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  • [Federal Register: February 24, 2009 (Volume 74, Number 35)]

    [Proposed Rules]

    [Page 8220-8228]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr24fe09-32]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 4

    RIN 3038-AC38

    Commodity Pool Operator Periodic Account Statements and Annual

    Financial Reports

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Proposed rules.

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    SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

    ``CFTC'') is proposing to amend its regulations governing the periodic

    account statements that commodity pool operators (``CPOs'') are

    required to provide to commodity pool participants and the annual

    financial reports that CPOs are required to provide to commodity pool

    participants and file with the National Futures Association (``NFA'').

    The proposed amendments would: Specify detailed information that must

    be included in the periodic account statements and annual reports for

    commodity pools with more than one series or class of ownership

    interest; clarify that the periodic account statements must disclose

    either the net asset value per outstanding participation unit in the

    pool, or the total value of a participant's interest or share in the

    pool; extend the time period for filing and distributing annual reports

    of commodity pools that invest in other funds; codify existing

    Commission staff interpretations regarding the proper accounting

    treatment and financial statement presentation of certain income and

    expense items in the periodic account statements and annual reports;

    streamline annual reporting requirements for pools ceasing operation;

    and clarify and update several other requirements for periodic and

    annual reports prepared and distributed by CPOs.

    DATES: Comments must be received on or before March 26, 2009.

    ADDRESSES: You may submit comments, identified by RIN 3038-AC38 by any

    of the following methods:

    Federal eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov/search/index.jsp http://www.regulations.gov/

    search/index.jsp. Follow the instructions for submitting comments.

    E-mail: secretary@cftc.gov. Include ``Commodity Pool

    Operator Periodic and Annual Reports'' in the subject line of the

    message.

    Fax: (202) 418-5521.

    Mail: Send to David Stawick, Secretary, Commodity Futures

    Trading Commission, 1155 21st Street, NW., Washington, DC 20581.

    Courier: Same as Mail above.

    All comments received will be posted without change to http://

    www.cftc.gov, including any personal information provided.

    FOR FURTHER INFORMATION CONTACT: Eileen R. Chotiner, Futures Trading

    Specialist, at (202) 418-5467, Division of Clearing and Intermediary

    Oversight, Commodity Futures Trading Commission, Three Lafayette

    Centre, 1155 21st Street, NW., Washington, DC 20581. Electronic mail:

    echotiner@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Background

    Commission Regulation 4.22(a) \1\ requires a registered CPO to

    distribute an account statement to each participant in each commodity

    pool that it operates within 30 days of the end of the reporting

    period.\2\ Regulation 4.22(c) requires a CPO to file with NFA, and to

    provide to each participant, an annual financial report, audited by an

    independent public accountant, for each commodity pool that it operates

    within 90 days of the end of the pool's fiscal year or the permanent

    cessation of the pool's trading.\3\

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    \1\ The regulations of the Commission cited in this release may

    be found at 17 CFR Ch. I (2008).

    \2\ Pursuant to Regulation 4.22(b), account statements must be

    provided monthly for pools with net asset values greater than

    $500,000 at the beginning of the pool's fiscal year; otherwise,

    account statements may be provided quarterly.

    \3\ NFA is a registered futures association pursuant to Section

    17 of the Commodity Exchange Act (``Act''), 7 U.S.C. 21.

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    CPOs operating pools offered solely to qualified eligible persons

    (``QEPs'') pursuant to Regulation 4.7 may claim relief from certain

    reporting requirements.\4\ In this regard, a CPO that has claimed an

    exemption from certain regulatory requirements pursuant to Regulation

    4.7 must distribute periodic account statements to each participant of

    an exempt pool at least quarterly, and also must file with NFA and

    distribute to participants in the exempt pool an annual report within

    90 days of the end

    [[Page 8221]]

    of the pool's fiscal year or the permanent cessation of the pool's

    trading. Annual reports for Regulation 4.7 exempt pools are not

    required to be audited by an independent public accountant.\5\

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    \4\ Regulation 4.7(a) defines ``qualified eligible person'' to

    include participants that meet certain eligibility criteria

    regarding their net worth, income, and investments.

    \5\ Regulation 4.7(b)(3) permits the CPO of a Regulation 4.7-

    qualifying pool to claim exemption from the specific annual report

    content requirements and annual report certification requirements,

    respectively, of Regulations 4.22(c) and (d).

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    II. Proposed Changes to Periodic Account Statements and Annual

    Financial Reports

    A. Periodic Account Statements for Regulation 4.7--Exempt Pools

    Regulation 4.7(b)(2) requires the CPO of a Regulation 4.7-exempt

    commodity pool to provide each participant in the pool with an account

    statement that must indicate: (1) The net asset value of the exempt

    pool as of the end of the reporting period; (2) the change in net asset

    value of the exempt pool from the end of the previous reporting period;

    and (3) the net asset value per outstanding unit of participation in

    the exempt pool as of the end of the reporting period. The account

    statement must be prepared in accordance with generally accepted

    accounting principles (``GAAP''), signed and affirmed by the CPO, and

    distributed to pool participants no less frequently than quarterly

    within 30 calendar days of the end of the reporting period.

    The Commission is proposing to amend Regulation 4.7(b)(2) to

    clarify that the periodic account statement provided to each pool

    participant must disclose either the net asset value per outstanding

    participation unit, or the total value of the participant's interest or

    share, in the commodity pool as of the end of the reporting period. The

    proposal is intended to ensure that pool participants receive

    sufficient information to determine the value of their investments in

    the commodity pool from the periodic account statement. Furthermore,

    the proposal is consistent with the comparable provision of Regulation

    4.22(a) for pools that are not Regulation 4.7-exempt, which specifies

    that either the net asset value per outstanding participation unit or

    the total value of the participant's interest or share in the pool be

    included in an account statement.

    B. Series Pools and Pools With Multiple Classes of Ownership Interests

    A commodity pool may contain an organizational structure that

    includes more than one series or class of ownership interest. Different

    ownership series or classes may exist due to differences in fees and

    expenses, currency denomination, trading, cash management strategies,

    and other aspects of the operation of the pool.

    GAAP provides guidance regarding the presentation of financial

    statements for series funds \6\ and for investment funds with multiple

    ownership classes,\7\ and pool financial statements prepared pursuant

    to both Regulation 4.22(c) and Regulation 4.7(b)(3) must be in

    accordance with GAAP. Commission staff has received many questions from

    CPOs, their attorneys and accountants, and NFA regarding the proper

    presentation of periodic account statements and annual financial

    reports for series funds and multi-class pools. Therefore, the

    Commission is proposing to amend Regulations 4.7(b)(2) and 4.22(a) to

    specify that, for series funds structured with a limitation on

    liability among the different series, the periodic account statement

    may include only the information for the series being reported,

    although additional information on other series may be provided;

    however, for other series funds and for multi-class funds, net asset

    value and other information required by the regulations must be

    presented for both the pool as a whole as well as for each series or

    class of ownership interest.

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    \6\ American Institute of Certified Public Accountants

    (``AICPA'') Audit and Accounting Guide, Investment Companies

    paragraph 7.03.

    \7\ AICPA Audit and Accounting Guide, Investment Companies,

    Chapter 5, Complex Capital Structures.

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    The Commission also is proposing to amend Regulations 4.7(b)(3) and

    4.22(c) to clarify that, for series funds structured with a limitation

    on liability among the different series, the annual report may include

    only the information for the series being reported. For both periodic

    account statements and annual financial reports, CPOs of series funds

    with a limitation on liability among the different series are not

    precluded by these amendments from providing financial information to

    participants for other series or classes of the pool.

    C. Changes to Extension Provisions Under Regulation 4.22(f)

    Regulations 4.7(b)(3) and 4.22(c) require a CPO to provide to each

    participant in each commodity pool that the CPO operates an annual

    report for the commodity pool within 90 calendar days of the end of the

    pool's fiscal year. The CPO is further required to submit a copy of the

    annual report electronically to NFA.

    Regulation 4.22(f)(2) permits a CPO of a commodity pool that

    invests in other funds (referred to as a ``fund of funds'') to claim up

    to an additional 60 days to distribute the pool's annual report to pool

    participants and to file a copy with NFA. CPOs may claim the Regulation

    4.22(f)(2) fund of funds 60-day extension by filing with NFA an initial

    notice, containing specified representations, in advance of the annual

    report's due date for the first year the extension is claimed. In

    subsequent years, the CPO may confirm that the circumstances

    necessitating the relief continue to apply by restating certain

    representations in a statement filed at the same time as the pool's

    annual report.

    Regulation 4.22(f)(2) currently is applicable only to CPOs that

    distribute annual reports that are audited by independent public

    accountants. CPOs of commodity pools that are permitted to distribute

    unaudited annual financial reports to participants pursuant to

    Regulation 4.7(b)(3) may request from NFA up to a 90-day extension of

    the filing deadline under Regulation 4.22(f)(1).

    In adopting Regulation 4.22(f)(2), the Commission anticipated,

    based upon its experience, that a substantial majority of the CPOs of

    funds of funds would be able to distribute to the participants and to

    file with NFA the pools' annual reports within 150 days of the end of

    the respective commodity pool's fiscal year.\8\ The Commission further

    noted that CPOs that could not meet the 150-day filing timeframe under

    Regulation 4.22(f)(2) could continue to request an extension of time to

    distribute and to file the pools' annual reports pursuant to Regulation

    4.22(f)(1).\9\

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    \8\ 65 FR 81333 at 81334 (December 26, 2000).

    \9\ However, the CPO of a commodity pool that operated as a fund

    of funds and claimed an automatic extension of 60 days pursuant to

    Regulation 4.22(f)(2) for the filing of the pool's annual report

    would be limited to requesting no more than an additional 30-day

    extension under Regulation 4.22(f)(1). Thus, under Regulations

    4.22(f)(1) and (2), all pool annual reports must be distributed to

    pool participants and filed with NFA within 180 days of the end of

    the pool's fiscal year.

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    In recent years, however, the number of CPOs that have requested

    additional extensions under Regulation 4.22(f)(1) after having claimed

    the 60-day extension under Regulation 4.22(f)(2) has increased

    significantly. According to data provided by NFA for pool annual

    reports with a fiscal year ending in 2006, CPOs claimed the 60-day fund

    of funds extension under Regulation 4.22(f)(2) for over 650 commodity

    pools. Subsequently, CPOs of approximately 50 percent of such pools

    filed requests with NFA for an additional extension of up to 30

    calendar days pursuant to Regulation 4.22(f)(1). Similarly, for

    [[Page 8222]]

    pools with fiscal years ending in 2007, CPOs claimed the 60-day filing

    extension under Regulation 4.22(f)(2) for over 500 commodity pools.

    Subsequently, CPOs of approximately 45 percent of such pools filed

    requests with NFA for an additional extension of up to 30 calendar days

    under Regulation 4.22(f)(1).

    To address this issue, the Commission is proposing to extend from

    60 to 90 days the maximum amount of additional time that a CPO that

    operates a commodity pool that invests in other funds may claim under

    Regulation 4.22(f)(2). Therefore, under the proposal, annual financial

    reports for funds of funds may be distributed to pool participants and

    filed with NFA a maximum of 180 days from the end of a qualifying

    pool's fiscal year. This amendment would eliminate the need for CPOs to

    file an additional request under Regulation 4.22(f)(1), and also would

    reduce the administrative burden to NFA of processing these additional

    requests. The Commission, however, expects CPOs to distribute pool

    annual reports to participants as soon after the end of the pool's

    fiscal year-end as possible, notwithstanding the availability of the

    additional extension.\10\

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    \10\ In this regard, the Commission would expect that pool

    annual financial reports would be issued to the pool's participants

    shortly after the completion of the reports by the independent

    public accountant or, for unaudited annual financial reports, by the

    CPO.

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    The 180-day timeframe for CPOs of funds of funds to prepare and to

    distribute pool annual reports also would be consistent with the

    timeframe within which registered investment advisers distribute annual

    reports to investors in funds of funds under the Securities and

    Exchange Commission's (``SEC's'') custody rule.\11\ Registered

    investment advisers are not required to comply with certain provisions

    of the SEC's custody rule with respect to the accounts of limited

    partnerships, limited liability companies, or other pooled investment

    vehicles that are subject to audit at least annually and for which the

    audited financial statements are distributed to partners, members or

    other beneficial owners within 120 days of the fund's fiscal year-end

    or, in the case of a fund of funds, within 180 days of the end of its

    fiscal year.

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    \11\ 17 CFR 275.206(4)-2(b)(3). ``Fund of funds'' is defined for

    purposes of the custody rule at 275.206(4)-2(b)(3)(c)(4).

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    The Commission also is proposing to extend the application of

    Regulation 4.22(f)(2) to CPOs that operate Regulation 4.7-exempt

    commodity pools that do not prepare audited financial statements

    certified by independent public accountants. As previously noted, a CPO

    operating a pool that meets the criteria of Regulation 4.7 may claim

    exemption from certain annual reporting requirements, including the

    requirement of Regulation 4.22(d) that the financial statements

    contained in the annual report be audited by an independent public

    accountant.

    Regulation 4.22(f)(2) was adopted, in large part, to address

    difficulties that CPOs experience in obtaining timely information about

    their pools' investments in other funds in order for the pools' public

    accountants to prepare audited financial statements. Annual reports

    that are not audited, however, are still required to be prepared in

    accordance with GAAP. The CPOs of unaudited funds of funds have

    explained that they often experience difficulties in obtaining the

    information necessary from investee funds to complete the preparation

    of the pools' financial statements by the time specified in Regulation

    4.22(c). In order to complete the financial statements of the pools,

    the CPOs need information establishing the value of the pools' material

    investments from the investee funds. These investments may be in a

    number of investee funds, such as other commodity pools, securities

    funds, or hedge funds, both domestic and offshore. The information that

    the CPOs require frequently is unavailable until the investee funds

    complete their own audited financial statements. Thus, in many cases,

    the CPOs cannot obtain the information they require about the investee

    funds in time for the annual financial reports of the pools to be

    prepared and distributed by the due date. Under the proposed amendment,

    CPOs of funds of funds for which unaudited annual reports are prepared

    also would be able to claim the extension under Regulation 4.22(f)(2).

    In addition, the Commission is proposing to remove the requirement

    that a CPO that has filed a claim of extension under Regulation

    4.22(f)(2) for a particular pool must restate certain representations

    in a statement filed with the pool's annual reports in subsequent

    years. Instead, having filed the initial claim, the CPO will be

    presumed to operate the pool as a fund of funds and otherwise continue

    to qualify for the automatic extension; however, if the pool no longer

    operates as a fund of funds, then its CPO must provide NFA with notice

    of the change in the pool's status and must file the pool's annual

    report within 90 days of the pool's fiscal year-end, as required by

    Regulation 4.22(c).

    If the proposed extension of the time period under Regulation

    4.22(f)(2) is adopted, CPOs that have claimed the fund of funds

    extension will not need to file new notices with NFA in order to claim

    the additional 30 days to file and to distribute their qualifying

    pools' annual reports. As noted previously, however, the Commission

    expects CPOs to file and to distribute their pools' annual reports as

    soon as possible after the pools' fiscal year-ends to ensure that

    participants obtain information that is as current as possible.

    D. Streamlined Filing Procedures for Liquidating Pools

    Regulation 4.22(c) requires a CPO of a commodity pool that has

    ceased operation to distribute a final annual report to commodity pool

    participants and to file a copy with NFA within 90 days of the pool's

    permanent cessation of trading, but in no event longer than 90 days

    after funds are returned to pool participants. Due to confusion created

    by the reference in Regulation 4.22(c) to two possible timeframes for

    filing a final annual report, the Commission is proposing to amend this

    regulation to specify that the final annual report must be filed no

    later than 90 days after the pool ceases trading. A CPO that has not

    distributed all funds to participants by the date that the report is

    issued must provide information about the return of funds to pool

    participants, including an estimate of the value of funds remaining to

    be distributed and the anticipated timeframe of when those funds are

    expected to be returned. When the remaining funds are returned to

    participants, the CPO should send a notice to all participants and to

    NFA.

    The Commission further acknowledges that the cost of preparing

    audited financial statements, which may reduce significantly the amount

    of funds available to return to participants, particularly where the

    pool has ceased operation due to material trading and investment

    losses, may exceed the benefits to the pool participants. In these

    situations, the most significant information for participants is

    disclosure of the factors that led to the decline in the pool's value,

    the fees and expenses attributable to the pool leading up to the

    liquidation, the manner in which the pool's operations were concluded,

    and when and how much of the participants' investment has been, or will

    be, returned.

    The Commission therefore is proposing to simplify the reporting

    requirements for CPOs of pools ceasing operation in order to assist

    them in providing participants with the most timely and meaningful

    information.

    [[Page 8223]]

    This information would include a Statement of Operations and a

    Statement of Changes in Net Assets since the last fiscal year-end

    annual report, an explanation of the winding down of the pool's

    operations, and a written disclosure that all interests in, and assets

    of, the pool have been redeemed, distributed, or transferred on behalf

    of the participants. If the report would otherwise be required to be

    audited pursuant to Regulation 4.22(d), the CPO may prepare an

    unaudited annual report provided that the CPO obtains from all

    participants, and files with NFA, written waivers of each of the

    participant's rights to receive an audited annual report. This latter

    provision is consistent with case-by-case exemptions that Commission

    staff has provided to CPOs of pools that have ceased operation.

    In order to clarify that the requirement to file an annual

    financial report upon the permanent cessation of trading applies to

    Regulation 4.7-exempt pools, the Commission proposes to add to the

    introductory text of Regulation 4.7(b)(3) the language that appears in

    the introductory text of Regulation 4.22(c) to this effect, subject to

    the clarification proposed above. Commission staff has confirmed that

    Regulation 4.7-exempt pools are subject to the same requirements as

    non-exempt pools with respect to their final annual reports in the

    annual report guidance letter issued to CPOs each year by Commission

    staff.\12\

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    \12\ CPO guidance letters issued by the Commission's Division of

    Clearing and Intermediary Oversight (``DCIO'') are available at

    http://www.cftc.gov/industryoversight/intermediaries/CPOs/guidancecporeports.html.

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    E. Codifying Existing Policies Regarding Special Allocations of

    Ownership Equity, Unrealized Gains and Losses, and Investee Funds'

    Income and Expenses

    1. Special Allocations of Ownership Interests

    CFTC Interpretative Letter No. 94-3, Special Allocations of

    Investment Partnership Equity,\13\ describes the procedures for

    reporting in a pool's annual financial report special allocations of

    partnership equity from limited partners to the general partner.\14\

    These special allocations must be recognized in the financial

    statements in the same reporting period as the net income, interest

    income, or other basis of computation of the special allocation;

    classified in the Statement of Operations as either an expense or a

    special allocation of net income; separately reported in the Statement

    of Partnership Equity; and deducted in the computation of the GAAP-

    required disclosures.

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    \13\ Available at http://www.cftc.gov/tm/tm94-03.htm.

    \14\ ``Special allocations'' are generally distributions of

    profits or transfers of equity that exceed a class's proportionate

    share of profits based upon the class's proportionate capital

    contribution to the pool. As noted in Interpretative Letter No. 94-

    3, a partnership agreement may often provide that a special

    allocation is to be made for the advisory services provided by the

    general partner, and that the amount of the allocation is based upon

    a percentage of the partnership's net income.

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    At the time Interpretative Letter 94-3 was issued, no specific

    accounting standard existed to address special allocations of

    partnership equity. Subsequently, the AICPA issued the Audit and

    Accounting Guide, Audits of Investment Companies, which contains a

    provision stating that special allocations of investment partnership

    equity can be accounted for in one of two ways. Pursuant to the Audit

    and Accounting Guide, the amounts of any special allocations may be

    presented in either the Statement of Operations or the Statement of

    Changes in Partners' Capital in accordance with the partnership

    agreement, and the method of computing such payments or allocations

    should be described in the notes to the financial statements.\15\

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    \15\ AICPA Audit and Accounting Guide, Investment Companies,

    paragraph 7.49.

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    Commission staff has consistently taken the position that requiring

    a CPO to report a special allocation in a pool's Statement of

    Operations provides the pool's participants with more complete

    information of the impact of a distribution of a special allocation to

    their respective capital accounts, notwithstanding the flexibility

    provided by the Audit and Accounting Guide.\16\ The Commission,

    therefore, is proposing to amend Regulation 4.22(e) to incorporate the

    requirements currently detailed in Interpretative Letter No. 94-3. CPOs

    may continue to use the sample financial statement reporting formats

    set forth in the Interpretative Letter.

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    \16\ This position has been stated in DCIO's annual CPO guidance

    letters.

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    2. Combining Gains and Losses on Regulated Futures Transactions With

    Gains and Losses on Non-CFTC Regulated Transactions in the Statement of

    Operations

    Regulation 4.22(e) provides that a commodity pool's Statement of

    Operations must itemize the pool's total realized net gain or loss from

    commodity interest trading and the change in unrealized net gain or

    loss in commodity interest positions during the pool's fiscal year.

    Regulation 4.22(e) does not provide explicitly for separate disclosure

    on the Statement of Operations of realized and unrealized gains and

    losses on non-commodity interest trading activities.

    In 1995, Commission staff issued an interpretation of the

    requirements for itemization of realized and unrealized gains or losses

    in the commodity pool's Statement of Operations.\17\ The interpretation

    noted that trading is often done by commodity pools using strategies

    that combine financial instruments from different types of markets,

    and, to reflect meaningfully the results of such trading strategies,

    permits the separate reporting of realized and unrealized gains and

    losses that combines the results of commodity interest trading and non-

    commodity interest trading that are part of the same trading strategy.

    The interpretation further noted that reporting realized and unrealized

    gains and/or losses for commodity interest transactions separately from

    other financial instruments that are part of the pool's trading

    strategy may be misleading to pool participants as the separate

    reporting may distort the real results of the pool's trading

    strategies.

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    \17\ CFTC Letter No. 95-52, Comm. Fut. L. Rep. (CCH) ] 26,421.

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    In order to formally establish staff's interpretation, the

    Commission is proposing to amend Regulation 4.22(e) to state that

    realized and unrealized gains and losses on regulated commodities

    transactions presented in the Statement of Operations of a commodity

    pool may be combined with realized or unrealized gains and losses,

    respectively, from non-commodity interest trading, provided that the

    gains and losses to be combined are part of a related trading strategy.

    Furthermore, gains or losses from foreign currency translations and

    conversions also may be included with the related trading strategy, or

    reported separately.\18\

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    \18\ The proposed treatment of gains or losses from foreign

    currency translation is consistent with AICPA Audit and Accounting

    Guide, Audits of Investment Companies, paragraphs 7.51 and 7.54.

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    3. Fees and Expenses of Investee Funds

    Commission Regulation 4.22(e) requires a CPO to itemize in the

    Statement of Operations brokerage commissions, management fees,

    advisory fees, incentive fees, interest income and expense, total

    realized net gain or loss from commodity interest trading, and change

    in unrealized net gain or loss on commodity interest positions during

    the pool's fiscal year directly incurred by the pool during the course

    of the reporting period. A purpose of this provision is to ensure

    [[Page 8224]]

    that pool participants receive a detailed listing of the fees and other

    expenses incurred by the pool for the reporting period.

    For over a decade, consistent with the policy of detailed

    disclosure of material fees and expenses set forth in Regulation

    4.22(e), Commission staff has encouraged CPOs to disclose separately in

    pool annual reports income received from, and fees paid to, investee

    pools.\19\ Specifically, CPOs were encouraged to disclose in the notes

    to the financial statements the amounts of management and incentive

    fees and expenses indirectly incurred as a result of investing in any

    fund where the investment in the fund exceeded five percent of the

    pool's net asset value. Commission staff took the position that such

    income, fees, and expenses should be disclosed separately for each fund

    in which a CPO invested five or more percent of a pool's net asset

    value. Income, fees, and expenses incurred from investments in one or

    more funds where each investment in a fund represented less than five

    percent of the pool's net asset value could be combined and reported in

    the aggregate; the total income on the detail schedule should agree

    with the amount of income reported for the income from investments in

    other funds in the pool's Statement of Operations.\20\ The rationale

    for this disclosure is that such information is material for pool

    participants to comprehend fully the investment strategy and fee

    structure of a commodity pool. In addition, the five percent threshold

    is consistent with the reporting thresholds set forth in the relevant

    accounting requirements regarding disclosure of investments in other

    funds.\21\

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    \19\ Commission staff has discussed these disclosures in the

    annual CPO guidance letters.

    \20\ Fees and expenses are generally reported net of any income

    by the investee fund to the CPO.

    \21\ AICPA Statement of Position (``SOP'') 03-04, Reporting

    Financial Highlights and Schedule of Investments by Nonregistered

    Investment Partnerships: An Amendment to the Audit and Accounting

    Guide, Audits of Investment Companies.

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    Accordingly, the Commission is proposing that information on the

    amounts of income and expenses associated with a pool's investments in

    investee funds, and identifying by name the investee funds in which

    investments exceed five percent of the pool's net assets, be required

    in annual reports for pools prepared under both Regulation 4.22(c) and

    Regulation 4.7(b)(3).

    F. Use of GAAP

    1. Regulations 4.22(c) and 4.7(b)(3)

    Commission regulations require that audited and unaudited financial

    statements, as well as periodic account statements, be presented and

    computed in accordance with GAAP. This provision consistently has been

    interpreted by Commission staff to mean GAAP as established in the

    United States (``U.S. GAAP''). Nevertheless, Commission staff has, on a

    case-by-case basis, provided limited relief to CPOs that operate

    commodity pools organized under the laws of a foreign jurisdiction by

    allowing the financial statements of such pools to be prepared and

    presented in accordance with International Financial Reporting

    Standards (``IFRS'') instead of U.S. GAAP.\22\ In cases where staff has

    provided relief, the relief was conditioned upon the offshore pool

    following certain key elements of U.S. GAAP standards, including

    preparing a condensed Schedule of Investments; \23\ reporting special

    allocations of partnership equity in accordance with CFTC

    Interpretative Letter 94-3, proposed to be codified as Regulation

    4.22(e)(2); and, in the event that IFRS would require consolidated

    financial statements for the pool, adequately reporting results of

    operations and financial position specific to each class of the pool's

    investors. In addition, using accounting standards other than U.S. GAAP

    must not conflict with any representations made to participants or

    potential participants in the pool.

    ---------------------------------------------------------------------------

    \22\ The annual CPO guidance letters issued by Commission staff

    have discussed the conditions under which such exemptions may be

    granted and the procedure for making exemption requests. See, e.g.,

    Section III of the January 16, 2008 annual guidance letter at http:/

    /www.cftc.gov/stellent/groups/public/@iointermediaries/documents/

    generic/cpoannualguidanceletter2007.pdf.

    \23\ As required by AICPA SOP 95-2, subsequently amended by SOP

    01-1 and SOP 03-4.

    ---------------------------------------------------------------------------

    Because these criteria under which CPOs have been granted relief

    from the requirement to prepare pool financial reports in accordance

    with U.S. GAAP have remained constant, the Commission is proposing that

    CPOs be permitted to claim relief to prepare financial statements

    pursuant to IFRS by filing a notice that includes representations

    regarding the operations of their offshore pools, the preparation of

    the pools' financial statements in accordance with IFRS, and the

    additional information that will be included in the reports in order

    for the financial statements to be consistent with U.S. GAAP. If IFRS

    would require consolidated financial statements for a pool, such as

    those with complex capital structures (for example, master-feeder

    structures or funds of funds), such financial statements must contain

    disclosures that adequately report results of operations and financial

    position specific to each class of the pool's investors.

    Under the proposal, the notice must be filed with NFA prior to the

    due date for the report, and the CPO can continue to prepare annual

    reports for future years in accordance with IFRS as long as all

    representations made in the initial notice remain in effect. A single

    notice may be filed for more than one pool operated by the CPO as long

    as all the representations in the notice apply to each of the pools

    named therein.

    Commission staff also has provided relief on a case-by-case basis

    to CPOs operating offshore commodity pools permitting the use of

    accounting standards established in other jurisdictions, including the

    United Kingdom, Ireland, and Luxembourg. However, the Commission

    currently is proposing to establish the notice procedure solely for

    pools that are following IFRS, due to IFRS's global nature and the

    various efforts under way in the U.S. and other countries to achieve

    convergence between IFRS and local accounting standards.\24\ CPOs of

    offshore pools that meet the criteria specified in proposed Regulation

    4.22(d)(2) but are using accounting standards other than IFRS may

    continue to seek case-by-case relief from the U.S. GAAP requirement by

    filing relief requests with Commission staff.

    ---------------------------------------------------------------------------

    \24\ See, e.g., the February 27, 2006 Memorandum of

    Understanding between the Financial Accounting Standards Board and

    the International Accounting Standards Board on convergence of IFRS

    and U.S. GAAP: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.fasb.org/intl/mou_02-27-06.pdf http://www.fasb.org/intl/mou_02-27-06.pdf.

    ---------------------------------------------------------------------------

    2. GAAP Requirement in Regulation 4.13

    Regulation 4.13 provides an exemption from registration for CPOs

    that operate only one pool at a time, for which no advertising is done

    and no compensation is received; or that operate pools that include no

    more than 15 participants each, and the aggregate subscriptions to all

    pools do not exceed $400,000. In 2003, the Commission adopted

    additional registration exemptions for CPOs of pools whose participants

    are SEC ``accredited investors'' \25\ and that limit their trading of

    commodity interests to a de minimis amount, or that limit participation

    to certain highly sophisticated investors. In proposing the Regulation

    4.13(a)(3) and (4) exemptions that were adopted in 2003, the Commission

    stated that ``this relief is intended to encourage and

    [[Page 8225]]

    facilitate participation in the commodity interest markets by

    additional collective investment vehicles and their advisers, with the

    added benefit to all market participants of increased liquidity.'' \26\

    ---------------------------------------------------------------------------

    \25\ 17 CFR 230.501(a) (2008).

    \26\ 68 FR 12625 (March 17, 2003).

    ---------------------------------------------------------------------------

    Regulation 4.13(c) specifies that, if a CPO that has claimed an

    exemption from registration under Regulation 4.13 distributes an annual

    report to pool participants, the annual report must be presented and

    computed in accordance with GAAP and, if audited by an independent

    public accountant, certified in accordance with Regulation 1.16. The

    Commission has reconsidered this requirement and determined that it

    does not need to prescribe the form of an annual report that is not

    required by its regulations to be prepared, distributed, or filed.

    Accordingly, the Commission is proposing to remove the requirement in

    Regulation 4.13(c) that an annual report distributed to participants in

    a pool for which exemption under Regulation 4.13 has been claimed must

    be prepared in accordance with GAAP. The Commission expects, however,

    that CPOs will prepare their pools' reports pursuant to the terms of

    the pools' operating documents.

    III. Updating References to Financial Schedules

    The Commission is proposing to update both the periodic and annual

    reporting provisions of Part 4 to conform with current accounting

    practices with respect to the references to various financial

    schedules. These changes would delete references to the Statement of

    Changes in Financial Position, which no longer exists; rename the

    Statement of Income (Loss) as the Statement of Operations; and rename

    the Statement of Changes in Net Asset Value as the Statement of Changes

    in Net Assets.

    IV. Related Matters

    Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,

    requires that agencies, in proposing regulations, consider the impact

    of those regulations on small businesses. The Commission previously has

    established certain definitions of ``small entities'' to be used by the

    Commission in evaluating the impact of its regulations on such entities

    in accordance with the RFA.\27\ The Commission has determined

    previously that registered CPOs are not small entities for the purpose

    of the RFA.\28\ The proposed amendments to Regulation 4.7 and

    Regulation 4.22 would apply only to registered CPOs. With respect to

    CPOs exempt from registration, 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). The proposed

    amendment to Regulation 4.13 would remove an existing requirement and

    does not impose any significant burdens. Therefore, the Chairman, on

    behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.

    605(b), that the action proposed to be taken herein will not have a

    significant economic impact on a substantial number of small entities.

    ---------------------------------------------------------------------------

    \27\ 47 FR 18618 (April 30, 1982).

    \28\ 47 FR at 18619.

    ---------------------------------------------------------------------------

    A. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') \29\ imposes certain

    requirements on federal agencies (including the Commission) in

    connection with their conducting or sponsoring any collection of

    information as defined by the PRA. Pursuant to the PRA, the Commission

    has submitted a copy of this section to the Office of Management and

    Budget (``OMB'') for its review.

    ---------------------------------------------------------------------------

    \29\ 44 U.S.C. 3507(d).

    ---------------------------------------------------------------------------

    Collection of Information. (Rules Relating to the Operations and

    Activities of Commodity Pool Operators and Commodity Trading Advisors

    and to Monthly Reporting by Futures Commission Merchants, OMB Control

    Number 3038-0005.)

    The proposed amendments will not require a new collection of

    information on the part of any entities subject to the proposed

    amendments. Specifically, the proposed amendments will modify existing

    regulatory requirements by clarifying information that must be included

    in required periodic and annual reports. The expected effect of the

    proposed amended regulations will be to increase slightly the burden

    for this collection of information due to including specific fee and

    expense information in annual reports for funds of funds. This increase

    affects only annual reports for pools that invest in other funds and

    therefore are required to include the additional fee and expense

    information, and does not affect reports for pools that do not invest

    in other funds. In addition, because the previous submission of this

    collection contained a calculation error with respect to the total

    number of respondents, the burden has been recalculated and the

    corrected numbers are included in the current estimate. The Commission

    estimates the burden of this collection of information as follows:

    Estimated Annual Reporting Burden:

    Number of Respondents: 9,200.

    Total Annual Responses: 28,275.

    Total Annual Hours: 167,550.

    The Commission considers comments by the public on this proposed

    collection of information in--

    Evaluating whether the proposed collection of information is

    necessary for the proper performance of the functions of the

    Commission, including whether the information will have a practical

    use;

    Evaluating the accuracy of the Commission's estimate of the burden

    of the proposed collection of information, including the validity of

    the methodology and assumptions used;

    Enhancing the quality, utility, and clarity of the information to

    be collected; and

    Minimizing the burden of the collection of information on those who

    are to respond, including through the use of appropriate automated,

    electronic, mechanical, or other technological collection techniques or

    other forms of information technology, e.g., permitting electronic

    submission of responses.

    Organizations and individuals desiring to submit comments on the

    information collection should contact the Office of Information and

    Regulatory Affairs, Office of Management and Budget, Room 10235, New

    Executive Office Building, Washington, DC 20503, Attn: Desk Officer of

    the Commodity Futures Commission. OMB is required to make a decision

    concerning the collection of information contained in these proposed

    regulations between 30 and 90 days after publication of this document

    in the Federal Register. Therefore, a comment to OMB is best assured of

    having its full effect if OMB receives it within 30 days of

    publication. This does not affect the deadline for the public to

    comment to the Commission on the proposed regulations. Copies of the

    information collection submission to OMB are available from the CFTC

    Clearance Officer, 1155 21st Street, NW., Washington, DC 20581 or (202)

    418-5160.

    B. 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 regulation outweigh its costs. Rather,

    Section 15(a) simply requires the

    [[Page 8226]]

    Commission to ``consider the costs and benefits'' of its action.

    Section 15(a) of the Act further specifies that costs and benefits

    shall be evaluated in light of five broad areas of market and public

    concern: Protection of market participants and the public; efficiency,

    competitiveness, and financial integrity of futures markets; price

    discovery; sound risk management practices; and 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 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 Commission has considered the costs and benefits of this

    proposed regulation in light of the specific provisions of Section

    15(a) of the Act, as follows:

    1. Protection of market participants and the public. The proposed

    amendments should not affect the protection of market participants and

    the public as they primarily clarify existing reporting requirements

    for commodity pools.

    2. Efficiency and competition. The Commission anticipates that the

    proposed amendments will benefit efficiency by streamlining the annual

    report filing process for funds of funds and pools ceasing operation.

    The proposal will also reduce the number of requests for additional

    extensions for funds of funds that must be processed by NFA. The

    proposed amendments are considered by the Commission as benefiting

    efficiency and not impacting competition.

    3. Financial integrity of futures markets and price discovery. The

    proposed amendments should have no effect, from the standpoint of

    imposing costs or creating benefits, on the financial integrity of

    futures markets or the price discovery function of such markets.

    4. Sound risk management practices. The proposed amendments should

    have no effect, from the standpoint of imposing costs or creating

    benefits, on sound risk management practices.

    5. Other public interest considerations. The Commission believes

    that the proposed clarification of requirements for periodic reporting

    of multi-class or series pools is beneficial in that it results in the

    provision of more meaningful information to participants in those

    pools.

    After considering these factors, the Commission has determined to

    propose the amendments discussed above. The Commission invites public

    comment on its application of the cost-benefit provision. Commenters

    also are invited to submit any data that they may have quantifying the

    costs and benefits of the proposal with their comment letters.

    List of Subjects in 17 CFR Part 4

    Advertising, Commodity futures, Commodity pool operators, Consumer

    protection, Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, the Commission proposes

    to amend 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. Amend Sec. 4.7 to revise paragraphs (b)(2)(iii), (b)(3)(i)

    introductory text, (b)(3)(i)(B), and (b)(3)(i)(C), and to add paragraph

    (b)(3)(i)(D) to read as follows:

    Sec. 4.7 Exemption from certain part 4 requirements for commodity

    pool operators with respect to offerings to qualified eligible persons

    and for commodity trading advisors with respect to advising qualified

    eligible persons.

    * * * * *

    (b) * * *

    (2) * * *

    (iii)(A) Either the net asset value per outstanding participation

    unit in the exempt pool as of the end of the reporting period, or

    (B) The total value of the participant's interest or share in the

    exempt pool as of the end of the reporting period;

    (C) Where the pool is comprised of more than one ownership class or

    series, the net asset value of the series or class on which the account

    statement is reporting, and the net asset value per unit or value of

    the participant's share, also must be included in the statement

    required by this paragraph (b)(2); except that, for a pool that is a

    series fund structured with a limitation on liability among the

    different series, the account statement required by this paragraph

    (b)(2) is not required to include the consolidated net asset value of

    all series of the pool.

    (3) Annual report relief. (i) Exemption from the specific

    requirements of Sec. Sec. 4.22(c) and (d); Provided, That within 90

    calendar days after the end of the exempt pool's fiscal year or the

    permanent cessation of trading, whichever is earlier, the commodity

    pool operator electronically files with the National Futures

    Association and distributes to each participant in lieu of the

    financial information and statements specified by those sections, an

    annual report for the exempt pool, affirmed in accordance with Sec.

    4.22(h) which contains, at a minimum:

    * * * * *

    (B) A Statement of Operations for that year;

    (C) Appropriate footnote disclosure and such further material

    information as may be necessary to make the required statements not

    misleading. For a pool that invests in other funds, this information

    must include, but is not limited to, separately disclosing the amounts

    of income and expenses associated with each investment in an investee

    fund that exceeds five percent of the pool's net assets. The income and

    expenses associated with an investment in an investee fund that is less

    than five percent of the pool's net assets may be combined and reported

    in the aggregate with the income and expenses of other investee funds

    that, individually, represent an investment of less than five percent

    of the pool's net assets;

    (D) Where the pool is comprised of more than one ownership class or

    series, information for the series or class on which the financial

    statements are reporting should be presented in addition to the

    information presented for the pool as a whole; except that, for a pool

    that is a series fund structured with a limitation on liability among

    the different series, the financial statements are not required to

    include consolidated information for all series.

    * * * * *

    Sec. 4.22 [Amended]

    3. Amend Sec. 4.13 by removing paragraph (c)(2) and redesignating

    paragraph (c)(3) as (c)(2).

    4. Amend Sec. 4.22 to revise paragraphs (a) introductory text,

    (a)(1) introductory text, (a)(2) introductory text, (c) introductory

    text, (c)(4), (c)(5), (d), (e) and (f)(2), and to add paragraphs

    (a)(2)(vii) and (c)(7) to read as follows:

    Sec. 4.22 Reporting to pool participants.

    (a) Except as provided in paragraph (a)(4) of this section, each

    commodity pool operator registered or required to be registered under

    the Act must periodically distribute to each participant in each pool

    that it operates, within 30 calendar days after the last date of the

    reporting period prescribed in paragraph (b) of this section, an

    Account Statement, which shall be presented in the form of a Statement

    of Operations and a Statement of Changes

    [[Page 8227]]

    in Net Assets, for the prescribed period. These financial statements

    must be presented and computed in accordance with generally accepted

    accounting principles consistently applied. The Account Statement must

    be signed in accordance with paragraph (h) of this section.

    (1) The portion of the Account Statement which must be presented in

    the form of a Statement of Operations must separately itemize the

    following information:

    * * * * *

    (2) The portion of the Account Statement that must be presented in

    the form of a Statement of Changes in Net Assets must separately

    itemize the following information:

    * * * * *

    (vii) Where the pool is comprised of more than one ownership class

    or series, information for the series or class on which the account

    statement is reporting should be presented in addition to the

    information presented for the pool as a whole; except that, for a pool

    that is a series fund structured with a limitation on liability among

    the different series, the account statement is not required to include

    consolidated information for all series.

    * * * * *

    (c) Except as provided in paragraph (c)(6) of this section, each

    commodity pool operator registered or required to be registered under

    the Act must distribute an Annual Report to each participant in each

    pool that it operates, and must electronically submit a copy of the

    Report and key financial balances from the Report to the National

    Futures Association pursuant to the electronic filing procedures of the

    National Futures Association, within 90 calendar days after the end of

    the pool's fiscal year or the permanent cessation of trading, whichever

    is earlier; Provided, however, that if during any calendar year the

    commodity pool operator did not operate a commodity pool, the pool

    operator must so notify the National Futures Association within 30

    calendar days after the end of such calendar year. The Annual Report

    must be affirmed pursuant to paragraph (h) of this section and must

    contain the following:

    * * * * *

    (4) Statements of Operations, and Changes in Net Assets, for the

    period between:

    (i) The later of:

    (A) The date of the most recent Statement of Financial Condition

    delivered to the National Futures Association pursuant to this

    paragraph (c), or

    (B) The date of the formation of the pool, and

    (ii) The close of the pool's fiscal year, together with Statements

    of Operations, and Changes in Net Assets for the corresponding period

    of the previous fiscal year.

    (5) Appropriate footnote disclosure and such further material

    information as may be necessary to make the required statements not

    misleading.

    (i) For a pool that invests in other funds, this information must

    include, but is not limited to, separately disclosing the amounts of

    income and expenses associated with each investment in an investee fund

    that exceeds five percent of the pool's net assets. The income and

    expenses associated with an investment in an investee fund that is less

    than five percent of the pool's net assets may be combined and reported

    in the aggregate with the income and expenses of other investee funds

    that, individually, represent an investment of less than five percent

    of the pool's net assets;

    (ii) Where the pool is comprised of more than one ownership class

    or series, information for the series or class on which the financial

    statements are reporting should be presented in addition to the

    information presented for the pool as a whole; except that, for a pool

    that is a series fund structured with a limitation on liability among

    the different series, the financial statements are not required to

    include consolidated information for all series.

    * * * * *

    (7) For a pool that has ceased operation prior to, or as of, the

    end of the fiscal year, the commodity pool operator may provide the

    following in lieu of the annual report that would otherwise be required

    by Sec. 4.22(c) or Sec. 4.7(b)(3):

    (i) Statements of Operations and Changes in Net Assets for the

    period between:

    (A) The later of:

    (1) The date of the most recent Statement of Financial Condition

    filed with the National Futures Association pursuant to this paragraph

    (c), or

    (2) The date of the formation of the pool; and

    (B) The close of the pool's fiscal year or the date of the

    cessation of trading, whichever is earlier,

    (ii)(A) An explanation of the winding down of the pool's operations

    and written disclosure that all interests in, and assets of, the pool

    have been redeemed, distributed or transferred on behalf of the

    participants;

    (B) If all funds have not yet been distributed or transferred to

    participants by the time that the final report is issued, disclosure of

    the value of assets remaining to be distributed and an approximate time

    frame of when the distribution will occur. At the time of the final

    distribution of the pool's assets, the commodity pool operator must

    provide written notice to each participant and to the National Futures

    Association that all interests in, and assets of, the pool have been

    redeemed, distributed or transferred on behalf of the participants.

    (iii) A report filed pursuant to paragraph (c)(7) of this section

    that would otherwise be required by Sec. 4.22(c) is not required to be

    certified in accordance with paragraph (d) of this section if the

    commodity pool operator obtains from all participants, and files with

    the National Futures Association no later than the time that the

    commodity pool operator files the Annual Report, written waivers of

    their rights to receive an audited Annual Report.

    * * * * *

    (d)(1) The financial statements in the Annual Report must be

    presented and computed in accordance with generally accepted accounting

    principles consistently applied and must be certified by an independent

    public accountant. The requirements of Sec. 1.16(g) of this chapter

    shall apply with respect to the engagement of such independent public

    accountants, except that any related notifications to be made may be

    made solely to the National Futures Association, and the certification

    must be in accordance with Sec. 1.16 of this chapter, except that the

    following requirements of that section shall not apply:

    (i) The audit objectives of Sec. 1.16(d)(1) of this chapter

    concerning the periodic computation of minimum capital and property in

    segregation;

    (ii) All other references in Sec. 1.16 of this chapter to the

    segregation requirements; and

    (iii) Sections 1.16(c)(5), (d)(2), (e)(2), and (f) of this chapter.

    (2)(i) The financial statements in the Annual Report required by

    this section or by Sec. 4.7(b)(3) may be presented and computed in

    accordance with International Financial Reporting Standards issued by

    the International Accounting Standards Board if the following

    conditions are met:

    (A) The pool is organized under the laws of a foreign jurisdiction;

    (B) The Annual Report will include a condensed schedule of

    investments, or, if required by the alternate accounting standards, a

    full schedule of investments;

    [[Page 8228]]

    (C) The preparation of the pool's financial statements under

    International Financial Reporting Standards is not inconsistent with

    representations set forth in the pool's offering memorandum or similar

    document;

    (D) Special allocations of ownership equity will be reported in

    accordance with Sec. 4.22(e)(2); and

    (E) In the event that the International Financial Reporting

    Standards require consolidated financial statements for the pool, such

    financial statements must contain disclosures that adequately report

    results of operations and financial position specific to each class of

    the pool's investors.

    (ii) The commodity pool operator of a pool that meets the

    conditions specified in paragraph (d)(2) of this section may claim

    relief from the requirement in paragraph (d)(1) of this section by

    filing a notice with the National Futures Association, within 90

    calendar days of the end of the pool's fiscal year.

    (A) The notice must contain the name, main business address, main

    telephone number and the National Futures Association registration

    identification number of the commodity pool operator, and name and the

    identification number of the commodity pool.

    (B) The notice must include representations regarding the pool's

    compliance with each of the conditions specified in Sec.

    4.22(d)(2)(i)(A) through (D), and, if applicable, (d)(2)(i)(E); and

    (C) The notice must be signed by the commodity pool operator in

    accordance with paragraph (h) of this section.

    (e)(1) The Statement of Operations required by this section must

    itemize brokerage commissions, management fees, advisory fees,

    incentive fees, interest income and expense, total realized net gain or

    loss from commodity interest trading, and change in unrealized net gain

    or loss on commodity interest positions during the pool's fiscal year.

    Gains and losses on commodity interests need not be itemized by

    commodity or by specific delivery or expiration date.

    (2)(i) Any share of a pool's profits or transfer of a pool's equity

    which exceeds the general partner's or any other class's share of

    profits computed on the general partner's or other class's pro rata

    capital contribution are ``special allocations.'' Special allocations

    of partnership equity or other interests must be recognized in the

    pool's Statement of Operations in the same period as the net income,

    interest income, or other basis of computation of the special

    allocation is recognized. Special allocations must be recognized and

    classified either as an expense of the pool or, if not recognized as an

    expense of the pool, presented in the Statement of Operations as a

    separate, itemized allocation of the pool's net income to arrive at net

    income available for pro rata distribution to all partners.

    (ii) Special allocations of ownership interest also must be

    reported separately in the Statement of Partners' Equity, in addition

    to the pro-rata allocations of net income, as to each class of

    ownership interest.

    (3) Realized gains or losses on regulated commodities transactions

    presented in the Statement of Operations of a commodity pool may be

    combined with realized gains or losses from trading in non-commodity

    interest transactions, provided that the gains or losses to be combined

    are part of a related trading strategy. Unrealized gains or losses on

    open regulated commodity positions presented in the Statement of

    Operations of a commodity pool may be combined with unrealized gains or

    losses from open positions in non-commodity positions, provided that

    the gains or losses to be combined are part of a related trading

    strategy.

    (f) * * *

    (2) In the event a commodity pool operator finds that it cannot

    obtain information necessary to prepare annual financial statements for

    a pool that it operates within the time specified in either paragraph

    (c) of this section or Sec. 4.7(b)(3)(i), as a result of the pool

    investing in another collective investment vehicle, it may claim an

    extension of time under the following conditions:

    (i) The commodity pool operator must, within 90 calendar days of

    the end of the pool's fiscal year, file a notice with the National

    Futures Association, except as provided in paragraph (f)(2)(v) of this

    section.

    (ii) The notice must contain the name, main business address, main

    telephone number and the National Futures Association registration

    identification number of the commodity pool operator, and name and the

    identification number of the commodity pool.

    (iii) The notice must state the date by which the Annual Report

    will be distributed and filed (the ``Extended Date''), which must be no

    more than 180 calendar days after the end of the pool's fiscal year.

    The Annual Report must be distributed and filed by the Extended Date.

    (iv) The notice must include representations by the commodity pool

    operator that:

    (A) The pool for which the Annual Report is being prepared has

    investments in one or more collective investment vehicles (the

    ``Investments'');

    (B) For all reports prepared under paragraph (c) of this section

    and for reports prepared under Sec. 4.7(b)(3)(i) that are certified by

    an independent public accountant, the commodity pool operator has been

    informed by the certified public accountant engaged to audit the

    commodity pool's financial statements that specified information

    required to complete the pool's annual report is necessary in order for

    the accountant to render an opinion on the commodity pool's financial

    statements. The notice must include the name, main business address,

    main telephone number, and contact person of the accountant; and

    (C) The information specified by the accountant cannot be obtained

    in sufficient time for the Annual Report to be prepared, audited, and

    distributed before the Extended Date.

    (D) For unaudited reports prepared under Sec. 4.7(b)(3)(i), the

    commodity pool operator has been informed by the operators of the

    Investments that specified information required to complete the pool's

    annual report cannot be obtained in sufficient time for the Annual

    Report to be prepared and distributed before the Extended Date.

    (v) For each fiscal year following the filing of the notice

    described in paragraph (f)(2)(i) of this section, for a particular

    pool, it shall be presumed that the particular pool continues to invest

    in another collective investment vehicle and the commodity pool

    operator may claim the extension of time; provided, however, that if

    the particular pool is no longer investing in another collective

    investment vehicle, then the commodity pool operator must file

    electronically with the National Futures Association an Annual Report

    within 90 days after the pool's fiscal year-end accompanied by a notice

    indicating the change in the pool's status.

    (vi) Any notice or statement filed pursuant to paragraph (f)(2) of

    this section must be signed by the commodity pool operator in

    accordance with paragraph (h) of this section.

    * * * * *

    Issued in Washington, DC, on February 18, 2009 by the

    Commission.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. E9-3840 Filed 2-23-09; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: May 10, 2012



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