[Federal Register: August 4, 2000 (Volume 65, Number 151)]
[Rules and Regulations]
[Page 47848-47859]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au00-9]
[[Page 47848]]
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 4, 30, 140 and 180
RIN 3038-AB37
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
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'') is
revising Commission Rule 4.7 (``Revision'') \1\ through both
substantive and technical revisions. Rule 4.7 provides a simplified
regulatory framework for commodity pool operators (``CPOs'') operating
commodity pools consisting of certain highly accredited pool
participants and for commodity trading advisors (``CTAs'') directing or
guiding the commodity interest trading accounts of certain highly
accredited clients. These persons formerly were termed ``qualified
eligible participants'' (or ``QEPs'') and ``qualified eligible
clients'' (or ``QECs''), respectively. Under the Revision, all such
persons are termed ``qualified eligible persons.''
---------------------------------------------------------------------------
\1\ Commission rules referred to herein are found at 17 CFR Ch.
I (2000).
---------------------------------------------------------------------------
The substantive revisions will make Rule 4.7 available to more CPOs
and CTAs and under more situations, by bringing within the scope of the
rule additional persons. They add, among others, the following persons
to the qualified eligible person definition: Principals of certain
registered investment professionals who themselves are defined as
qualified eligible persons; certain registered securities investment
advisers and their principals; ``qualified purchasers'' and
``knowledgeable employees'' as those terms are defined under the
federal securities laws; certain employees and agents of pools, CPOs
and CTAs and certain of those employees' and agents' immediate family
members; and trusts whose advisors and settlors are qualified eligible
persons. In addition, these revisions make it easier for certain
charitable organizations, trusts and collective investment vehicles to
be qualified eligible persons, and it includes persons who are not
``United States persons'' in the qualified eligible person definition
with respect to both Rule 4.7 exempt pools and exempt accounts. Certain
of the technical revisions, i.e., those which reorganize the rule, will
facilitate employment of the rule. Other technical revisions conform
the nomenclature of the text of Rule 4.7 to reflect the revised
structure of the Rule. The Commission has made similar conforming
revisions to Rules 30.6(b), 140.99(i)(A) and 180.3(b)(2)(vi), which
prior to these revisions referred to, e.g., ``qualified eligible
participants'' in their text.
In light of the breadth of the revisions to Rule 4.7, the
Commission is including at Part IV of this release a distribution table
that indicates where the provisions of the former rule can be found in
the revised rule and a derivation table that indicates where the
provisions of the revised rule can be found in the former rule.
DATES: Effective August 4, 2000.
FOR FURTHER INFORMATION CONTACT: Barbara Stern Gold, Assistant Chief
Counsel, Helene D. Schroeder, Attorney-Advisor or Ky Tran-Trong,
Attorney-Advisor, Division of Trading and Markets, Commodity Futures
Trading Commission, 1155 21st Street, NW, Washington, DC 20581.
Telephone: (202) 418-5450.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
In 1992, the Commission adopted Rule 4.7 as part of the
Commission's ongoing program for review of its rules.\2\ Rule 4.7
provides an exemption from certain disclosure, reporting and
recordkeeping requirements for registered CPOs in connection with their
operation of commodity pools whose participants meet specified
eligibility criteria.\3\ The exemption provides relief from all of the
specific disclosures required by Rules 4.21 and 4.24 through 4.26 and
streamlines the reporting and recordkeeping requirements of Rules 4.22
and 4.23, respectively.\4\ Rule 4.7 provides similar relief from the
specific disclosure requirements of Rules 4.31 and 4.34 through 4.36
and recordkeeping requirements of Rule 4.33 to registered CTAs who
direct or guide the commodity interest trading accounts of clients who
meet specified eligibility criteria.\5\
---------------------------------------------------------------------------
\2\ 57 FR 34853 (Aug. 7, 1992). The Commission made certain
technical, non-substantive amendments to Rule 4.7 in 1995. 60 FR
38146, 38182-93 (July 25, 1995). These amendments were necessary to
conform certain of the references in Rule 4.7 to other Part 4 rules
the Commission had renumbered in connection with revising the
disclosure rules generally applicable to CPOs and CTAs.
\3\ As stated above, these persons formerly were termed
``qualified eligible participants.'' As a result of the Revision,
they are now termed ``qualified eligible persons.''
\4\ Under Rule 4.7, however, a registered CPO operating a pool
for which it has claimed Rule 4.7 relief (``exempt pool'') remains
subject to all other applicable requirements of the Act and the
Commission's regulations issued thereunder with respect to the
exempt pool and any other pool the CPO operates or intends to
operate. Former Rule 4.7(a)(4); Revised Rule 4.7(d)(4)(i). For
example, it remains subject to the antifraud provisions of Sections
4b and 4o of the Act, 7 U.S.C. 6b and 6o (1994), the prohibited
activities and advertising provisions applicable to CPOs in Rules
4.20 and 4.41, respectively, and the reporting requirements for
traders set forth in Parts 15, 18 and 19 of the Commission's
regulations. Moreover, if a CPO distributes an offering memorandum
in connection with soliciting participations in an exempt pool, the
memorandum must include all disclosures necessary to make the
information contained therein, in the context in which it is
furnished, not misleading. Former Rule 4.7(a)(2)(i)(A); Revised Rule
4.7(b)(1)(i).
\5\ As also stated above, these persons formerly were termed
``qualified eligible clients.'' As a result of the Revision, they,
too, are termed ``qualified eligible persons.''
Under Rule 4.7, a CTA that has claimed Rule 4.7 relief with
respect to a qualified eligible person likewise remains subject to
all other applicable requirements of the Act and the Commission's
regulations with respect to the qualified eligible person and any
other client to which the CTA provides or intends to provide
commodity interest trading advice. Former Rule 4.7(b)(4); Revised
Rule 4.7(d)(4)(ii). Similarly, if a CTA delivers a brochure or other
disclosure statement to qualified eligible persons, the brochure or
statement must include all disclosures necessary to make the
information contained therein, in the context in which it is
furnished, not misleading. Former Rule 4.7(b)(2)(i)(A); Revised Rule
4.7(c)(1)(i).
---------------------------------------------------------------------------
Subsequent to the adoption of Rule 4.7, and consistent with the
purposes of the rule, Commission staff permitted various CPOs and CTAs
to claim relief under the rule with respect to certain persons who did
not meet the specified eligibility criteria of the rule. In addition,
in 1996, Congress enacted the National Securities Markets Improvement
Act of 1996 (``NSMIA'').\6\ Among other things, NSMIA added Section
3(c)(7) to the ICA \7\ thereby providing an additional exemption from
the definition of the term ``investment company'' under the ICA with
respect to funds comprised exclusively of qualified purchasers
(``QPs''). NSMIA also directed the Securities and Exchange Commission
(``SEC'') to promulgate rules that would permit ownership by
knowledgeable employees
[[Page 47849]]
of the securities of the issuer (or affiliate) without loss of the
issuer's definitional exemption under Section 3(c)(1) \8\ or 3(c)(7) of
the ICA. In 1997, the SEC adopted Rule 3c-5 under the ICA,\9\ which
defines the term ``knowledgeable employee.'' \10\
---------------------------------------------------------------------------
\6\ Pub. L. No. 104-290, 110 Stat. 3416 (codified as amended in
scattered sections of 15 U.S.C. and 29 U.S.C.). Many collective
investment vehicles trade both securities and commodity interests,
and absent an exemption, they are subject to registration as an
investment company under the Investment Company Act of 1940 (the
``ICA'') and their operators are subject to registration as a CPO
under the Act. See, e.g., Peavey Commodity Futures Funds I, II, III,
[1983-1984 Transfer Binder] Fed. Sec. L. Rep. (CCH) para.77,511
(June 2, 1983).
\7\ 15 U.S.C. 80a-3(c)(7) (Supp. III 1997).
\8\ 15 U.S.C. 80a-3(c) (1)(1994 & Supp. III 1997).
\9\ 17 CFR 270.3c-5 (1999).
\10\ 62 FR 17512 (Apr. 9, 1997).
---------------------------------------------------------------------------
Based upon staff's experience in administering Rule 4.7 and taking
into account these recent developments in the federal securities laws,
on March 2, 2000 the Commission published for comment in the Federal
Register proposed revisions to Rule 4.7 (the ``Proposal'').\11\ Certain
of the proposed revisions were substantive in nature--i.e., they would
expand the definitions employed in Rule 4.7, which would have the
effect of permitting registered CPOs and CTAs to claim relief in
additional circumstances under the rule. In proposing this action, the
Commission noted that it had been guided by the purposes of Rule 4.7.
With respect to CPOs, these purposes are to: (1) Reduce unnecessary
regulatory burdens with respect to persons who appear not to need the
full protections of the Part 4 framework; and (2) coordinate the
Commission's rules with certain federal securities laws.\12\ As for
CTAs, the rationale for relief ``is analogous to that for * * * CPOs,
i.e., that [qualified eligible persons] are sophisticated investors who
have the financial ability and experience necessary to understand the
risks of futures trading and to obtain the information they require.''
\13\
---------------------------------------------------------------------------
\11\ 65 FR 11253.
\12\ 57 FR 3148, 3150-51 (Jan. 28, 1992).
\13\ 57 FR at 3151.
---------------------------------------------------------------------------
B. The Comments
The Commission received six comment letters on the Proposal: one
from a firm registered as a futures commission merchant, CPO and CTA;
one from a firm registered as a CPO; one from a designated self-
regulatory organization; one from a bar association; one from a member
of the commodities bar; and one from a trade association representing
CPOs and CTAs.\14\ All of the persons who commented on the proposed
revisions to Rule 4.7 expressed strong support for the Proposal. Among
the reasons commenters provided for their support were that the
Proposal: (1) Would coordinate and harmonize the commodities and
securities laws where they have a common purpose; (2) would relieve
Commission staff from expending its resources on what have become
routine and redundant Rule 4.7 letters; (3) would provide similar
relief to the applicants for those letters; and (4) would make the
rules more ``user friendly.''
---------------------------------------------------------------------------
\14\ Not all of the comments, however, were directly related to
the Proposal. One comment recommended adoption of a uniform
``sophisticated customer definition'' for various of the
Commission's rules (i.e., Rules 1.3, 1.55, 4.7, 35.1 and 36.1);
another comment recommended adoption of an exemption from CPO
registration for operators of privately-offered collective
investment vehicles limited solely to Non-United States persons; and
yet another comment recommended adoption of an exclusion from the
CPO definition for a collective investment vehicle using commodity
interests solely for recognized risk management purposes. Inasmuch
as these comments do not specifically concern Rule 4.7, the
Commission is not by this Federal Register release addressing them
(although, as discussed below, the Commission has revised Rule 4.7
so that it now provides relief with respect to ``qualified eligible
persons'' (emphasis added)). The Commission does, however, intend to
consider these comments in connection with other regulatory reform
initiatives that it may propose--e.g., in connection with revisions
to the registration requirements for CPOs and CTAs that it may
propose.
---------------------------------------------------------------------------
In light of the comments received, the Commission generally has
adopted the revisions to Rule 4.7 that it proposed.\15\ In addition,
the Commission has further reorganized the rule and has included more
persons in the qualified eligible person definition. Each of the
changes from the Proposal is discussed below, and distribution and
derivation tables are provided at Section IV below.
---------------------------------------------------------------------------
\15\ As discussed more fully below, the Commission has adopted
certain provisions without the qualifying limitations it had
proposed thereon. These provisions concern the treatment of family
members of--e.g., the CPO of the exempt pool or the CTA of the
exempt account--as qualified eligible persons for other purposes of
Rule 4.7 (see Section II.D.3. below) and the availability of rule
4.7 relief to a CTA with respect to those of its clients who are
Non-United States persons (see Section II.E. below).
---------------------------------------------------------------------------
In the Federal Register release announcing the Proposal
(``Proposing Release''), the Commission gave a detailed explanation of
each revision it had proposed to make to Rule 4.7.\16\ The scope of
this Federal Register release generally is restricted to the comments
received on the Proposal and changes to the Proposal that the
Commission has made in response thereto. Accordingly, the Commission
encourages interested persons to read the Proposing Release for a
discussion of the purpose of each of the revisions the Commission
proposed to make to the various provisions under Rule 4.7.
---------------------------------------------------------------------------
\16\ The Commission also cited at various places in the
Proposing Release to the letters its staff had issued granting
relief from the definitional requirements of Rule 4.7.
---------------------------------------------------------------------------
II. Responses to the Comments Received
A. Reorganization of Rule 4.7
The Commission proposed to reorganize Rule 4.7 to assist CPOs and
CTAs in determining the availability of the rule to them. This proposed
reorganization would have put all of the definitions used in Rule 4.7
in one place, proposed paragraph (a) of the rule.\17\ In particular,
proposed paragraph (a)(1) would have contained the general definitions
used throughout Rule 4.7.\18\ One of those definitions was the term
``Portfolio Requirement'' in proposed paragraph (a)(1)(v).\19\ One of
the commenters questioned the need for two separate definitions of the
term ``Portfolio Requirement'' (one for QEPs and one for QECs) because,
as it noted, these definitions were virtually identical except for
those references where the definition applicable to QEPs concerned
``pool participants'' and ``exempt pool'' and the definition applicable
to QECs concerned ``clients'' and ``exempt account.'' Accordingly, the
commenter recommended that the Commission should merge the two
``Portfolio Requirement'' definitions into one definition. The
Commission believes this is a useful recommendation, and it has thus
adopted in Rule 4.7(a)(1)(v) a single definition of ``Portfolio
Requirement'' that equally applies to pool participants and exempt
pools and to clients and exempt accounts.
---------------------------------------------------------------------------
\17\ See generally 65 FR at 11255-56.
\18\ 65 FR at 11256.
\19\ Id.
---------------------------------------------------------------------------
In furtherance of this comment, the Commission additionally has
streamlined other definitions used in Rule 4.7, such that now the rule
solely refers to ``qualified eligible persons.'' Under both the former
rule and the Proposal, persons for whom a CPO or CTA could claim relief
under Rule 4.7 were termed QEPs and QECs, respectively, and the
criteria each such person had to satisfy was separately set forth
depending on whether the person had to meet the Portfolio Requirement.
Thus, under proposed Rule 4.7(a)(2), two categories of persons were
defined as QEPs (persons who were QEPs irrespective of the Portfolio
Requirement and persons who were required to satisfy the Portfolio
Requirement to be QEPs) and under proposed Rule 4.7(a)(3) two
categories of persons were defined as QECs (persons who were QECs
irrespective of the Portfolio Requirement and persons who were required
to satisfy the Portfolio Requirement to be QECs). This
[[Page 47850]]
made for a total of four eligibility categories under Rule 4.7.\20\ By
employing solely the term ``qualified eligible person'' in Rule 4.7,
the Commission has reduced to two from four the categories of persons
defined under the rule: Persons who do not need to satisfy the
Portfolio Requirement to be qualified eligible persons (Rule 4.7(a)(2))
\21\ and persons who do need to satisfy the Portfolio Requirement to be
qualified eligible persons (Rule 4.7(a)(3)).\22\
---------------------------------------------------------------------------
\20\ See generally 65 FR at 11256-61 for persons who were
proposed to be QEPs and QECs irrespective of the Portfolio
Requirement and 65 FR at 11261-62 for persons who were proposed to
be QEPs and QECs if they satisfied the Portfolio Requirement.
\21\ As proposed, the Commission employed the phrase ``persons
who are QEPs or QECs irrespective of the Portfolio Requirement.'' As
adopted, the Commission is employing the phrase ``persons who do not
need to satisfy the Portfolio Requirement to be qualifying eligible
persons.'' This phrase is consistent with the other phrase employed
for eligibility status under Rule 4.7 applicable to ``persons who
must satisfy the Portfolio Requirement to be qualified eligible
persons.''
\22\ As a result of this reorganization, Rule 4.7(a)(3)(xi) now
defines a qualified eligible person as:
A pool, trust, insurance company separate account or bank
collective trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of either participating in the
exempt pool or opening an exempt account, and whose participation in
the exempt pool or investment in the exempt account is directed by a
qualified eligible person (emphasis added.)
Former Rule 4.7 included pools within the applicable QEP
definition but it did not include pools within the applicable QEC
definition. The Commission stated that this difference in
definitions was ``to ensure that pools generally, that is pools
whose participants are not all QEPs, continue to receive a
Disclosure Document from their CTAs.'' 57 FR at 34856. Upon
reconsideration, the Commission is now of the view that all pools
which meet the criteria of Rule 4.7(a)(3)(xi) should be defined as
qualified eligible persons. With respect to exempt accounts in
particular, this is because investment by a pool in an exempt
account must be directed by a qualified eligible person--who, as the
CPO of the pool and on behalf of the participants in the pool, will
direct the investment in the exempt account.
---------------------------------------------------------------------------
The Commission additionally has streamlined Rule 4.7 by combining
at one place, Rule 4.7(d), text applicable to the notice of claim for
exemption that must be made to claim the relief available under Rule
4.7. Under both the former rule and the Proposal, text applicable to
this notice was included at two places in Rule 4.7: After the relief
that CPOs could claim and after the relief that CTAs could claim.
Inasmuch as this text was virtually identical at both places, the
Commission has combined it into one location, Rule 4.7(d).
Finally, to assist CPOs and CTAs in their reading and application
of Rule 4.7, the Commission has adopted introductory text to the rule,
which explains the organization of Rule 4.7 as follows: Paragraph (a)
contains definitions for the purposes of Rule 4.7; paragraph (b)
contains the relief available to CPOs under Rule 4.7; paragraph (c)
contains the relief available to CTAs under Rule 4.7; paragraph (d)
concerns the Notice of Claim for Exemption under Rule 4.7; and
paragraph (e) concerns insignificant deviations from a term, condition
or requirement of Rule 4.7.
B. Clarification of the Term ``Non-United States Person''
Under the Proposal, the term ``Non-United States person'' would
have been defined at proposed Rule 4.7(a)(1)(iv).\23\ Similar to the
definition of the term ``Portfolio Requirement,'' the Commission did
not propose to change the definition but, rather, it proposed to change
its placement within the rule and to replace with the term ``Non-United
States person'' the former reference in the rule to ``a person that is
not a United States person.''
---------------------------------------------------------------------------
\23\ 65 FR at 11256 and n.32.
---------------------------------------------------------------------------
Under the Proposal, a Non-United States person would have been
defined to include, among other persons:
(D) An entity organized principally for passive investment such
as a pool, investment company or other similar entity; Provided,
That units of participation in the entity held by persons who do not
qualify as Non-United States persons represent in the aggregate less
than 10% of the beneficial interest in the entity, and that such
entity was not formed principally for the purpose of facilitating
investment by persons who do not qualify as Non-United States
persons in a pool with respect to which the operator is exempt from
certain requirements of Part 4 of the Commission's regulations by
virtue of its participants being Non-United States persons.
One of the commenters stated that it was unclear as to how, if at
all, persons who did not qualify as Non-United States persons but who
otherwise were QEPs should be counted for purposes of the 10%
limitation of this definition. This commenter contended that they
should not be counted because they were, after all, QEPs in their own
right.
The Commission agrees with this commenter, and has revised the rule
accordingly. Thus, as adopted, the ownership limitation of Rule
4.7(a)(1)(iv)(D) provides that ``units of participation in the entity
held by persons who do not qualify as Non-United States persons or
otherwise as qualified eligible persons represent in the aggregate less
than 10% of the beneficial interest in the entity'' (emphasis added).
C. The Reasonable Belief Standard
Because of the organization of the former rule, CPOs and CTAs were
required to have a ``reasonable belief'' that certain persons defined
in Rule 4.7 as QEPs and QECs, respectively were, in fact, QEPs and
QECs. Under the proposed reorganization of the rule, CPOs and CTAs
would have been required to have a ``reasonable belief'' that all
persons defined as QEPs and QECs, respectively, were, in fact, QEPs and
QECs. While the Commission stated that it did not believe that this
should impose any additional burdens on CPOs and CTAs, it nonetheless
requested comment on the proposed revision.\24\ The three persons who
commented on this proposed revision stated that they had no objection
to it. And, in response to one of those commenters, the Commission is
clarifying that CPOs and CTAs have latitude in determining how to
obtain a ``reasonable belief''--e.g., whether by statements from the
prospective participant or client, its agent, or other similar means.
Of course, what will establish a ``reasonable belief'' will depend on
the facts of each particular case.
---------------------------------------------------------------------------
\24\ 65 FR at 11257.
---------------------------------------------------------------------------
D. Transferees of Insiders, Agents Engaged by Insiders, and the Family
Members of Insiders as Qualified Eligible Persons
1. Transferees of Insiders as Qualified Eligible Persons
Under the Proposal, the QEP definition would have been expanded in
proposed Rule 4.7(a)(2)(i)(H) to include, in addition to the CPO or the
CTA of the exempt pool, the following persons: the investment adviser
of the exempt pool; an affiliate of the exempt pool, CPO, CTA or
investment adviser; a principal of these persons; certain employees of
these persons; and certain family members of these persons.\25\
Similarly, the QEC definition would have been expanded in proposed Rule
4.7(a)(3)(i)(B) to include the following persons: an affiliate of the
CTA of the exempt account; a principal of the CTA or the affiliate;
certain employees of these persons; and certain family members of these
persons.\26\ For the purposes of the discussion below, all of the
foregoing persons collectively are referred to as ``Insiders.''
---------------------------------------------------------------------------
\25\ 65 FR at 11259-61.
\26\ Id.
---------------------------------------------------------------------------
The Commission has adopted as proposed the provisions that would
define each of the Insiders as a qualified eligible person. Further, in
response to the comments received, the Commission
[[Page 47851]]
has included certain other persons as qualified eligible persons and
has expanded from the Proposal the availability of the qualified
eligible person definition to certain family members of Insiders.
For example, one of the commenters on the proposed addition of
Insiders to the QEP and QEC definitions suggested that the Commission
include in Rule 4.7 a provision allowing transfers of interests in a
Rule 4.7 exempt pool or exempt account from Insiders to other persons
by gift or bequest. This commenter stated that support for including
such a provision is found in rules under the ICA,\27\ which permit
transfers of interests in a Section 3(c)(1) or 3(c)(7) fund from a
knowledgeable employee or QP to another person under specified
situations. The Commission agrees with this suggestion and has adopted
it in Rule 4.7(a)(2)(viii), which provides that a qualified eligible
person includes the following: (1) Asny person who acquires a
participation in the exempt pool or an interest in the exempt account
by gift, bequest or pursuant to an agreement relating to a legal
separation or divorce from an Insider; (2) the estate of an Insider; or
(3) a company established by an Insider exclusively for the benefit of
(or owned exclusively by) the Insider and any other permitted
transferee. This language generally follows the provisions of Rule 3c-
6(b) under the ICA, which applies to transfers of interests in Section
3(c)(1) and (3)(c)(7) funds.
---------------------------------------------------------------------------
\27\ 17 CFR 270.3c-5 and 3c-6 (1999).
---------------------------------------------------------------------------
2. Agents Engaged by Insiders as Qualified Eligible Persons
Proposed Rule 4.7(a)(2)(i)(H)(4) would have included within the QEP
definition certain employees of the exempt pool, CPO, CTA, investment
adviser of the exempt pool, or affiliate thereof, and proposed Rule
4.7(a)(3)(i)(B)(4) would have included within the QEC definition
certain employees of the CTA of the exempt account or of an affiliate
of the CTA, provided that the employee: (1) Was an accredited investor
as defined in Rule 501(a)(5) or (a)(6) under the Securities Act of 1933
\28\ (``Accredited Investor''); and (2) had been employed by any of the
foregoing persons, or by another person engaged in providing commodity
interest, securities or other financial services, for at least 24
months. As the Commission explained, the purpose of these rules was in
furtherance of the intent of Rule 4.7: to reduce unnecessary regulatory
prescriptions for CPOs and CTAs with respect to persons who do not
appear to need the full protections offered by the Part 4
framework.\29\ The Commission has adopted this proposed definition and,
in response to a comment received, has additionally included certain
agents as qualified eligible persons under this rule.
---------------------------------------------------------------------------
\28\ 17 CFR 230.501(a)(5) or (a)(6)(1999), respectively.
\29\ 65 FR at 11260.
---------------------------------------------------------------------------
One of the commenters on the Proposal suggested that the Commission
consider including as QEPs and QECs certain attorneys and other persons
similarly engaged whose activities and degree of sophistication would
merit their being treated as QEPs and QECs. The Commission agrees with
this comment and has incorporated it in Rule 4.7. Specifically, Rule
4.7(a)(2)(viii)(A)(4) defines a qualified eligible person with respect
to an exempt pool as ``any other employee of, or an agent engaged to
perform legal, accounting, auditing or other financial services for,''
the exempt pool or the CPO, CTA or investment adviser of the exempt
pool, or for an affiliate of any of the foregoing, provided that the
employee or agent: (1) Is an Accredited Investor; and (2) has been
engaged by the exempt pool, CPO, CTA, investment adviser or affiliate,
or by another person engaged in providing commodity interest,
securities or other financial services, for at least 24 months.
Similarly, Rule 4.7(a)(2)(viii)(B)(4) defines a qualified eligible
person with respect to an exempt account as ``any other employee of, or
an agent engaged to perform legal, accounting, auditing or other
financial services for,'' the CTA of the exempt account, or for an
affiliate of the CTA, provided that the employee or agent: (1) Is an
Accredited Investor; and (2) has been engaged by the CTA or the
affiliate, or by another person engaged in providing commodity
interest, securities or other financial services, for at least 24
months. Consistent with the treatment of employees under Rule 4.7, this
definition excludes agents who perform solely clerical, secretarial or
administrative functions.
3. Restriction on Family Members of Insiders Being Qualified Eligible
Persons
Proposed Rule 4.7(a)(2)(i)(H)(5) would have included in the QEP
definition the spouse, child, sibling or parent of an Insider, provided
that an investment in the exempt pool by any such family member was
made with the knowledge and at the direction of the Insider.\30\
Proposed Rule 4.7(a)(3)(i)(B)(5) similarly would have included in the
QEC definition the spouse, child, sibling or parent of an Insider,
provided that the establishment of an exempt account by any such family
member was made with the knowledge and at the direction of the trading
advisor.\31\ The Commission received no comments on these criteria and,
accordingly, has adopted them as proposed in Rules
4.7(a)(2)(viii)(A)(5)(i) with respect to exempt pools and
4.7(a)(2)(viii)(B)(5)(i) with respect to exempt accounts.
---------------------------------------------------------------------------
\30\ Id.
\31\ Id.
---------------------------------------------------------------------------
The proposed rules also would have strictly limited the application
of the QEP and QEC definitions, such that these family members would
not have been QEPs or QECs for any other purposes of Rule 4.7--e.g.,
for the purpose of being a QEP settlor of a trust under proposed Rule
4.7(a)(2)(i)(I). The commenter on this proposed criterion stated that
it was unnecessarily opaque, and urged the Commission to treat these
family members as QEPs and QECs for all purposes of Rule 4.7. Upon
further reflection, the Commission agrees that the proposed limitation
may have been overly broad where the source of funds used for
participating in an exempt pool or investing in an exempt account was
one of the specified family members. Accordingly, Rules
4.7(a)(2)(viii)(A)(5)(ii) with respect to exempt pools and
(a)(2)(viii)(B)(5)(ii) with respect to exempt accounts provide that
these family members are qualified eligible persons except for the
purposes of paragraph (a)(3)(xi) of the rule. That paragraph provides
that certain collective investment vehicles, such as a pool, are
qualified eligible persons if, among other things, they satisfy the
Portfolio Requirement, have in excess of $5,000,000 in total assets and
their ``participation in the exempt pool or investment in the exempt
account is directed by a qualified eligible person.'' Because the
source of funds in a collective investment vehicle such as a pool will
always be either in addition to or other than from the family member,
the Commission has provided that the family member is not a qualified
eligible person for the purposes of Rule 4.7(a)(3)(xi).
E. Non-United States Persons as Qualified Eligible Persons for the
Purpose of Opening an Exempt Account With a CTA
Proposed Rule 4.7(a)(3)(i)(A)(2) would have defined Non-United
States persons as QECs, provided that the CTA who sought to direct or
guide the commodity interest trading account of the Non-United States
person: (1) Provided
[[Page 47852]]
commodity interest trading advice exclusively to persons who were QECs
(including persons who were Non-United States persons); and (2) had
filed a notice of claim for exemption under Rule 4.7. In the Proposing
Release, the Commission noted that a CTA who directs or guides the
accounts of United States persons who are not QECs would be subject to
the Disclosure Document requirements of Rules 4.31, 4.34, 4.35 and 4.36
and the recordkeeping requirements of Rule 4.33. Accordingly, the
Commission reasoned that requiring the CTA to comply with requirements
to which it already would be subject would not impose any additional
burden on the CTA with respect to clients who are Non-United States
persons.\32\
---------------------------------------------------------------------------
\32\ 65 FR at 11261.
---------------------------------------------------------------------------
Four persons commented on this proposed provision. While they
generally expressed support for expanding the QEC definition to include
Non-United States persons, they objected to the proposed limitation on
permitting CTAs to claim relief under Rule 4.7 where the CTA has both
United States and Non-United States persons as clients. Commenters
disagreed with the Commission's argument that this framework would not
impose any additional burdens on these CTAs because they would already
be subject to disclosure and recordkeeping requirements with regard to
their (other) Non-QEC clients. One of these commenters further stated
that while this may be true where the trading programs and solicitation
documents are substantially the same, this frequently will impose a
significant burden on CTAs where the trading programs and solicitation
documents are different--thereby requiring significant additional work
for the CTA in what is likely to be a very different context. In
support of permitting CTAs to treat Non-United States persons as QECs
without limitation, commenters noted that a CTA soliciting Non-United
States persons is subject to the requirements of applicable foreign
law, including any mandatory disclosure requirements. On the whole,
then, the commenters on this proposed provision saw no reason why the
Commission should treat Non-United States persons differently for the
purpose of participating in an exempt pool or opening an exempt
account.
Based upon the comments received, and in light of the increasing
globalization of the futures markets and competitiveness concerns, the
Commission has decided not to adopt the proposed limitation. Thus, Rule
4.7(a)(2)(xi) defines a Non-United States person as a qualified
eligible person, without regard to whether the Non-United States person
is seeking to participate in an exempt pool or to open an exempt
account.\33\
---------------------------------------------------------------------------
\33\ CTAs claiming relief under Rule 4.7 are nonetheless
required under paagraph (c)(1)(i) of the rule to display a
prescribed disclaimer statement on the cover page of any brochure or
other disclosure statement they provide to prospective clients or,
if none is provided, immediately above the signature line of the
agreement the client must execute before it opens an account. CPOs
claiming relief under Rule 4.7 are subject to a similar requirement
under paragraph (b)(1)(i).
---------------------------------------------------------------------------
III. QPs and Knowledgeable Employees as Qualified Eligible Persons
By the Proposal the Commission proposed to add QPs and
knowledgeable employees to the QEP and QEC definitions, \34\ and by the
Revision the Commission has included QPs and knowledgeable employees in
the qualified eligible person definition. As the Commission stated in
the Proposing Release:
---------------------------------------------------------------------------
\34\ 65 FR at 11258-59.
The Commission intends to follow interpretations issued by the
SEC and its staff of the QP and knowledgeable employee definitions.
The Commission has the right further to interpret or to amend Rule
4.7 to exclude from the [qualified eligible person definition] any
person that the SEC or its staff found to be a QP or knowledgeable
employee or to include in the [qualified eligible person definition]
any person the SEC or its staff excluded from the QP or
knowledgeable employee definition, if such action is found to be
necessary to effectuate the purposes of the Act and the Commission's
regulations. The Commission expects that it would exercise this
right infrequently.\35\
---------------------------------------------------------------------------
\35\ 65 FR at 11259 (footnote omitted).
---------------------------------------------------------------------------
In particular, the Commission noted that in April of 1999, staff of
the SEC's Division of Investment Management responded to a series of
inquiries from the Subcommittee on Private Investment Entities of the
Federal Regulation of Securities Committee, Section of Business Law of
the American Bar Association concerning the scope of both the qualified
purchaser and knowledgeable employee definitions.\36\ As stated in the
SEC staff's letter:
---------------------------------------------------------------------------
\36\ American Bar Ass'n [Current Transfer Binder] Fed. Sec. L.
Rep. (CCH) para. 77,548 (Apr. 22, 1999).
Whether an employee actively participates in the investment
activities of a Fund is a factual determination that must be made on
a case-by-case basis by the Fund. Nevertheless, as a general matter,
with the possible exception of some research analysts (e.g., a
research analyst who researches all potential portfolio investments
and provides recommendations to the portfolio manager), we believe
that the types of employees described * * * [i.e., certain marketing
and investor relations professionals, research analysts, attorneys,
brokers, traders and financial, compliance, operational and
accounting officers of a fund] would not qualify as knowledgeable
employees under Rule 3c-5.\37\
---------------------------------------------------------------------------
\37\ Id. at 78,746 (footnote omitted).
IV. Distribution and Derivation Tables
The following distribution table indicates where the provisions of
former Rule 4.7 can be found in revised Rule 4.7 and the derivation
table indicates where the provisions of revised Rule 4.7 can be found
in former Rule 4.7. The derivation table indicates by ``--'' any
provision in the revised rule that is not derived from the former rule
(i.e., it is an entirely new provision). To avoid what otherwise would
be a very lengthy presentation, as appropriate each table groups
together certain paragraphs.
A. Distribution Table
----------------------------------------------------------------------------------------------------------------
Former rule 4.7 Revised rule 4.7
----------------------------------------------------------------------------------------------------------------
(a)(1)........................... (a)(1)
(a)(1)(i)........................ (a)(1)(iii)
(a)(1)(ii)(A).................... (a)(2)
(a)(1)(ii)(A)(1)-(4)............. a)(2)(i)-(iv)
(a)(1)(ii)(A)(5)................. (a)(2)(viii)(A)(1)
(a)(1)(ii)(B)(1)................. (a)(1)(v)
(a)(1)(ii)(B)(2)(i)-(xii)........ (a)(3)(i)-(xii)
(a)(1)(ii)(C).................... (a)(1)(iv); (a)(1)(vi); (a)(2)(xi)
(a)(1)(ii)(D).................... (a)(1)(xii)(A)
(a)(2)........................... (b)
(a)(3)........................... (d)
[[Page 47853]]
(b)(1)........................... (a)(1)
(b)(1)(i)........................ (a)(1)(ii)
(b)(1)(ii)(A).................... (a)(2)(i)-(iv)
(b)(1)(ii)(B)(1 )................ (a)(1)(v)
(b)(1)(ii)(B)(2 )(i )-(xii)...... (a)(3)(i)-(xii)
(b)(1)(ii)(C).................... (a)(2)(xii)(B)
(b)(1)(ii)(D).................... (a)(2)(xii)(A)
(b)(1)(ii)(E).................... (a)(2)(xii)(C)
(b)(2)........................... (c)
(b)(3)........................... (d)
(c).............................. (e)
----------------------------------------------------------------------------------------------------------------
B. Derivation Table
----------------------------------------------------------------------------------------------------------------
Revised rule 4.7 Former rule 4.7
----------------------------------------------------------------------------------------------------------------
(a).............................. (a)(1)
(a)(1)........................... - -
(a)(1)(i)........................ - -
(a)(1)(ii)....................... (b)(1)(i)
(a)(1)(iii)...................... (a)(1)(i)
(a)(1)(iv)....................... (a)(1)(ii)(C)
(a)(1)(v)........................ (a)(1)(ii)(b)(1); (b)(1)(ii)(B)(1)
(a)(1)(vi)....................... (a)(1)(ii)(C)
(a)(2)........................... (a)(1)(ii)(A); (b)(1)(ii)(A)
(a)(2)(i)-(iv)................... (a)(1)(ii)(A)(1)-(4); (b)(1)(ii)(A)
(a)(2)(v)-(vii).................. - -
(a)(2)(viii)(A)(1)............... (a)(1)(ii)(A)(5)
(a)(2)(viii)(A)(2)-(6)........... - -
(a)(2)(viii)(B).................. - -
(a)(2)(ix)-(x)................... - -
(a)(2)(xi)....................... (a)(1)(ii)(C)
(a)(2)(xii)(A)................... (a)(1)(ii)(D); (b)(1)(ii)(D)
(a)(2)(xii)(B)................... (b)(1)(ii)(C)
(a)(2)(xii)(C)................... (b)(1)(ii)(E)
(a)(3)........................... (a)(1)(ii)(B)(2); (b)(1)(ii)(B)(2)
(a)(3)(i)-(xii).................. (a)(1)(ii)(B)(2)(i)-(xii); (b)(1)(ii)(B)(2)(i)-(xii)
(b).............................. (a)(2)
(c).............................. (b)(2)
(d).............................. (a)(3); (b)(3)
(e).............................. (c)
----------------------------------------------------------------------------------------------------------------
V. Technical Revisions to Rules 30.6(b), 140.99(i)(A) and
180.3(b)(2)
A. Rule 30.6(b)
Part 30 of the Commission's rules governs the offer and sale of
foreign futures and foreign options contracts to persons located in the
United States. Rule 30.6 sets forth the disclosure requirements that
apply to domestic and foreign persons who are registered or required to
be registered under Part 30 or who have obtained an exemption from such
registration under Rule 30.5. Specifically, Rule 30.6(b) sets forth
those requirements with respect to CPOs and CTAs, differentiating
between disclosures applicable in the context of participants and
clients, respectively, who meet the requirements of Rule 4.7 (Rule
30.6(b)(1)) and those who do not (Rule 30.6(b)(2)).
As discussed above, under the Revision persons who formerly were
termed ``qualified eligible participants'' or ``qualified eligible
clients'' are now all termed ``qualified eligible persons'' and the
provisions of Rule 4.7 have been reorganized. The Commission
accordingly has conformed the nomenclature of Rule 30.6(b) to that of
revised Rule 4.7.
B. Rule 140.99(i)(A)
Rule 140.99 governs requests for exemptive, no-action and
interpretative letters. Among other things, it sets forth the
procedures that an applicant must follow in making a request for a
letter. Paragraph (i)(A) makes clear that Rule 140.99 does not affect
the requirements of, or is otherwise applicable to, notice filings
required to be made to claim relief from the Act or from a Commission
rule--e.g., pursuant to Rule 4.7.
As stated above, all claims for relief under Rule 4.7 are now found
in paragraph (d) of the rule. Accordingly, the Commission has revised
Rule 140.99(i)(A) such that it similarly refers to Rule 4.7(d).
C. Rule 180.3(b)(2)
Part 180 of the Commission's rules governs arbitration or other
dispute settlement procedures. Rule 180.3(b)(2) concerns the signing of
a pre-dispute arbitration agreement and certain endorsement procedures
that may be followed by certain persons. The Commission similarly has
conformed the nomenclature of Rule 180.3(b)(2)(vi) so that it now
refers to ``A person who is a `qualified eligible person' under
Sec. 4.7(a) of this chapter.'' \38\
---------------------------------------------------------------------------
\38\ This action is consistent with the Commission's recent
regulatory reform proposals, which, among other things, would
provide in new Rule 166.5 for the use of pre-dispute arbitration
agreements for certain customer claims and grievances and which
``expands the use of the `single-signature format' for account
opening agreements to include * * * `qualified eligible clients' as
defined in Rule 4.7.'' 65 FR 39008, 39016 n. 31 (June 22, 2000). As
footnote 31 sates, the Commission has proposed to delete Part 180 in
its entirety. If the Commission adopts these regulatory reform
proposals, references in Rule 166.5 solely will be to ``qualified
eligible persons.''
---------------------------------------------------------------------------
[[Page 47854]]
VI. Related Matters
A. Paperwork Reduction Act
Rule 4.7 affects information collection requirements. As required
by the Paperwork Reduction Act of 1995, the Commission has submitted a
copy of this Rule 4.7 to the Office of Management and Budget (OMB) for
its review.\39\ The Commission did not receive any comments on any
potential paperwork burden associated with the Proposal.
---------------------------------------------------------------------------
\39\ 44 U.S.C. 3507(d) (Supp. I 1995).
---------------------------------------------------------------------------
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \40\ requires each federal
agency to consider the impact of proposed rules on small entities. The
Commission previously has established certain definitions of ``small
entities'' to be used by the Commission in evaluating the impact of its
rules on such small entities in accordance with the RFA.\41\ The
Commission has determined that registered CPOs are not small entities
for the purposes of the RFA.\42\ With respect to CTAs, the Commission
has stated that it would evaluate within the context of a particular
rule proposal whether all or some affected CTAs should be considered to
be small entities and, if so, that it would analyze the economic impact
on them of any rule.\43\
---------------------------------------------------------------------------
\40\ 5 U.S.C. 601 et seq. (1994 & Supp. II 1996).
\41\ 47 FR 18618 (Apr. 30, 1982).
\42\ Id. at 18619-20.
\43\ Id. at 18620.
---------------------------------------------------------------------------
Rule 4.7 reduces the regulatory burdens on registered CPOs and CTAs
by providing exemptive relief from the disclosure, reporting and
recordkeeping requirements that are otherwise applicable to these
registrants. As revised, Rule 4.7 makes this relief available to more
CPOs and CTAs and under more situations. This expanded relief,
moreover, is available to all CPOs and CTAs, regardless of size.
C. Administrative Procedure Act
The Administrative Procedure Act provides that the required
publication of a substantive rule shall be made not less than 30 days
before its effective date, but provides an exception for ``a
substantive rule which grants or recognizes an exemption or relieves a
restriction.'' \44\ Rule 4.7 makes available an exemption from certain
Part 4 requirements for CPOs who operate commodity pools consisting of
qualified eligible persons and for CTAs who direct or guide the
commodity interest trading accounts of qualified eligible persons.
Accordingly, the Commission has determined to make the proposed
amendments to Rule 4.7 effective immediately.
---------------------------------------------------------------------------
\44\ 5 U.S.C. 553(d) (1994).
---------------------------------------------------------------------------
List of Subjects
17 CFR Part 4
Advertising, Commodity futures, Commodity pool operators, Commodity
trading advisors, Consumer protection, Reporting and recordkeeping
requirements.
17 CFR Part 30
Definitions, Foreign futures, Foreign options, Reporting and
recordkeeping requirements, Registration requirements, Risk disclosure
statements, Treatment of foreign futures and options secured amount,
Customer protection.
17 CFR Part 140
Authority delegations (Government agencies), Organization and
functions (Government agencies).
17 CFR Part 180
Arbitration or other dispute settlement procedures, Consumer
protection.
In consideration of the foregoing, and pursuant to the authority
contained in the Commodity Exchange Act, and in particular, sections
1a(4), 1a(5), 4b, 4l, 4m, 4n, 4o and 8a, 7 U.S.C. 1a, 6b, 6l, 6m, 6n,
6o and 12a, the Commission hereby amends Parts 4, 30, 140 and 180 of
Chapter I of Title 17 of the Code of Federal Regulations as follows:
PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS
Subpart A--General Provisions, Definitions and Exemptions
1. The authority citation for part 4 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4, 6b, 6c, 6l, 6m, 6n, 6o, 12a, and
23.
2. Section 4.7 is revised 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.
This section is organized as follows: Paragraph (a) contains
definitions for the purposes of Sec. 4.7; paragraph (b) contains the
relief available to commodity pool operators under Sec. 4.7; paragraph
(c) contains the relief available to commodity trading advisors under
Sec. 4.7; paragraph (d) concerns the Notice of Claim for Exemption
under Sec. 4.7; and paragraph (e) addresses the effect of an
insignificant deviation from a term, condition or requirement of
Sec. 4.7.
(a) Definitions. Paragraph (a)(1) of this section contains general
definitions, paragraph (a)(2) of this section contains the definition
of the term qualified eligible person with respect to those persons who
do not need to satisfy the Portfolio Requirement and paragraph (a)(3)
of this section contains the definition of the term qualified eligible
person with respect to those persons who must satisfy the Portfolio
Requirement. For the purposes of this section:
(1) In general.
(i) Affiliate of, or a person affiliated with, a specified person
means a person that directly or indirectly through one or more persons,
controls, is controlled by, or is under common control with the
specified person.
(ii) Exempt account means the account of a qualified eligible
person that is directed or guided by a commodity trading advisor
pursuant to an effective claim for exemption under Sec. 4.7.
(iii) Exempt pool means a pool that is operated pursuant to an
effective claim for exemption under Sec. 4.7.
(iv) Non-United States person means:
(A) A natural person who is not a resident of the United States;
(B) A partnership, corporation or other entity, other than an
entity organized principally for passive investment, organized under
the laws of a foreign jurisdiction and which has its principal place of
business in a foreign jurisdiction;
(C) An estate or trust, the income of which is not subject to
United States income tax regardless of source;
(D) An entity organized principally for passive investment such as
a pool, investment company or other similar entity; Provided, That
units of participation in the entity held by persons who do not qualify
as Non-United States persons or otherwise as qualified eligible persons
represent in the aggregate less than 10% of the beneficial interest in
the entity, and that such entity was not formed principally for the
purpose of facilitating investment by persons who do not qualify as
Non-United States persons in a pool with respect to which the operator
is exempt from certain
[[Page 47855]]
requirements of Part 4 of the Commission's regulations by virtue of its
participants being Non-United States persons; and
(E) A pension plan for the employees, officers or principals of an
entity organized and with its principal place of business outside the
United States.
(v) Portfolio Requirement means that a person:
(A) Owns securities (including pool participations) of issuers not
affiliated with such person and other investments with an aggregate
market value of at least $2,000,000;
(B) Has had on deposit with a futures commission merchant, for its
own account at any time during the six-month period preceding either
the date of sale to that person of a pool participation in the exempt
pool or the date that the person opens an exempt account with the
commodity trading advisor, at least $200,000 in exchange-specified
initial margin and option premiums for commodity interest transactions;
or
(C) Owns a portfolio comprised of a combination of the funds or
property specified in paragraphs (a)(1)(v)(A) and (B) of this section
in which the sum of the funds or property includable under paragraph
(a)(1)(v)(A), expressed as a percentage of the minimum amount required
thereunder, and the amount of futures margin and option premiums
includable under paragraph (a)(1)(v)(B), expressed as a percentage of
the minimum amount required thereunder, equals at least one hundred
percent. An example of a composite portfolio acceptable under this
paragraph (a)(1)(v)(C) would consist of $1,000,000 in securities and
other property (50% of paragraph (a)(1)(v)(A)) and $100,000 in
exchange-specified initial margin and option premiums (50% of paragraph
(a)(1)(v)(B)).
(vi) United States means the United States, its states, territories
or possessions, or an enclave of the United States government, its
agencies or instrumentalities.
(2) Persons who do not need to satisfy the Portfolio Requirement to
be qualified eligible persons. Qualified eligible person means any
person, acting for its own account or for the account of a qualified
eligible person, who the commodity pool operator reasonably believes,
at the time of the sale to that person of a pool participation in the
exempt pool, or who the commodity trading advisor reasonably believes,
at the time that person opens an exempt account, is:
(i) A futures commission merchant registered pursuant to section 4d
of the Act, or a principal thereof;
(ii) A broker or dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934, or a principal thereof;
(iii) A commodity pool operator registered pursuant to section 4m
of the Act, or a principal thereof; Provided, That the pool operator:
(A) Has been registered and active as such for two years; or
(B) Operates pools which, in the aggregate, have total assets in
excess of $5,000,000;
(iv) A commodity trading advisor registered pursuant to section 4m
of the Act, or a principal thereof; Provided, That the trading advisor:
(A) Has been registered and active as such for two years; or
(B) Provides commodity interest trading advice to commodity
accounts which, in the aggregate, have total assets in excess of
$5,000,000 deposited at one or more futures commission merchants;
(v) An investment adviser registered pursuant to section 203 of the
Investment Advisers Act of 1940 (``Investment Advisers Act'') or
pursuant to the laws of any state, or a principal thereof; Provided,
That the investment adviser:
(A) Has been registered and active as such for two years; or
(B) Provides securities investment advice to securities accounts
which, in the aggregate, have total assets in excess of $5,000,000
deposited at one or more registered securities brokers;
(vi) A ``qualified purchaser'' as defined in section 2(51)(A) of
the Investment Company Act of 1940 (the ``Investment Company Act'');
(vii) A ``knowledgeable employee'' as defined in Sec. 270.3c-5 of
this title;
(viii)(A) With respect to an exempt pool:
(1) The commodity pool operator, commodity trading advisor or
investment adviser of the exempt pool offered or sold, or an affiliate
of any of the foregoing;
(2) A principal of the exempt pool or the commodity pool operator,
commodity trading advisor or investment adviser of the exempt pool, or
of an affiliate of any of the foregoing;
(3) An employee of the exempt pool or the commodity pool operator,
commodity trading advisor or investment adviser of the exempt pool, or
of an affiliate of any of the foregoing (other than an employee
performing solely clerical, secretarial or administrative functions
with regard to such person or its investments) who, in connection with
his or her regular functions or duties, participates in the investment
activities of the exempt pool, other commodity pools operated by the
pool operator of the exempt pool or other accounts advised by the
trading advisor or the investment adviser of the exempt pool, or by the
affiliate; Provided, That such employee has been performing such
functions and duties for or on behalf of the exempt pool, pool
operator, trading advisor, investment adviser or affiliate, or
substantially similar functions or duties for or on behalf of another
person engaged in providing commodity interest, securities or other
financial services, for at least 12 months;
(4) Any other employee of, or an agent engaged to perform legal,
accounting, auditing or other financial services for, the exempt pool
or the commodity pool operator, commodity trading advisor or investment
adviser of the exempt pool, or any other employee of, or agent so
engaged by, an affiliate of any of the foregoing (other than an
employee or agent performing solely clerical, secretarial or
administrative functions with regard to such person or its
investments); Provided, That such employee or agent:
(i) Is an accredited investor as defined in Sec. 230.501(a)(5) or
(6) of this title; and
(ii) Has been employed or engaged by the exempt pool, commodity
pool operator, commodity trading advisor, investment adviser or
affiliate, or by another person engaged in providing commodity
interest, securities or other financial services, for at least 24
months;
(5) The spouse, child, sibling or parent of a person who satisfies
the criteria of paragraph (a)(2)(viii)(A)(1), (2), (3) or (4) of this
section; Provided, That:
(i) An investment in the exempt pool by any such family member is
made with the knowledge and at the direction of the person; and
(ii) The family member is not a qualified eligible person for the
purposes of paragraph (a)(3)(xi) of this section;
(6)(i) Any person who acquires a participation in the exempt pool
by gift, bequest or pursuant to an agreement relating to a legal
separation or divorce from a person listed in paragraph
(a)(2)(viii)(A)(1), (2), (3), (4) or (5) of this section;
(ii) The estate of any person listed in paragraph
(a)(2)(viii)(A)(1), (2), (3), (4) or (5) of this section; or
(iii) A company established by any person listed in paragraph
(a)(2)(viii)(A)(1), (2), (3), (4) or (5) of this section exclusively
for the benefit of (or owned exclusively by) that person and any person
listed in paragraph (a)(2)(viii)(A)(6)(i) or (ii) of this section;
[[Page 47856]]
(B) With respect to an exempt account:
(1) An affiliate of the commodity trading advisor of the exempt
account;
(2) A principal of the commodity trading advisor of the exempt
account or of an affiliate of the trading advisor;
(3) An employee of the commodity trading advisor of the exempt
account or of an affiliate of the trading advisor (other than an
employee performing solely clerical, secretarial or administrative
functions with regard to such person or its investments) who, in
connection with his or her regular functions or duties, participates in
the investment activities of the trading advisor or the affiliate;
Provided, That such employee has been performing such functions and
duties for or on behalf of the trading advisor or the affiliate, or
substantially similar functions or duties for or on behalf of another
person engaged in providing commodity interest, securities or other
financial services, for at least 12 months;
(4) Any other employee of, or an agent engaged to perform legal,
accounting, auditing or other financial services for, the commodity
trading advisor of the exempt account or any other employee of, or
agent so engaged by, an affiliate of the trading advisor (other than an
employee or agent performing solely clerical, secretarial or
administrative functions with regard to such person or its
investments); Provided, That such employee or agent:
(i) Is an accredited investor as defined in Sec. 230.501(a)(5) or
(a)(6) of this title; and
(ii) Has been employed or engaged by the commodity trading advisor
or the affiliate, or by another person engaged in providing commodity
interest, securities or other financial services, for at least 24
months; or
(5) The spouse, child, sibling or parent of the commodity trading
advisor of the exempt account or of a person who satisfies the criteria
of paragraph (a)(2)(viii)(B)(1), (2), (3) or (4) of this section;
Provided, That:
(i) The establishment of an exempt account by any such family
member is made with the knowledge and at the direction of the person;
and
(ii) The family member is not a qualified eligible person for the
purposes of paragraph (a)(3)(xi) of this section;
(6)(i) Any person who acquires an interest in an exempt account by
gift, bequest or pursuant to an agreement relating to a legal
separation or divorce from a person listed in paragraph
(a)(2)(viii)(B)(1), (2), (3), (4) or (5) of this section;
(ii) The estate of any person listed in paragraph
(a)(2)(viii)(B)(1), (2), (3), (4) or (5) of this section; or
(iii) A company established by any person listed in paragraph
(a)(2)(viii)(B)(1), (2), (3), (4) or (5) of this section exclusively
for the benefit of (or owned exclusively by) that person and any person
listed in paragraph (a)(2)(viii)(B)(6)(i) or (ii) of this section;
(ix) A trust; Provided, That:
(A) The trust was not formed for the specific purpose of either
participating in the exempt pool or opening an exempt account; and
(B) The trustee or other person authorized to make investment
decisions with respect to the trust, and each settlor or other person
who has contributed assets to the trust, is a qualified eligible
person;
(x) An organization described in section 501(c)(3) of the Internal
Revenue Code (the ``IRC''); Provided, That the trustee or other person
authorized to make investment decisions with respect to the
organization, and the person who has established the organization, is a
qualified eligible person;
(xi) A Non-United States person;
(xii)(A) An entity in which all of the unit owners or participants,
other than the commodity trading advisor claiming relief under this
section, are qualified eligible persons;
(B) An exempt pool; or
(C) Notwithstanding paragraph (a)(3) of this section, an entity as
to which a notice of eligibility has been filed pursuant to Sec. 4.5
which is operated in accordance with such rule and in which all unit
owners or participants, other than the commodity trading advisor
claiming relief under this section, are qualified eligible persons.
(3) Persons who must satisfy the Portfolio Requirement to be
qualified eligible persons. Qualified eligible person means any person
who the commodity pool operator reasonably believes, at the time of the
sale to that person of a pool participation in the exempt pool, or any
person who the commodity trading advisor reasonably believes, at the
time that person opens an exempt account, satisfies the Portfolio
Requirement and is:
(i) An investment company registered under the Investment Company
Act or a business development company as defined in section 2(a)(48) of
such Act not formed for the specific purpose of either investing in the
exempt pool or opening an exempt account;
(ii) A bank as defined in section 3(a)(2) of the Securities Act of
1933 (the ``Securities Act'') or any savings and loan association or
other institution as defined in section 3(a)(5)(A) of the Securities
Act acting for its own account or for the account of a qualified
eligible person;
(iii) An insurance company as defined in section 2(13) of the
Securities Act acting for its own account or for the account of a
qualified eligible person;
(iv) A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000;
(v) An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974; Provided, That the investment
decision is made by a plan fiduciary, as defined in section 3(21) of
such Act, which is a bank, savings and loan association, insurance
company, or registered investment adviser; or that the employee benefit
plan has total assets in excess of $5,000,000; or, if the plan is self-
directed, that investment decisions are made solely by persons that are
qualified eligible persons;
(vi) A private business development company as defined in section
202(a)(22) of the Investment Advisers Act;
(vii) An organization described in section 501(c)(3) of the IRC,
with total assets in excess of $5,000,000;
(viii) A corporation, Massachusetts or similar business trust, or
partnership, other than a pool, which has total assets in excess of
$5,000,000, and is not formed for the specific purpose of either
participating in the exempt pool or opening an exempt account;
(ix) A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of either his purchase in
the exempt pool or his opening of an exempt account exceeds $1,000,000;
(x) A natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year;
(xi) A pool, trust, insurance company separate account or bank
collective trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of either participating in the exempt pool or
opening an exempt account, and whose participation in the exempt pool
or investment in the exempt account is directed by a qualified eligible
person; or
(xii) Except as provided for the governmental entities referenced
in paragraph (a)(3)(iv) of this section, if
[[Page 47857]]
otherwise authorized by law to engage in such transactions, a
governmental entity (including the United States, a state, or a foreign
government) or political subdivision thereof, or a multinational or
supranational entity or an instrumentality, agency, or department of
any of the foregoing.
(b) Relief available to commodity pool operators. Upon filing the
notice required by paragraph (d) of this section, and subject to
compliance with the conditions specified in paragraph (d) of this
section, any registered commodity pool operator who offers or sells
participations in a pool solely to qualified eligible persons in an
offering which qualifies for exemption from the registration
requirements of the Securities Act pursuant to section 4(2) of that Act
or pursuant to Regulation S, 17 CFR 230.901 et seq., and any bank
registered as a commodity pool operator in connection with a pool that
is a collective trust fund whose securities are exempt from
registration under the Securities Act pursuant to section 3(a)(2) of
that Act and are offered or sold, without marketing to the public,
solely to qualified eligible persons, may claim any or all of the
following relief with respect to such pool:
(1) Disclosure relief. (i) Exemption from the specific requirements
of Secs. 4.21, 4.24, 4.25 and 4.26 with respect to each exempt pool;
Provided, That if an offering memorandum is distributed in connection
with soliciting prospective participants in the exempt pool, such
offering memorandum must include all disclosures necessary to make the
information contained therein, in the context in which it is furnished,
not misleading; and that the following statement is prominently
disclosed on the cover page of the offering memorandum, or, if none is
provided, immediately above the signature line on the subscription
agreement or other document that the prospective participant must
execute to become a participant in the pool:
``PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING
COMMISSION IN CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED
TO QUALIFIED ELIGIBLE PERSONS, AN OFFERING MEMORANDUM FOR THIS POOL
IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION.
THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE
MERITS OF PARTICIPATING IN A POOL OR UPON THE ADEQUACY OR ACCURACY
OF AN OFFERING MEMORANDUM. CONSEQUENTLY, THE COMMODITY FUTURES
TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS OFFERING OR ANY
OFFERING MEMORANDUM FOR THIS POOL.''
(ii) Exemption from disclosing the past performance of exempt pools
in the Disclosure Document of non-exempt pools except to the extent
that such past performance is material to the non-exempt pool being
offered; Provided, That a pool operator that has claimed exemption
hereunder and elects not to disclose any such performance in the
Disclosure Document of non-exempt pools shall state in a footnote to
the performance disclosure therein that the operator is operating or
has operated exempt pools whose performance is not disclosed in this
Disclosure Document.
(2) Periodic reporting relief. Exemption from the specific
requirements of Secs. 4.22(a) and (b); Provided, That a statement
signed and affirmed in accordance with Sec. 4.22(h) is prepared and
distributed to pool participants no less frequently than quarterly
within 30 calendar days after the end of the reporting period. This
statement must indicate:
(i) The net asset value of the exempt pool as of the end of the
reporting period;
(ii) The change in net asset value from the end of the previous
reporting period; and
(iii) The net asset value per outstanding unit of participation in
the exempt pool as of the end of the reporting period.
(3) Annual report relief. (i) Exemption from the specific
requirements of Secs. 4.22(c) and (d); Provided, That within 90
calendar days after the end of the exempt pool's fiscal year, the
commodity pool operator files with the Commission and 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, signed and affirmed in accordance
with Sec. 4.22(h) which contains, at a minimum:
(A) A Statement of Financial Condition as of the close of the
exempt pool's fiscal year (elected in accordance with Sec. 4.22(g));
(B) A Statement of Income (Loss) for that year; and
(C) Appropriate footnote disclosure and any other material
information.
(ii) Such annual report must be presented and computed in
accordance with generally accepted accounting principles consistently
applied and, if certified by an independent public accountant, so
certified in accordance with Sec. 1.16 as applicable.
(iii) Legend. (A) If a claim for exemption has been made pursuant
to this section, the commodity pool operator must make a statement to
that effect on the cover page of each annual report.
(B) If the annual report is not certified in accordance with
Sec. 1.16, the pool operator must make a statement to that effect on
the cover page of each annual report and state that a certified audit
will be provided upon the request of the holders of a majority of the
units of participation in the pool who are unaffiliated with the
commodity pool operator.
(4) Recordkeeping relief. Exemption from the specific requirements
of Sec. 4.23; Provided, That the commodity pool operator must maintain
the reports referred to in paragraphs (b)(2) and (b)(3) of this section
and all books and records prepared in connection with his activities as
the pool operator of the exempt pool (including, without limitation,
records relating to the qualifications of qualified eligible persons
and substantiating any performance representations) at his main
business address and must make such books and records available to any
representative of the Commission, the National Futures Association and
the United States Department of Justice in accordance with the
provisions of Sec. 1.31.
(c) Relief available to commodity trading advisors. Upon filing the
notice required by paragraph (d) of this section, and subject to
compliance with the conditions specified in paragraph (d) of this
section, any registered commodity trading advisor who anticipates
directing or guiding the commodity interest accounts of qualified
eligible persons may claim any or all of the following relief with
respect to the accounts of qualified eligible persons who have given
due consent to their account being an exempt account under Sec. 4.7:
(1) Disclosure relief. (i) Exemption from the specific requirements
of Secs. 4.31, 4.34, 4.35 and 4.36; Provided, That if the commodity
trading advisor delivers a brochure or other disclosure statement to
such qualified eligible persons, such brochure or statement shall
include all additional disclosures necessary to make the information
contained therein, in the context in which it is furnished, not
misleading; and that the following statement is prominently displayed
on the cover page of the brochure or statement or, if none is provided,
immediately above the signature line of the agreement that the client
must execute before it opens an account with the commodity trading
advisor:
[[Page 47858]]
``PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING
COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE
PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE,
AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES
TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN
A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY
TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES
TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM
OR THIS BROCHURE OR ACCOUNT DOCUMENT.''
(ii) Exemption from disclosing the past performance of exempt
accounts in the Disclosure Document for non-exempt accounts except to
the extent that such past performance is material to the non-exempt
account being offered; Provided, That a commodity trading advisor that
has claimed exemption hereunder and elects not to disclose any such
performance in the Disclosure Document for non-exempt accounts shall
state in a footnote to the performance disclosure therein that the
advisor is advising or has advised exempt accounts for qualified
eligible persons whose performance is not disclosed in this Disclosure
Document.
(2) Recordkeeping relief. Exemption from the specific requirements
of Sec. 4.33; Provided, That the commodity trading advisor must
maintain, at its main business office, all books and records prepared
in connection with his activities as the commodity trading advisor of
qualified eligible persons (including, without limitation, records
relating to the qualifications of such qualified eligible persons and
substantiating any performance representations) and must make such
books and records available to any representative of the Commission,
the National Futures Association and the United States Department of
Justice in accordance with the provisions of Sec. 1.31.
(d) Notice of claim for exemption.
(1) A notice of a claim for exemption under this section must:
(i) Be in writing;
(ii) Provide the name, main business address, main business
telephone number and the National Futures Association commodity pool
operator or commodity trading advisor identification number of the
person claiming the exemption;
(iii)(A) Where the claimant is a commodity pool operator, provide
the name(s) of the pool(s) for which the request is made; Provided,
That a single notice representing that the pool operator anticipates
operating single-investor pools may be filed to claim exemption for
single-investor pools and such notice need not name each such pool;
(B) Where the claimant is a commodity trading advisor, contain a
representation that the trading advisor anticipates providing commodity
interest trading advice to qualified eligible persons;
(iv) Contain representations that:
(A) Neither the commodity pool operator or commodity trading
advisor nor any of its principals is subject to any statutory
disqualification under section 8a(2) or 8a(3) of the Act unless such
disqualification arises from a matter which was previously disclosed in
connection with a previous application for registration if such
registration was granted or which was disclosed more than thirty days
prior to the filing of the notice under this paragraph (d);
(B) The commodity pool operator or commodity trading advisor will
comply with the applicable requirements of Sec. 4.7; and
(C) Where the claimant is a commodity pool operator, that the
exempt pool will be offered and operated in compliance with the
applicable requirements of Sec. 4.7;
(v) Specify the relief claimed under Sec. 4.7;
(vi) Where the claimant is a commodity pool operator, state the
closing date of the offering or that the offering will be continuous;
(vii) Be signed by the commodity pool operator or commodity trading
advisor as follows: If it is a sole proprietorship, by the sole
proprietor; if a partnership, by a general partner; and if a
corporation, by the chief executive officer or chief financial officer;
(viii) Be filed in duplicate with the Commission at the address
specified in Sec. 4.2 and with the National Futures Association at its
headquarters office (Attn: Director of Compliance, Compliance
Department); and
(ix)(A)(1) Where the claimant is a commodity pool operator, except
as provided in paragraph (d)(1)(iii)(A) of this section with respect to
single-investor pools and in paragraph (d)(1)(ix)(A)(2) of this
section, be received by the Commission:
(i) Before the date the pool first enters into a commodity interest
transaction, if the relief claimed is limited to that provided under
paragraphs (b)(2), (3) and (4) of this section; or
(ii) Prior to any offer or sale of any participation in the exempt
pool if the claimed relief includes that provided under paragraph
(b)(1) of this section.
(2) Where participations in a pool have been offered or sold in
full compliance with Part 4, the notice of a claim for exemption may be
filed with the Commission at any time; Provided, That the claim for
exemption is otherwise consistent with the duties of the commodity pool
operator and the rights of pool participants and that the commodity
pool operator notifies the pool participants of his intention, absent
objection by the holders of a majority of the units of participation in
the pool who are unaffiliated with the commodity pool operator within
twenty-one days after the date of the notification, to file a notice of
claim for exemption under Sec. 4.7 and such holders have not objected
within such period. A commodity pool operator filing a notice under
this paragraph (d)(1)(ix)(A)(2) shall either provide disclosure and
reporting in accordance with the requirements of Part 4 to those
participants objecting to the filing of such notice or allow such
participants to redeem their units of participation in the pool within
three months of the filing of such notice.
(B) Where the claimant is a commodity trading advisor, be received
by the Commission before the date the trading advisor first enters into
an agreement to direct or guide the commodity interest account of a
qualified eligible person pursuant to Sec. 4.7.
(2) The notice will be effective upon receipt by the Commission
with respect to each pool for which it was made where the claimant is a
commodity pool operator and otherwise generally where the claimant is a
commodity trading advisor; Provided, That any notice which does not
include all the required information shall not be effective, and that
if at the time the Commission receives the notice, an enforcement
proceeding brought by the Commission under the Act or the regulations
is pending against the pool operator or trading advisor or any of its
principals, the exemption will not be effective until twenty-one
calendar days after receipt of the notice by the Commission and that in
such case an exemption may be denied by the Commission or made subject
to such conditions as the Commission may impose.
(3) Any exemption claimed hereunder shall cease to be effective
upon any change which would cause the commodity pool operator of an
exempt pool to be ineligible for the relief claimed with respect to
such pool or which would cause a commodity trading advisor to be
ineligible for the relief claimed. The pool operator or trading advisor
must promptly file a
[[Page 47859]]
notice advising the Commission of such change.
(4)(i) Any exemption from the requirements of Sec. 4.21, 4.22,
4.23, 4.24, 4.25 or 4.26 claimed hereunder with respect to a pool shall
not affect the obligation of the commodity pool operator to comply with
all other applicable provisions of Part 4, the Act and the Commission's
rules and regulations, with respect to the pool and any other pool the
pool operator operates or intends to operate.
(ii) Any exemption from the requirements of Sec. 4.31, 4.33, 4.34,
4.35 or 4.36 claimed hereunder shall not affect the obligation of the
commodity trading advisor to comply with all other applicable
provisions of Part 4, the Act and the Commission's rules and
regulations, with respect to any qualified eligible person and any
other client to which the commodity trading advisor provides or intends
to provide commodity interest trading advice.
(e) Insignificant deviations from a term, condition or requirement
of Sec. 4.7.
(1) A failure to comply with a term or condition of Sec. 4.7 will
not result in the loss of the exemption with respect to a particular
pool or client if the commodity pool operator or the commodity trading
advisor relying on the exemption shows that:
(i) The failure to comply did not pertain to a term, condition or
requirement directly intended to protect that particular qualified
eligible person;
(ii) The failure to comply was insignificant with respect to the
exempt pool as a whole or to the particular exempt account; and
(iii) A good faith and reasonable attempt was made to comply with
all applicable terms, conditions and requirements of Sec. 4.7.
(2) A transaction made in reliance on Sec. 4.7 must comply with all
applicable terms, conditions and requirements of Sec. 4.7. Where an
exemption is established only through reliance upon paragraph (e)(1) of
this section, the failure to comply shall nonetheless be actionable by
the Commission.
PART 30--FOREIGN FUTURES AND OPTIONS TRANSACTIONS
3. The authority citation for part 30 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4, 6, 6c and 12a, unless otherwise
noted.
4. Section 30.6 is amended by revising paragraph (b) to read as
follows:
Sec. 30.6 Disclosure.
* * * * *
(b) Commodity pool operators and commodity trading advisors. (1)
With respect to persons who satisfy the requirements of qualified
eligible persons, as defined in Sec. 4.7(a) of this chapter:
(i) A commodity pool operator registered or required to be
registered under this part, or exempt from registration pursuant to
Sec. 30.5, may not, directly or indirectly, engage in any of the
activities described in Sec. 30.4(c) unless the pool operator, at or
before the time it engages in such activities, first provides each
prospective qualified eligible person with the Risk Disclosure
Statement set forth in Sec. 4.24(b)(2) of this chapter and the
statement in Sec. 4.7(b)(1)(i) of this chapter;
(ii) A commodity trading advisor registered or required to be
registered under this part, or exempt from registration pursuant to
Sec. 30.5, may not, directly or indirectly, engage in any of the
activities described in Sec. 30.4(d) unless the trading advisor, at or
before the time it engages in such activities, first provides each
qualified eligible person with the Risk Disclosure Statement set forth
in Sec. 4.34(b)(2) of this chapter and the statement in
Sec. 4.7(c)(1)(i) of this chapter.
(2) With respect to persons who do not satisfy the requirements of
qualified eligible persons, as defined in Sec. 4.7(a) of this chapter:
(i) A commodity pool operator registered or required to be
registered under this part, or exempt from registration pursuant to
Sec. 30.5, may not, directly or indirectly, engage in any of the
activities described in Sec. 30.4(c) unless the pool operator, at or
before the time it engages in such activities, first provides each
prospective participant with the Disclosure Document required to be
furnished to customers or potential customers pursuant to Sec. 4.21 of
this chapter and files the Disclosure Document in accordance with
Sec. 4.26 of this chapter;
(ii) A commodity trading advisor registered or required to be
registered under this part, or exempt from registration pursuant to
Sec. 30.5, may not, directly or indirectly, engage in any of the
activities described in Sec. 30.4(d) unless the trading advisor, at or
before the time it engages in such activities, first provides each
prospective client with the Disclosure Document required to be
furnished customers or potential customers pursuant to Sec. 4.31 of
this chapter and files the Disclosure Document in accordance with
Sec. 4.36 of this chapter.
* * * * *
PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION
5. The authority citation for part 140 continues to read as
follows:
Authority: 7 U.S.C. 4a and 12a.
Sec. 140.99 [Amended]
6. In Sec. 140.99, paragraphs (i)(A) and (B) are correctly
designated as paragraphs (i)(1) and (2). In paragraph (i)(1), the
phrase ``Secs. 4.5, 4.7(a), 4.7(b), 4.12(b), 4.13(b) and 4.14(a)(8) of
this chapter'' is revised to read ``Secs. 4.5, 4.7(d), 4.12(b), 4.13(b)
and 4.14(a)(8) of this chapter''.
PART 180--ARBITRATION OR OTHER DISPUTE SETTLEMENT PROCEDURES
7. The authority citation for part 180 continues to read as
follows:
Authority: 7 U.S.C. 6c, 6d, 6f, 6k, 7a, 12a, and 21, unless
otherwise noted.
8. Section 180.3 is amended by revising paragraph (b)(2)(vi) to
read as follows:
Sec. 180.3 Voluntary procedure and compulsory payments.
* * * * *
(b) * * *
(2) * * *
(vi) A person who is a ``qualified eligible person'' as defined in
Sec. 4.7(a) of this chapter.
* * * * *
Issued in Washington, D.C., on July 27, 2000, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 00-19445 Filed 8-3-00; 8:45 am]
BILLING CODE 6351-01-P
======== RETURN TO INDEX ========