and (a)(4)) and represent that the pool will be

    operated in accordance with the criteria of that paragraph or

    paragraphs; and

    * * * * *

    (2) The person must file the notice by no later than the time that

    the pool operator delivers a subscription agreement for the pool to a

    prospective participant in the pool; Provided, however, that in the

    case of a claim for relief under Sec. 4.13(a)(5), the person must file

    the notice by the later of the effective date of the pool's

    registration statement under the Securities Act of 1933 or the date on

    which the person first becomes a director or trustee; and Provided,

    further, that where a person registered with the Commission as a

    commodity pool operator intends to withdraw from registration in order

    to claim exemption hereunder, the person must notify its pool's

    participants in written communication physically delivered or delivered

    through electronic transmission that it intends to withdraw from

    registration and claim the exemption, and it must provide each such

    participant with a right to redeem its interest in the pool prior to

    the person filing a notice of exemption from registration

    * * * * *

    Issued in Washington, DC, on May 5, 2011, by the Commission.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. 2011-11551 Filed 5-17-11; 8:45 am]

    BILLING CODE P

    Last Updated: May 18, 2011



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