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Conduct of business of pool operator

Commodity Trading Regulations 2001

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—(1) No commodity pool operator shall, directly or indirectly, solicit, accept or receive funds, securities or other property from a prospective participant for a pool that he operates or intends to operate unless the pool operator delivers or causes to be delivered to the prospective participant a disclosure document containing the following information:(a)particulars relating to —(i)the name and address of the pool operator, and the name and address, if any, of his main business office, his telephone number and the form of organisation of the pool operator;(ii)the name of the person who will make the trading decisions for the pool including the name of any commodity trading adviser;(iii)if known, the name of the commodity broker through whom the pool will execute its trades;(iv)the types of contracts the pool operator intends that the pool will trade in, with a description of any restriction or limitations on such trading established by the pool operator; and(v)a risk disclosure statement in Form 2 in the Second Schedule;(b)any actual or potential conflict of interest regarding any aspect of the pool on the part of —(i)the pool operator or any of his directors;(ii)the pool’s commodity trading adviser or any director of the trading adviser if the trading adviser is a corporation; or(iii)any commodity broker through which the pool’s trades will be executed or any of the broker’s directors,and including in the description of such conflict, any arrangement whereby the pool operator, his trading advisers, or the directors of such pool operator or trading adviser may benefit, directly or indirectly, from the maintenance of the pool’s account with any commodity broker;(c)the actual performance record of the pool operator, in the following manner:(i)a table showing at least quarterly the following information, current as of a date not more than 3 months preceding the date of the record:(A)the initial net asset value of the pool for the period, which shall be 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 of the pool for the period, which shall be the change in the net asset value, net of additions, withdrawals and redemptions;(E)the ending net asset value of the pool for the period, which shall be the initial net asset value plus or minus additions, withdrawals and redemptions and net performance;(F)the rate of return for the period, which shall be calculated by dividing the net performance by the initial net asset value; and(G)the number of participation units outstanding at the end of the period; and(ii)a description of the material differences among the pools for which past performance is disclosed;(d)the actual performance record of the pool’s commodity trading advisers;(e)a complete description of each kind of expense which the pool operator knows or ought reasonably to know has been incurred by the pool for its preceding financial year or is expected to be incurred by the pool in its current financial year, including, but not limited to, fees for management, trading advice, brokerage commissions, legal advice, accounting services and organisational services and, in particular —(i)the pool operator shall specify the actual dollar amount of each such expense for the pool’s preceding financial year and, wherever possible, the estimated amount of each such expense for the pool’s current financial year;(ii)where any expense is determined by reference to a base amount term including, but not limited to, “net assets”, “gross profits”, “net profits” or “net gains”, the specific definition of each such term; and(iii)where any fee is based on an increase in the value of the pool, the pool operator shall specify how the increase is calculated, the period of time during which the increase is calculated, the fee to be charged at the end of that period and the value of the pool at the point where payment of the increased fee commences;(f)information relating to —(i)the minimum aggregate amount of funds that will be necessary for the pool to commence trading in commodity contracts, or if there is no such minimum amount, a statement to that effect;(ii)the maximum aggregate amount of funds that may be contributed to the pool, or if there is no such maximum amount, a statement to that effect;(iii)the maximum period of time for which the pool will hold funds prior to the commencement of any trading, or if there is no such period of time, a statement to that effect;(iv)the disposition of funds 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(v)where the pool operator deposits or invests funds received prior to the commencement of trading by the pool and if the pool operator intends to place those funds in an income-generating account or obligation, the name of the person to whom that income will be paid;(g)information relating to —(i)the manner in which the pool will fulfil its margin requirements, and where the pool will fulfil its margin requirements otherwise than by cash, a statement of disclosure as to —(A)the nature of such non-cash items; and(B)if those items generate income, the name of the person to whom that income will be paid; and(ii)the form in which pool funds not deposited as margin will be held after the commencement of trading by the pool, and where those funds will be held in assets other than cash, a statement to that effect;(h)a complete description of any restrictions upon the transferability of a participant’s interest in the pool, and where there are no such restrictions, a statement to that effect;(i)a complete description of the manner in which a participant may redeem his interest in the pool, and the description must specify —(i)the method of calculating the redemption value of a participant’s interest, including the cost associated therewith;(ii)the conditions under which a participant may redeem his interest including the terms of any notification required; and(iii)any restrictions on the redemption of a participant’s interest, or if there are no such restrictions, a statement to that effect;(j)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;(k)the pool’s policies with respect to the payment of distributions from profits or capital and the pool’s policies with respect to the frequency of such payments;(l)a statement as to —(i)whether trading in commodity contracts will be done or is intended to be done for the proprietary account of —(A)the pool operator or any of his directors; or(B)the commodity trading adviser of the pool or any of their respective directors; and(ii)if any of the persons mentioned in this paragraph does not trade or intend to trade for their own account, a statement to that effect with respect to each such person; and(m)a statement that the pool operator shall provide all participants with a monthly or quarterly (whichever is applicable) statement of accounts and a certified annual report.(2) For the purposes of paragraph (1), no pool operator shall use any disclosure document which is dated more than 6 months preceding the date of its use.(3) The risk disclosure document required by section 32(2) of the Act to be provided by a commodity pool operator to a prospective client shall be in Form 2 in the Second Schedule.

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