
[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR4]

[Page 178-194]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS--Table of Conte
nts
 
Subpart B--Commodity Pool Operators

Sec. 4.20  Prohibited activities.

    (a)(1) Except as provided in paragraph (a)(2) of this section, a 
commodity pool operator must operate its pool as an entity cognizable as 
a legal entity separate from that of the pool operator.
    (2) The Commission may exempt a corporation from the requirements of 
paragraph (a)(1) of this section if;
    (i) The corporation represents in writing to the Commission that 
each participant in its pool will be issued stock or other evidences of 
ownership in the corporation for all funds, securities or other property 
that the participant contributes for the purchase of an ownership 
interest in the pool;
    (ii) The corporation demonstrates to the satisfaction of the 
Commission that it has estabilshed procedures adequate to assure 
compliance with paragraphs (b) and (c) of this section; and
    (iii) The Commission finds that the exemption is not contrary to the 
public interest and to the purposes of the provision from which the 
exemption is sought.
    (b) All funds, securities or other property received by a commodity 
pool operator from an existing or prospective pool participant for the 
purchase of an interest or as an assessment (whether voluntary or 
involuntary) on an interest in a pool that it operates or that it 
intends to operate must be received in the pool's name.
    (c) No commodity pool operator may commingle the property of any 
pool that it operates or that it intends to operate with the property of 
any other person.

(Approved by the Office of Management and Budget under control number 
3038-0005)

[46 FR 26013, May 8, 1981, as amended at 46 FR 34311, July 1, 1981; 46 
FR 63035, Dec. 30, 1981]

Sec. 4.21  Required delivery of pool Disclosure Document.

    (a)(1) No commodity pool operator registered or required to be 
registered under the Act may, directly or indirectly, solicit, accept or 
receive funds, securities or other property from a prospective 
participant in a pool that it operates or intends to operate unless, on 
or before the date it engages in that activity, the commodity pool 
operator delivers or causes to be delivered to the prospective 
participant a Disclosure Document for the pool containing the 
information set forth in Sec. 4.24.
    (2) Notwithstanding the requirements regarding solicitation 
specified in paragraph (a)(1) of this section, a commodity pool operator 
may provide to a prospective participant either of the following 
documents prior to delivery of a Disclosure Document, subject to 
compliance with rules promulgated by a registered futures association 
pursuant to section 17(j) of the Act:
    (i) A profile document;
    (ii) Where the prospective participant is an accredited investor, as 
defined in 17 CFR 230.501(a), a notice of intended offering and 
statement of the terms of the intended offering.
    (b) The commodity pool operator may not accept or receive funds, 
securities or other property from a prospective participant unless the 
pool operator first receives from the prospective participant an 
acknowledgment signed and dated by the prospective participant stating 
that the prospective participant received a Disclosure Document for the 
pool. Where a Disclosure Document is delivered to a prospective pool 
participant by electronic means, in lieu of a manually signed and dated 
acknowledgment, the pool operator may establish receipt by electronic 
means that use a unique identifier to confirm the identity of the 
recipient of such Disclosure Document, Provided, however, That the 
requirement of

[[Page 179]]

Sec. 4.23(a)(3) to retain the acknowledgment specified in this paragraph 
(b) applies equally to such substitute evidence of receipt, which must 
be retained either in hard copy form or in another form approved by the 
Commission.

[60 FR 38183, July 25, 1995, as amended at 62 FR 39115, July 22, 1997; 
65 FR 58649, Oct. 2, 2000]

Sec. 4.22  Reporting to pool participants.

    (a) 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 Income (Loss) and a Statement of Changes in Net Asset 
Value, 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 Income (Loss) must separately itemize the 
following information:
    (i) The total amount of realized net gain or loss on commodity 
interest positions liquidated during the reporting period;
    (ii) The change in unrealized net gain or loss on commodity interest 
positions during the reporting period;
    (iii) The total amount of net gain or loss from all other 
transactions in which the pool engaged during the reporting period, 
including interest and dividends earned on funds not paid as premiums or 
used to margin the pool's commodity interest positions;
    (iv) The total amount of all management fees during the reporting 
period;
    (v) The total amount of all advisory fees during the reporting 
period;
    (vi) The total amount of all brokerage commissions during the 
reporting period;
    (vii) The total amount of other fees for commodity interest and 
other investment transactions during the reporting period; and
    (viii) The total amount of all other expenses incurred or accrued by 
the pool during the reporting period.
    (2) The portion of the Account Statement that must be presented in 
the form of a Statement of Changes in Net Asset Value must separately 
itemize the following information:
    (i) The net asset value of the pool as of the beginning of the 
reporting period;
    (ii) The total amount of additions to the pool, whether voluntary or 
involuntary, made during the reporting period;
    (iii) The total amount of withdrawals from and redemption of 
participation units in the pool, whether voluntary or involuntary, for 
the reporting period;
    (iv) The total net income or loss of the pool during the reporting 
period;
    (v) The net asset value of the pool as of the end of the reporting 
period; and
    (vi)(A) The net asset value per outstanding participation unit in 
the pool as of the end of the reporting period, or
    (B) The total value of the participant's interest or share in the 
pool as of the end of the reporting period.
    (3) The Account Statement must also disclose any material business 
dealings between the pool, the pool's operator, commodity trading 
advisor, futures commission merchant, or the principals thereof that 
previously have not been disclosed in the pool's Disclosure Document or 
any amendment thereto, other Account Statements or Annual Reports.
    (b) The Account Statement must be distributed at least monthly in 
the case of pools with net assets of more than $500,000 at the beginning 
of the pool's fiscal year, and otherwise at least quarterly; Provided, 
however, That an Account Statement for the last reporting period of the 
pool's fiscal year need not be distributed if the Annual Report required 
by paragraph (c) of this section is sent to pool participants within 45 
calendar days after the end of the fiscal year. The requirement to 
distribute an Account Statement shall commence as of the date the pool 
is formed as specified in paragraph (g)(1) of this section.

[[Page 180]]

    (c) 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 file two copies of 
the Report with the Commission, within 90 calendar days after the end of 
the pool's fiscal year or the permanent cessation of trading, whichever 
is earlier, but in no event longer than 90 days after funds are returned 
to pool participants; 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 Commission within 30 calendar days 
after the end of such calendar year. The first fiscal year for which an 
Annual Report is due shall be the first fiscal year that begins on or 
after January 1, 1979. The Annual Report must be signed pursuant to 
paragraph (h) of this section and must contain the following:
    (1) The net asset value of the pool as of the end of each of the 
pool's two preceding fiscal years.
    (2)(i) The net asset value per outstanding participation unit in the 
pool as of the end of each of the pool's two preceding fiscal years, or
    (ii) The total value of the participant's interest or share in the 
pool as of the end of each of the pool's two preceding fiscal years.
    (3) A Statement of Financial Condition as of the close of the pool's 
fiscal year and preceding fiscal year.
    (4) Statements of Income (Loss), Changes in Financial Position, and 
Changes in Ownership Equity, for the period between (i) the later of: 
(A) the date of the most recent Statement of Financial Condition 
delivered to the Commission pursuant to this paragraph (c), (B) January 
1, 1979, or (C) the date of the formation of the pool, and (ii) the 
close of the pool's fiscal year, together with Statements of Income 
(Loss), Changes in Financial Position, and Changes in Ownership Equity 
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.
    (d) 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 certification must be in accordance with Sec. 1.16, 
except that the following requirements of that section shall not apply:
    (1) The audit objectives of Sec. 1.16(d)(1) concerning the periodic 
computation of minimum capital and property in segregation;
    (2) All other references in Sec. 1.16 to the segregation 
requirements; and
    (3) Sections 1.16(c)(5), (d)(2), (e)(2), and (f).
    (e) The Statement of Income (Loss) 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.
    (f)(1)(i) In the event the commodity pool operator finds that it 
cannot distribute the Annual Report for a pool that it operates within 
the time specified in paragraph (c) of this section without substantial 
undue hardship, it may file with the Commission an application for 
extension of time to a specified date not more than 90 calendar days 
after the date as of which the Annual Report was to have been 
distributed. The application must be made by the pool operator and must:
    (A) State the name of the pool for which the application is being 
made;
    (B) State the reasons for the requested extension;
    (C) Indicate that the inability to make a timely filing is due to 
circumstances beyond the control of the pool operator, if such is the 
case, and describe briefly the nature of such circumstances;
    (D) Contain an undertaking to file the Annual Report on or before 
the date specified in the application; and
    (E) Be filed with the Commission prior to the date on which the 
Annual Report is due.

[[Page 181]]

    (ii) The application must be accompanied by a letter from the 
independent public accountant answering the following questions:
    (A) What specifically are the reasons for the extension request?
    (B) Do you have any indication from the part of your audit completed 
to date that would lead you to believe that the commodity pool operator 
was or is not meeting the segregation or recordkeeping requirements of 
this part 4?
    (iii) Within ten calendar days after receipt of an application for 
an extension of time, the Commission shall:
    (A) Notify the commodity pool operator of the grant or denial of the 
requested extension, or
    (B) Indicate to the pool operator that additional time is required 
to analyze the request, in which case the amount of time needed will be 
specified.
    (2) In the event a commodity pool operator finds that it cannot 
obtain information necessary to prepare certified 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 National Futures 
Association and the Commission, 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 150 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) The commodity pool operator has been informed by the certified 
public accountant selected to audit the commodity pool's financial 
statements that specified information establishing the value of the 
Investments is necessary in order for the accountant to render an 
opinion on the commodity pool's financial statements. The notice must 
include the name 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.
    (v) For each fiscal year following the filing of the notice 
described in paragraph (f)(2)(i) of this section, the commodity pool 
operator may claim the extension of time by filing a statement 
containing the representations specified in paragraph (f)(2)(iv) of this 
section, at the same time as the pool's Annual Report.
    (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.
    (g)(1) A commodity pool operator may initially elect any fiscal year 
for a pool, but the first fiscal year may not end more than one year 
after the pool's formation. For purposes of this section, a pool shall 
be deemed to be formed as of the date the pool operator first receives 
funds, securities or other property for the purchase of an interest in 
the pool.
    (2) If a commodity pool operator elects a fiscal year other than the 
calendar year, it must give written notice of the election to all 
participants and must file the notice with the Commission within 90 
calendar days after the date of the pool's formation. If this notice is 
not given, the pool operator will be deemed to have elected the calendar 
year as the pool's fiscal year.
    (3) The commodity pool operator must continue to use the elected 
fiscal year for the pool unless it provides written notice of any 
proposed change to all participants and files such notice

[[Page 182]]

with the Commission at least 90 days before the change and the 
Commission does not disapprove the change within 30 days after the 
filing of the notice.
    (h)(1) Each Account Statement and Annual Report must contain a 
signed oath or affirmation that, to the best of the knowledge and belief 
of the individual making the oath or affirmation, the information 
contained in the document is accurate and complete; Provided, however, 
That it shall be unlawful for the individual to make such oath or 
affirmation if the individual knows or should know that any of the 
information in the document is not accurate and complete.
    (2) There must be typed beneath the signed oath or affirmation:
    (i) The name of the individual signing the document;
    (ii) The capacity in which he is signing;
    (iii) The name of the commodity pool operator for whom he is 
signing; and
    (iv) The name of the commodity pool for which the document is being 
distributed.
    (3) If the commodity pool operator is a sole proprietorship, the 
oath or affirmation must be made by the sole proprietor; if a 
partnership, by a general partner; and if a corporation, by the chief 
executive officer or chief financial officer.

(Approved by the Office of Management and Budget under control number 
3038-0005)

(Secs. 2(a)(1), 4c(a)-(d), 4d, 4f, 4g, 4k, 4m, 4n, 8a, 15 and 17, 
Commodity Exchange Act (7 U.S.C. 2, 4, 6c(a)-(d), 6f, 6g, 6k, 6m, 6n, 
12a, 19 and 21; 5 U.S.C. 552 and 552b))

[46 FR 26013, May 8, 1981, as amended at 46 FR 63035, Dec. 30, 1981; 47 
FR 57011, Dec. 22, 1982; 52 FR 41986, Nov. 2, 1987; 65 FR 81334, Dec. 
26, 2000]

Sec. 4.23  Recordkeeping.

    Each commodity pool operator registered or required to be registered 
under the Act must make and keep the following books and records in an 
accurate, current and orderly manner at its main business office and in 
accordance with Sec. 1.31. All books and records required by this 
section except those required by paragraphs (a)(3), (a)(4), (b)(1), 
(b)(2) and (b)(3) must be made available to participants for inspection 
and copying during normal business hours at the main business office of 
the pool operator. Upon request, copies must be sent by mail to any 
participant within five business days if reasonable reproduction and 
distribution costs are paid by the pool participant. If the commodity 
pool operator's main business office is outside of the United States, 
its territories or possessions, then upon the request of a Commission 
representative, the pool operator must provide such books and records as 
requested at the place in the United States, its territories or 
possessions designated by the representative within 72 hours after the 
pool operator receives the request.
    (a) Concerning the commodity pool:
    (1) An itemized daily record of each commodity interest transaction 
of the pool, showing the transaction date, quantity, commodity interest, 
and, as applicable, price or premium, delivery month or expiration date, 
whether a put or a call, strike price, underlying contract for future 
delivery or underlying physical, the futures commission merchant 
carrying the account and the introducing broker, if any, whether the 
commodity interest was purchased, sold, exercised, or expired, and the 
gain or loss realized.
    (2) A journal of original entry or other equivalent record showing 
all receipts and disbursements of money, securities and other property.
    (3) The acknowledgement specified by Sec. 4.21(b) for each 
participant in the pool.
    (4) A subsidiary ledger or other equivalent record for each 
participant in the pool showing the participant's name and address and 
all funds, securities and other property that the pool received from or 
distributed to the participant.
    (5) Adjusting entries and any other records of original entry or 
their equivalent forming the basis of entries in any ledger.
    (6) A general ledger or other equivalent record containing details 
of all asset, liability, capital, income and expense accounts.
    (7) Copies of each confirmation of a commodity interest transaction 
of the pool, each purchase and sale statement and each monthly statement 
for the

[[Page 183]]

pool received from a futures commission merchant.
    (8) Cancelled checks, bank statements, journals, ledgers, invoices, 
computer generated records, and all other records, data and memoranda 
prepared or received in connection with the operation of the pool.
    (9) The original or a copy of each report, letter, circular, 
memorandum, publication, writing, advertisement or other literature or 
advice (including the texts of standardized oral presentations and of 
radio, television, seminar or similar mass media presentations) 
distributed or caused to be distributed by the commodity pool operator 
to any existing or prospective pool participant or received by the pool 
operator from any commodity trading advisor of the pool, showing the 
first date of distribution or receipt if not otherwise shown on the 
document.
    (10) A Statement of Financial Condition as of the close of (i) each 
regular monthly period if the pool had net assets of $500,000 or more at 
the beginning of the pool's fiscal year, or (ii) each regular quarterly 
period for all other pools. The Statement must be completed within 30 
days after the end of that period.
    (11) A Statement of Income (Loss) for the period between (i) the 
later of: (A) the date of the most recent Statement of Financial 
Condition furnished to the Commission pursuant to Sec. 4.22(c), (B) 
April 1, 1979 or (C) the formation of the pool, and (ii) the date of the 
Statement of Financial Condition required by paragraph (a)(10) of this 
section. The Statement must be completed within 30 days after the end of 
that period.
    (b) Concerning the commodity pool operator:
    (1) An itemized daily record of each commodity interest transaction 
of the commodity pool operator and each principal thereof, showing the 
transaction date, quantity, commodity interest, and, as applicable, 
price or premium, delivery month or expiration date, whether a put or a 
call, strike price, underlying contract for future delivery or 
underlying physical, the futures commission merchant carrying the 
account and the introducing broker, if any whether the commodity 
interest was purchased, sold, exercised, or expired, and the gain or 
loss realized.
    (2) Each confirmation of a commodity interest transaction, each 
purchase and sale statement and each monthly statement furnished by a 
futures commission merchant to (i) the commodity pool operator relating 
to a personal account of the pool operator, and (ii) each principal of 
the pool operator relating to a personal account of such principal.
    (3) Books and records of all other transactions in all other 
activities in which the pool operator engages. Those books and records 
must include cancelled checks, bank statements, journals, ledgers, 
invoices, computer generated records and all other records, data and 
memoranda which have been prepared in the course of engaging in those 
activities.

(Approved by the Office of Management and Budget under control number 
3038-0005)

(Secs. 2(a)(1), 4c(a)-(d), 4d, 4f, 4g, 4k, 4m, 4n, 8a, 15 and 17, 
Commodity Exchange Act (7 U.S.C. 2, 4, 6c(a)-(d), 6f, 6g, 6k, 6m, 6n, 
12a, 19 and 21; 5 U.S.C. 552 and 552b))

[46 FR 26013, May 8, 1981, as amended at 46 FR 63035, Dec. 30, 1981; 47 
FR 57011, Dec. 22, 1982; 48 FR 35299, Aug. 3, 1983; 60 FR 38183, July 
25, 1995]

Sec. 4.24  General disclosures required.

    Except as otherwise provided herein, a Disclosure Document must 
include the following information.
    (a) Cautionary Statement. The following Cautionary Statement must be 
prominently displayed on the cover page of the Disclosure Document.

    THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE 
MERITS OF PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED ON 
THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.

    (b) Risk Disclosure Statement. (1) The following Risk Disclosure 
Statement must be prominently displayed immediately following any 
disclosures required to appear on the cover page of the Disclosure 
Document as provided by the Commission, by any applicable federal or 
state securities laws and regulations or by any applicable laws of non-
United States jurisdictions.

[[Page 184]]

                        RISK DISCLOSURE STATEMENT

    YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION 
PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD 
BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE 
LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET 
ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN 
THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR 
ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.
    FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR 
MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR 
THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL 
TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS 
DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO 
BE CHARGED THIS POOL AT PAGE (insert page number) AND A STATEMENT OF THE 
PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE 
AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE (insert page number).
    THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS 
NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. 
THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU 
SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION 
OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGE (insert page 
number).

    (2) If the pool may trade foreign futures or options contracts, the 
Risk Disclosure Statement must further state:

    YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN 
FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE 
THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES 
MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR 
DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED 
STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF 
THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES 
JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED.

    (3) If the potential liability of a participant in the pool is 
greater than the amount of the participant's contribution for the 
purchase of an interest in the pool and the profits earned thereon, 
whether distributed or not, the commodity pool operator must make the 
following additional statement in the Risk Disclosure Statement, to be 
prominently disclosed as the last paragraph thereof:

    ALSO, BEFORE YOU DECIDE TO PARTICIPATE IN THIS POOL, YOU SHOULD NOTE 
THAT YOUR POTENTIAL LIABILITY AS A PARTICIPANT IN THIS POOL FOR TRADING 
LOSSES AND OTHER EXPENSES OF THE POOL IS NOT LIMITED TO THE AMOUNT OF 
YOUR CONTRIBUTION FOR THE PURCHASE OF AN INTEREST IN THE POOL AND ANY 
PROFITS EARNED THEREON. A COMPLETE DESCRIPTION OF THE LIABILITY OF A 
PARTICIPANT IN THIS POOL IS EXPLAINED MORE FULLY IN THIS DISCLOSURE 
DOCUMENT.

    (c) Table of contents. A table of contents showing, by subject 
matter, the location of the disclosures made in the Disclosure Document 
must appear immediately following the Risk Disclosure Statement.
    (d) Information required in the forepart of the Disclosure Document. 
(1) The name, address of the main business office, main business 
telephone number and form of organization of the pool. If the mailing 
address of the main business office is a post office box number or is 
not within the United States, its territories or possessions, the pool 
operator must state where the pool's books and records will be kept and 
made available for inspection;
    (2) The name, address of the main business office, main business 
telephone number and form of organization of the commodity pool 
operator. If the mailing address of the main business office is a post 
office box number or is not within the United States, its territories or 
possessions, the pool operator must state where its books and records 
will be kept and made available for inspection;
    (3) As applicable, a statement that the pool is:
    (i) Privately offered pursuant to section 4(2) of the Securities Act 
of 1933,

[[Page 185]]

as amended (15 U.S.C. 77d(2)), or pursuant to Regulation D thereunder 
(17 CFR 230.501 et seq.);
    (ii) A multi-advisor pool as defined in Sec. 4.10(d)(2);
    (iii) A principal-protected pool as defined in Sec. 4.10(d)(3); or
    (iv) Continuously offered. If the pool is not continuously offered, 
the closing date of the offering must be disclosed.
    (4) The date when the commodity pool operator first intends to use 
the Disclosure Document; and
    (5) The break-even point per unit of initial investment, as 
specified in Sec. 4.10(j).
    (e) Persons to be identified. The names of the following persons:
    (1) Each principal of the pool operator;
    (2) The pool's trading manager, if any, and each principal thereof;
    (3) Each major investee pool, the operator of such investee pool, 
and each principal of the operator thereof;
    (4) Each major commodity trading advisor and each principal thereof;
    (5) Which of the foregoing persons will make trading decisions for 
the pool; and
    (6) If known, the futures commission merchant through which the pool 
will execute its trades, and, if applicable, the introducing broker 
through which the pool will introduce its trades to the futures 
commission merchant.
    (f) Business background. (1) The business background, for the five 
years preceding the date of the Disclosure Document, of:
    (i) The commodity pool operator;
    (ii) The pool's trading manager, if any;
    (iii) Each major commodity trading advisor;
    (iv) The operator of each major investee pool; and
    (v) Each principal of the persons referred to in this paragraph 
(f)(1) who participates in making trading or operational decisions for 
the pool or who supervises persons so engaged.
    (2) The pool operator must include in the description of the 
business background of each person identified in Sec. 4.24(f)(1) the 
name and main business of that person's employers, business associations 
or business ventures and the nature of the duties performed by such 
person for such employers or in connection with such business 
associations or business ventures. The location in the Disclosure 
Document of any required past performance disclosure for such person 
must be indicated.
    (g) Principal risk factors. A discussion of the principal risk 
factors of participation in the offered pool. This discussion must 
include, without limitation, risks relating to volatility, leverage, 
liquidity, and counterparty creditworthiness, as applicable to the types 
of trading programs to be followed, trading structures to be employed 
and investment activity expected to be engaged in by the offered pool.
    (h) Investment program and use of proceeds. The pool operator must 
disclose the following:
    (1) The types of commodity interests and other interests which the 
pool will trade, including:
    (i) The approximate percentage of the pool's assets that will be 
used to trade commodity interests, securities and other types of 
interests, categorized by type of commodity or market sector, type of 
security (debt, equity, preferred equity), whether traded or listed on a 
regulated exchange market, maturity ranges and investment rating, as 
applicable;
    (ii) The extent to which such interests are subject to state or 
federal regulation, regulation by a non-United States jurisdiction or 
rules of a self-regulatory organization;
    (iii)(A) The custodian or other entity (e.g., bank or broker-dealer) 
which will hold such interests; and
    (B) If such interests will be held or if pool assets will be 
invested in a non-United States jurisdiction, the jurisdiction in which 
such interests or assets will be held or invested.
    (2) A description of the trading and investment programs and 
policies that will be followed by the offered pool, including the method 
chosen by the pool operator concerning how futures commission merchants 
carrying the pool's accounts shall treat offsetting positions pursuant 
to Sec. 1.46 of this chapter, if the method is other than to close out 
all offsetting positions or to close out offsetting positions on other 
than a

[[Page 186]]

first-in, first-out basis, and any material restrictions or limitations 
on trading required by the pool's organizational documents or otherwise. 
This description must include, if applicable, an explanation of the 
systems used to select commodity trading advisors, investee pools and 
types of investment activity to which pool assets will be committed;
    (3)(i) A summary description of the pool's major commodity trading 
advisors, including their respective percentage allocations of pool 
assets, a description of the nature and operation of the trading 
programs such advisors will follow, including the types of interests 
traded pursuant to such programs, and each advisor's historical 
experience trading such program including material information as to 
volatility, leverage and rates of return and the length of time during 
which the advisor has traded such program;
    (ii) A summary description of the pool's major investee pools or 
funds, including their respective percentage allocations of pool assets 
and a description of the nature and operation of such investee pools and 
funds, including for each investee pool or fund the types of interests 
traded, material information as to volatility, leverage and rates of 
return for such investee pool or fund and the period of its operation; 
and
    (4)(i) The manner in which the pool will fulfill its margin 
requirements and the approximate percentage of the pool's assets that 
will be held in segregation pursuant to the Act and the Commission's 
regulations thereunder;
    (ii) If the pool will fulfill its margin requirements with other 
than cash deposits, the nature of such deposits; and
    (iii) If assets deposited by the pool as margin generate income, to 
whom that income will be paid.
    (i) Fees and expenses. (1) The Disclosure Document must include a 
complete description of each fee, commission and other expense which the 
commodity pool operator knows or should know has been incurred by the 
pool for its preceding fiscal year and is expected to be incurred by the 
pool in its current fiscal year, including fees or other expenses 
incurred in connection with the pool's participation in investee pools 
and funds.
    (2) This description must include, without limitation:
    (i) Management fees;
    (ii) Brokerage fees and commissions, including interest income paid 
to futures commission merchants;
    (iii) Fees and commissions paid in connection with trading advice 
provided to the pool;
    (iv) Fees and expenses incurred within investments in investee 
pools, investee funds and other collective investment vehicles, which 
fees and expenses must be disclosed separately for each investment tier;
    (v) Incentive fees;
    (vi) Any allocation to the commodity pool operator, or any agreement 
or understanding which provides the commodity pool operator with the 
right to receive a distribution, where such allocation or distribution 
is greater than a pro rata share of the pool's profits based on the 
percentage of capital contributions made by the commodity pool operator;
    (vii) Commissions or other benefits, including trailing commissions 
paid or that may be paid or accrue, directly or indirectly, to any 
person in connection with the solicitation of participations in the 
pool;
    (viii) Professional and general administrative fees and expenses, 
including legal and accounting fees and office supplies expenses;
    (ix) Organizational and offering expenses;
    (x) Clearance fees and fees paid to national exchanges and self-
regulatory organizations;
    (xi) For principal-protected pools, any direct or indirect costs to 
the pool associated with providing the protection feature, as referred 
to in paragraph (o)(3) of this section; and
    (xii) Any other direct or indirect cost.
    (3) Where any fee, commission or other expense is determined by 
reference to a base amount including, but not limited to, ``net 
assets,'' ``allocation of assets,'' ``gross profits,'' ``net profits,'' 
or ``net gains,'' the pool operator must explain how such base amount 
will be calculated, in a manner

[[Page 187]]

consistent with calculation of the break-even point.
    (4) Where any fee, commission or other expense is based on an 
increase in the value of the pool, the pool operator must specify how 
the increase is calculated, the period of time during which the increase 
is calculated, the fee, commission or other expense to be charged at the 
end of that period and the value of the pool at which payment of the 
fee, commission or other expense commences.
    (5) Where any fee, commission or other expense of the pool has been 
paid or is to be paid by a person other than the pool, the pool operator 
must disclose the nature and amount thereof and the person who paid or 
who is expected to pay it.
    (6) The pool operator must provide, in a tabular format, an analysis 
setting forth how the break-even point for the pool was calculated. The 
analysis must include all fees, commissions and other expenses of the 
pool, as set forth in Sec. 4.24(i)(2).
    (j) Conflicts of interest. (1) A full description of any actual or 
potential conflicts of interest regarding any aspect of the pool on the 
part of:
    (i) The commodity pool operator;
    (ii) The pool's trading manager, if any;
    (iii) Any major commodity trading advisor;
    (iv) The commodity pool operator of any major investee pool;
    (v) Any principal of the persons described in paragraphs (j)(1) (i), 
(ii), (iii) and (iv) of this section; and
    (vi) Any other person providing services to the pool or soliciting 
participants for the pool.
    (2) Any other material conflict involving the pool.
    (3) Included in the description of such conflicts must be any 
arrangement whereby a person may benefit, directly or indirectly, from 
the maintenance of the pool's account with the futures commission 
merchant or from the introduction of the pool's account to a futures 
commission merchant by an introducing broker (such as payment for order 
flow or soft dollar arrangements) or from an investment of pool assets 
in investee pools or funds or other investments.
    (k) Related party transactions. A full description, including a 
discussion of the costs thereof to the pool, of any material 
transactions or arrangements for which there is no publicly disseminated 
price between the pool and any person affiliated with a person providing 
services to the pool.
    (l) Litigation. (1) Subject to the provisions of Sec. 4.24(l)(2), 
any material administrative, civil or criminal action, whether pending 
or concluded, within five years preceding the date of the Document, 
against any of the following persons; Provided, however, that a 
concluded action that resulted in an adjudication on the merits in favor 
of such person need not be disclosed:
    (i) The commodity pool operator, the pool's trading manager, if any, 
the pool's major commodity trading advisors, and the operators of the 
pool's major investee pools;
    (ii) Any principal of the foregoing; and
    (iii) The pool's futures commission merchants and introducing 
brokers, if any.
    (2) With respect to a futures commission merchant or an introducing 
broker, an action will be considered material if:
    (i) The action would be required to be disclosed in the notes to the 
futures commission merchant's or introducing broker's financial 
statements prepared pursuant to generally accepted accounting 
principles;
    (ii) The action was brought by the Commission; Provided, however, 
that a concluded action that did not result in civil monetary penalties 
exceeding $50,000 need not be disclosed unless it involved allegations 
of fraud or other willful misconduct; or
    (iii) The action was brought by any other federal or state 
regulatory agency, a non-United States regulatory agency or a self-
regulatory organization and involved allegations of fraud or other 
willful misconduct.
    (m) Trading for own account. If the commodity pool operator, the 
pool's trading manager, any of the pool's commodity trading advisors or 
any principal thereof trades or intends to trade commodity interests for 
its own

[[Page 188]]

account, the pool operator must disclose whether participants will be 
permitted to inspect the records of such person's trades and any written 
policies related to such trading.
    (n) Performance disclosures. Past performance must be disclosed as 
set forth in Sec. 4.25.
    (o) Principal-protected pools. If the pool is a principal-protected 
pool as defined in Sec. 4.10(d)(3), the commodity pool operator must:
    (1) Describe the nature of the principal protection feature intended 
to be provided, the manner by which such protection will be achieved, 
including sources of funding, and what conditions must be satisfied for 
participants to receive the benefits of such protection;
    (2) Specify when the protection feature becomes operative; and
    (3) Disclose, in the break-even analysis required by 
Sec. 4.24(i)(6), the costs of purchasing and carrying the assets to fund 
the principal protection feature or other limitation on risk, expressed 
as a percentage of the price of a unit of participation.
    (p) Transferability and redemption. (1) A complete description of 
any restrictions upon the transferability of a participant's interest in 
the pool; and
    (2) A complete description of the frequency, timing and manner in 
which a participant may redeem interests in the pool. Such description 
must specify:
    (i) How the redemption value of a participant's interest will be 
calculated;
    (ii) The conditions under which a participant may redeem its 
interest, including the cost associated therewith, the terms of any 
notification required and the time between the request for redemption 
and payment;
    (iii) Any restrictions on the redemption of a participant's 
interest, including any restrictions associated with the pool's 
investments; and
    (iv) Any liquidity risks relative to the pool's redemption 
capabilities.
    (q) Liability of pool participants. The extent to which a 
participant may be held liable for obligations of the pool in excess of 
the funds contributed by the participant for the purchase of an interest 
in the pool.
    (r) Distribution of profits and taxation. (1) The pool's policies 
with respect to the payment of distributions from profits or capital and 
the frequency of such payments;
    (2) The federal income tax effects of such payments for a 
participant, including a discussion of the federal income tax laws 
applicable to the form of organization of the pool and to such payments 
therefrom; and
    (3) If a pool is specifically structured to accomplish certain 
federal income tax objectives, the commodity pool operator must explain 
those objectives, the manner in which they will be achieved and any 
risks relative thereto.
    (s) Inception of trading and other information. (1) The minimum 
aggregate subscriptions that will be necessary for the pool to commence 
trading commodity interests;
    (2) The minimum and maximum aggregate subscriptions that may be 
contributed to the pool;
    (3) The maximum period of time the pool will hold funds prior to the 
commencement of trading commodity interests;
    (4) The disposition of funds received if the pool does not receive 
the necessary amount to commence trading, including the period of time 
within which the disposition will be made; and
    (5) Where the pool operator will deposit funds received prior to the 
commencement of trading by the pool, and a statement specifying to whom 
any income from such deposits will be paid.
    (t) Ownership in pool. The extent of any ownership or beneficial 
interest in the pool held by the following:
    (1) The commodity pool operator;
    (2) The pool's trading manager, if any;
    (3) The pool's major commodity trading advisors;
    (4) The operators of the pool's major investee pools; and
    (5) Any principal of the foregoing.
    (u) Reporting to pool participants. A statement that the commodity 
pool operator is required to provide all participants with monthly or 
quarterly (whichever applies) statements of account and with an annual 
report containing financial statements certified by an independent 
public accountant.

[[Page 189]]

    (v) Supplemental information. If any information, other than that 
required by Commission rules, the antifraud provisions of the Act, other 
federal or state laws or regulations, rules of a self-regulatory agency 
or laws of a non-United States jurisdiction, is provided, such 
information:
    (1) May not be misleading in content or presentation or inconsistent 
with required disclosures;
    (2) Is subject to the antifraud provisions of the Act and Commission 
rules and to rules regarding the use of promotional material promulgated 
by a registered futures association pursuant to section 17(j) of the 
Act; and
    (3) Must be placed as follows, unless otherwise specified by 
Commission rules, provided that where a two-part document is used 
pursuant to rules promulgated by a registered futures association 
pursuant to Section 17(j) of the Act, all supplemental information must 
be provided in the second part of the two-part document:
    (i) Supplemental performance information (not including proprietary 
trading results as defined in Sec. 4.25(a)(8), or hypothetical, 
extracted, pro forma or simulated trading results) must be placed after 
all specifically required performance information; Provided, however, 
that required volatility disclosure may be included with the related 
required performance disclosure;
    (ii) Supplemental non-performance information relating to a required 
disclosure may be included with the related required disclosure; and
    (iii) Other supplemental information may be included after all 
required disclosures; Provided, however, that any proprietary trading 
results as defined in Sec. 4.25(a)(8), and any hypothetical, extracted, 
pro forma or simulated trading results included in the Disclosure 
Document must appear as the last disclosure therein following all 
required and non-required disclosures.
    (w) Material information. Nothing set forth in Secs. 4.21, 4.24, 
4.25 or Sec. 4.26 shall relieve a commodity pool operator from any 
obligation under the Act or the regulations thereunder, including the 
obligation to disclose all material information to existing or 
prospective pool participants even if the information is not 
specifically required by such sections.

[60 FR 38183, July 25, 1995, as amended at 63 FR 58303, Oct. 30, 1998; 
66 FR 53522, Oct. 23, 2001]

Sec. 4.25  Performance disclosures.

    (a) General principles--(1) Capsule performance information--(i) For 
pools. Unless otherwise specified, disclosure of the past performance of 
a pool must include the following information. Amounts shown must be net 
of any fees, expenses or allocations to the commodity pool operator.
    (A) The name of the pool;
    (B) A statement as to whether the pool is:
    (1) Privately offered pursuant to section 4(2) of the Securities Act 
of 1933, as amended (15 U.S.C. 77d(2)), or pursuant to Regulation D 
thereunder (17 CFR 230.501 et seq.);
    (2) A multi-advisor pool as defined in Sec. 4.10(d)(2); and
    (3) A principal-protected pool as defined in Sec. 4.10(d)(3);
    (C) The date of inception of trading;
    (D) The aggregate gross capital subscriptions to the pool;
    (E) The pool's current net asset value;
    (F) The largest monthly draw-down during the most recent five 
calendar years and year-to-date, expressed as a percentage of the pool's 
net asset value and indicating the month and year of the draw-down (the 
capsule must include a definition of ``draw-down'' that is consistent 
with Sec. 4.10(k));
    (G) The worst peak-to-valley draw-down during the most recent five 
calendar years and year-to-date, expressed as a percentage of the pool's 
net asset value and indicating the months and year of the draw-down; and
    (H) Subject to Sec. 4.25(a)(2) for the offered pool, the annual and 
year-to-date rate of return for the pool for the most recent five 
calendar years and year-to-date, computed on a compounded monthly basis;
    (ii) For accounts. Disclosure of the past performance of an account 
required under this Sec. 4.25 must include the following capsule 
performance information:
    (A) The name of the commodity trading advisor or other person 
trading the

[[Page 190]]

account and the name of the trading program;
    (B) The date on which the commodity trading advisor or other person 
trading the account began trading client accounts and the date when 
client funds began being traded pursuant to the trading program;
    (C) The number of accounts directed by the commodity trading advisor 
or other person trading the account pursuant to the trading program 
specified, as of the date of the Disclosure Document;
    (D)(1) The total assets under the management of the commodity 
trading advisor or other person trading the account, as of the date of 
the Disclosure Document; and
    (2) The total assets traded pursuant to the trading program 
specified, as of the date of the Disclosure Document;
    (E) The largest monthly draw-down for the trading program specified 
during the most recent five calendar years and year-to-date expressed as 
a percentage of client funds, and indicating the month and year of the 
draw-down;
    (F) The worst peak-to-valley draw-down for the trading program 
specified during the most recent five calendar years and year-to-date, 
expressed as a percentage of net asset value and indicating the months 
and year of the draw-down; and
    (G) The annual and year-to-date rate-of-return for the program 
specified, computed on a compounded monthly basis.
    (2) Additional requirements with respect to the offered pool. (i) 
The performance of the offered pool must be identified as such and 
separately presented first;
    (ii) The rate of return of the offered pool must be presented on a 
monthly basis for the period specified in Sec. 4.25(a)(5), either in a 
numerical table or in a bar graph;
    (iii) A bar graph used to present monthly rates of return for the 
offered pool:
    (A) Must show percentage rate of return on the vertical axis and 
one-month increments on the horizontal axis;
    (B) Must be scaled in such a way as to clearly show month-to-month 
differences in rates of return; and
    (C) Must separately display numerical percentage annual rates of 
return for the period covered by the bar graph; and
    (iv) The pool operator must make available upon request to 
prospective and existing participants all supporting data necessary to 
calculate monthly rates of return for the offered pool as specified in 
Sec. 4.25(a)(7), for the period specified in Sec. 4.25(a)(5).
    (3) Additional requirements with respect to pools other than the 
offered pool. With respect to pools other than the offered pool for 
which past performance is required to be presented under this section:
    (i) Performance data for pools of the same class as the offered pool 
must be presented following the performance of the offered pool, on a 
pool-by-pool basis.
    (ii) Pools of a different class than the offered pool must be 
presented less prominently and, unless such presentation would be 
misleading, may be presented in composite form; Provided, however, that:
    (A) The Disclosure Document must disclose how the composite was 
developed;
    (B) Pools of different classes or pools with materially different 
rates of return may not be presented in the same composite.
    (iii) For the purpose of Sec. 4.25(a)(3)(ii), the following, without 
limitation, shall be considered pools of different classes: Pools 
privately offered pursuant to section 4(2) of the Securities Act of 
1933, as amended (15 U.S.C. 77d(2)), or pursuant to Regulation D 
thereunder (17 CFR 230.501 et seq.), and public offerings; and 
principal-protected and non-principal-protected pools. Multi-advisor 
pools as defined in Sec. 4.10(d)(2) will be presumed to have materially 
different rates of return from those of non-multi-advisor pools absent 
evidence sufficient to demonstrate otherwise.
    (iv) Material differences among the pools for which past performance 
is disclosed, including, without limitation, differences in leverage and 
use of different trading programs, must be described.

[[Page 191]]

    (4) Additional requirements with respect to accounts. (i) Unless 
such presentation would be misleading, past performance of accounts 
required to be presented under this section may be presented in 
composite form on a program-by-program basis using the format set forth 
in Sec. 4.25(a)(1)(ii).
    (ii) Accounts that differ materially with respect to rates of return 
may not be presented in the same composite.
    (iii) The commodity pool operator must disclose all material 
differences among accounts included in a composite.
    (5) Time period for required performance. All required performance 
information must be presented for the most recent five calendar years 
and year-to-date or for the life of the pool, account or trading 
program, if less than five years.
    (6) Trading programs. If the offered pool will use any of the 
trading programs for which past performance is required to be presented, 
the Disclosure Document must so indicate.
    (7) Calculation of, and recordkeeping concerning, performance 
information. (i) All performance information presented in a Disclosure 
Document, including performance information contained in any capsule and 
performance information not specifically required by Commission rules, 
must be current as of a date not more than three months preceding the 
date of the Document, and must be supported by the following amounts, 
calculated on an accrual basis of accounting in accordance with 
generally accepted accounting principles, as specified below or by a 
method otherwise approved by the Commission.
    (A) The beginning net asset value for the period, which shall be the 
same as the previous period's ending net asset value;
    (B) All additions, whether voluntary or involuntary, during the 
period;
    (C) All withdrawals and redemptions, whether voluntary or 
involuntary, during the period;
    (D) The net performance for the period, which shall represent the 
change in the net asset value net of additions, withdrawals, and 
redemptions;
    (E) The ending net asset value for the period, which shall represent 
the beginning net asset value plus or minus additions, withdrawals, 
redemptions and net performance;
    (F) The rate of return for the period, which shall be calculated by 
dividing the net performance by the beginning net asset value or by a 
method otherwise approved by the Commission; and
    (G) The number of units outstanding at the end of the period, if 
applicable.
    (ii) All supporting documents necessary to substantiate the 
computation of such amounts must be maintained in accordance with 
Sec. 1.31.
    (8) Proprietary trading results. (i) Proprietary trading results may 
not be included in a Disclosure Document unless such performance is 
prominently labeled as proprietary and is set forth separately after all 
disclosures in accordance with Sec. 4.24(v), together with a discussion 
of any differences between such performance and the performance of the 
offered pool, including, but not limited to, differences in costs, 
leverage and trading methodology.
    (ii) For the purposes of Sec. 4.24(v) and this Sec. 4.25(a), 
proprietary trading results means the performance of any pool or account 
in which fifty percent or more of the beneficial interest is owned or 
controlled by:
    (A) The commodity pool operator, trading manager (if any), commodity 
trading advisor or any principal thereof
    (B) An affiliate or family member of the commodity pool operator, 
trading manager (if any) or commodity trading advisor; or
    (C) Any person providing services to the pool.
    (9) Required legend. Any past performance presentation, whether or 
not required by Commission rules, must be preceded by the following 
statement, prominently displayed:

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

    (b) Performance disclosure when the offered pool has at least a 
three-year operating history. The commodity pool operator must disclose 
the performance of the offered pool, in accordance with paragraphs 
(a)(1)(i) (A) through (H) and (a)(2) of this Sec. 4.25, where:

[[Page 192]]

    (1) The offered pool has traded commodity interests for three years 
or more; and
    (2) For at least such three-year period, seventy-five percent or 
more of the contributions to the pool were made by persons unaffiliated 
with the commodity pool operator, the trading manager (if any), the 
pool's commodity trading advisors, or the principals of any of the 
foregoing.
    (c) Performance disclosure when the offered pool has less than a 
three-year operating history--(1) Offered pool performance. (i) The 
commodity pool operator must disclose the performance of the offered 
pool, in accordance with paragraphs (a)(1)(i)(A) through (H) and (a)(2) 
of this Sec. 4.25; or
    (ii) If the offered pool has no operating history, the pool operator 
must prominently display the following statement:

THIS POOL HAS NOT COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE 
HISTORY.

    (2) Other performance of commodity pool operator. (i)(A) Except as 
provided in Sec. 4.25(a)(8), the commodity pool operator must disclose, 
for the period specified by Sec. 4.25(a)(5), the performance of each 
other pool operated by the pool operator (and by the trading manager if 
the offered pool has a trading manager) in accordance with paragraphs 
(a)(1)(i) (C) through (H) and (a)(3) of this Sec. 4.25, and the 
performance of each other account traded by the pool operator (and by 
the trading manager if the offered pool has a trading manager) in 
accordance with paragraphs (a)(1)(ii) (C) through (G) of this Sec. 4.25. 
If the trading manager has been delegated complete authority for the 
offered pool's trading, and the trading manager's performance is not 
materially different from that of the pool operator, the performance of 
the other pools operated by and accounts traded by the pool operator is 
not required to be disclosed.
    (B) In addition, if the pool operator, or if applicable, the trading 
manager, has not operated for at least three years any commodity pool in 
which seventy-five percent or more of the contributions to the pool were 
made by persons unaffiliated with the commodity pool operator, the 
trading manager, the pool's commodity trading advisors or their 
respective principals, the pool operator must also disclose the 
performance of each other pool operated by and account traded by the 
trading principals of the pool operator (and of the trading manager, as 
applicable) unless such performance does not differ in any material 
respect from the performance of the offered pool and the pool operator 
(and trading manager, if any) disclosed in the Disclosure Document.
    (ii) If neither the pool operator or trading manager (if any), nor 
any of its trading principals has operated any other pools or traded any 
other accounts, the pool operator must prominently display the following 
statement: NEITHER THIS POOL OPERATOR (TRADING MANAGER, IF APPLICABLE) 
NOR ANY OF ITS TRADING PRINCIPALS HAS PREVIOUSLY OPERATED ANY OTHER 
POOLS OR TRADED ANY OTHER ACCOUNTS. If the commodity pool operator or 
trading manager, if applicable, is a sole proprietorship, reference to 
its trading principals may be deleted from the prescribed statement.
    (3) Major commodity trading advisor performance. (i) The commodity 
pool operator must disclose the perfor- mance of any accounts (including 
pools) directed by a major commodity trading advisor in accordance with 
paragraphs (a)(1)(ii) (C) through (G) of this Sec. 4.25.
    (ii) If a major commodity trading advisor has not previously traded 
accounts, the pool operator must prominently display the following 
statement:

(name of the major commodity trading advisor), A COMMODITY TRADING 
ADVISOR THAT HAS DISCRETIONARY TRADING AUTHORITY OVER (percentage of the 
pool's funds available for commodity interest trading allocated to that 
trading advisor) PERCENT OF THE POOL'S FUTURES AND COMMODITY OPTION 
TRADING HAS NOT PREVIOUSLY DIRECTED ANY ACCOUNTS.

    (4) Major investee pool performance. (i) The commodity pool operator 
must disclose the performance of any major investee pool.
    (ii) If a major investee pool has not commenced trading, the pool 
operator must prominently display the following statement:


[[Page 193]]


(name of the major investee pool), AN INVESTEE POOL THAT IS ALLOCATED 
(percentage of the pool assets allocated to that investee pool) PERCENT 
OF THE POOL'S ASSETS HAS NOT COMMENCED TRADING.

    (5) With respect to commodity trading advisors and investee pools 
for which performance is not required to be disclosed pursuant to 
Sec. 4.25(c) (3) and (4), the pool operator must provide a summary 
description of the performance history of each of such advisors and 
pools including the following information, provided that where the pool 
operator uses a two-part document pursuant to the rules promulgated by a 
registered futures association pursuant to Section 17(j) of the Act, 
such summary description may be provided in the second part of the two-
part document:
    (i) Monthly return parameters (highs and lows);
    (ii) Historical volatility and degree of leverage; and
    (iii) Any material differences between the performance of such 
advisors and pools as compared to that of the offered pool's major 
trading advisors and major investee pools.

[60 FR 38186, July 25, 1995, as amended at 63 FR 58303, Oct. 30, 1998]

Sec. 4.26  Use, amendment and filing of Disclosure Document.

    (a)(1) Subject to paragraph (c) of this section, all information 
contained in the Disclosure Document and, where used, profile document, 
must be current as of the date of the Document; Provided, however, that 
performance information may be current as of a date not more than three 
months prior to the date of the Document.
    (2) No commodity pool operator may use a Disclosure Document or 
profile document dated more than nine months prior to the date of its 
use.
    (b)(1) If the commodity pool operator knows or should know that the 
Disclosure Document or profile document is materially inaccurate or 
incomplete in any respect, it must correct that defect and must 
distribute the correction to:
    (i) All existing pool participants within 21 calendar days of the 
date upon which the pool operator first knows or has reason to know of 
the defect; and
    (ii) Each previously solicited prospective pool participant prior to 
accepting or receiving funds, securities or other property from any such 
prospective participant.
    (2) The pool operator may furnish the correction by any of the 
following means:
    (i) An amended Disclosure Document or profile document;
    (ii) With respect to a hard copy of the Disclosure Document, a 
sticker affixed to the Disclosure Document; or
    (iii) Other similar means.
    (3) The pool operator may not use the Disclosure Document or profile 
document until such correction has been made.
    (c)(1) If the commodity pool operator knows or should know that the 
Disclosure Document is materially inaccurate or incomplete in any 
respect, it must correct that defect and must distribute the correction 
to:
    (i) All existing pool participants within 21 calendar days of the 
date upon which the pool operator first knows or has reason to know of 
the defect; and
    (ii) Each previously solicited prospective pool participant prior to 
accepting or receiving funds, securities or other property from any such 
prospective participant. The pool operator may furnish the correction by 
way of an amended Disclosure Document, a sticker on the Document, or 
other similar means.
    (2) The pool operator may not use the Disclosure Document until such 
correction has been made.
    (d) Except as provided by Sec. 4.8:
    (1) The commodity pool operator must file with the Commission one 
copy of the Disclosure Document and, where used, profile document for 
each pool that it operates or that it intends to operate not less than 
21 calendar days prior to the date the pool operator first intends to 
deliver such Document or documents to a prospective participant in the 
pool; and
    (2) The commodity pool operator must file with the Commission one 
copy of the subsequent amendments to the Disclosure Document and, where 
used, profile document for each pool

[[Page 194]]

that it operates or that it intends to operate within 21 calendar days 
of the date upon which the pool operator first knows or has reason to 
know of the defect requiring the amendment.

[60 FR 38188, July 25, 1995, as amended at 62 FR 18268, Apr. 15, 1997; 
65 FR 58649, Oct. 2, 2000]
