Electronic Code of Federal Regulations (e-CFR)

Chapter I. COMMODITY FUTURES TRADING COMMISSION

Part 4. COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

Section 4.22. Reporting to pool participants.

17 CFR 4.22 – Reporting to pool participants.

(a)Except asprovidedin paragraph (a)(4) or (a)(6) of this section, eachcommodity pool operatorregistered or required to be registered under the Act must periodically distribute to eachparticipantin each pool that it operates, within 30 calendar days after the last date of the reporting period prescribed inparagraph (b)of this section, an Account Statement, which shall be presented in the form of a Statement of Operations and a Statement of Changes in Net Assets, for the prescribed period. These financial statements must be presented and computed in accordance with generally accepted accounting principles consistently applied. The Account Statement must be signed in accordance withparagraph (h)of this section.

(1)The portion of the Account Statement which must be presented in the form of a Statement of Operations must separately itemize the following information:

(i)The total amount of realized net gain or loss oncommodity interestpositions liquidated during the reporting period;

(ii)The change in unrealized net gain or loss oncommodity interestpositions during the reporting period;

(iii)The total amount of net gain or loss from all other transactions in which the pool engaged during the reporting period, including interest and dividends earned on funds not paid aspremiumsor used to margin the poolscommodity interestpositions;

(iv)The total amount of all management fees during the reporting period;

(v)The total amount of all advisory fees during the reporting period;

(vi)The total amount of all brokeragecommissionsduring the reporting period;

(vii)The total amount of other fees forcommodity interestand other investment transactions during the reporting period; and

(viii)The total amount of all other expenses incurred or accrued by the pool during the reporting period.

(2)The portion of the Account Statement that must be presented in the form of a Statement of Changes in Net Assets must separately itemize the following information:

(i)Thenet asset valueof the pool as of the beginning of the reporting period;

(ii)The total amount of additions to the pool, whether voluntary or involuntary, made during the reporting period;

(iii)The total amount of withdrawals from and redemption of participation units in the pool, whether voluntary or involuntary, for the reporting period;

(iv)The total net income or loss of the pool during the reporting period;

(v)Thenet asset valueof the pool as of the end of the reporting period; and

(A)Thenet asset valueper outstanding participation unit in the pool as of the end of the reporting period, or

(B)The total value of theparticipants interest or share in the pool as of the end of the reporting period.

(3)The Account Statement must also disclose any material business dealings between the pool, the pools operator,commodity trading advisorfutures commission merchant, retail foreign exchangedealerswap dealer, or the principals thereof that previously have not been disclosed in the pools Disclosure Document or any amendment thereto, other Account Statements or Annual Reports.

(4)For the purpose of the Account Statement delivery requirement, including any Account Statement distributed pursuant to 4.7(b)(2)or 4.12(b)(2)(ii), the term participant does not include acommoditypool operated by a pool operator that is the same as, or thatcontrols, iscontrolledby, or is under commoncontrolwith, the pool operator of a pool in which thecommoditypool has invested.

(5)Where the pool is comprised of more than one ownership class or series, information for the series or class on which the account statement is reporting should be presented in addition to the information presented for the pool as a whole; except that, for a pool that is a series fund structured with a limitation on liability among the different series, the account statement is not required to include consolidated information for all series.

(6)Acommodity pool operatorof a pool that meets the conditions specified inparagraph (d)(2)(i)of this section and has filed notice pursuant toparagraph (d)(2)(iii)of this section may elect to follow the same accounting treatment with respect to the computation and presentation of the account statement.

(b)The Account Statement must be distributed at least monthly in the case of pools with net assets of more than $500,000 at the beginning of the pools fiscal year, and otherwise at least quarterly;Provided, however,That an Account Statement for the last reporting period of the pools fiscal year need not be distributed if the Annual Report required byparagraph (c)of this section is sent to poolparticipantswithin 45 calendar days after the end of the fiscal year. The requirement to distribute an Account Statement shall commence as of the date the pool is formed as specified inparagraph (g)(1)of this section.

(c)Except asprovidedin paragraph (c)(7) or (c)(8) of this section, eachcommodity pool operatorregistered or required to be registered under the Act must distribute an Annual Report to eachparticipantin each pool that it operates, and must electronically submit a copy of the Report and key financial balances from the Report to the National Futures Association pursuant to the electronic filing procedures of the National Futures Association, within 90 calendar days after the end of the pools fiscal year or the permanent cessation of trading, whichever is earlier;Provided, however,that if during any calendar year thecommodity pool operatordid not operate acommoditypool, the pool operator must so notify the National Futures Association within 30 calendar days after the end of such calendar year. The Annual Report must be affirmed pursuant toparagraph (h)of this section and must contain the following:

(1)Thenet asset valueof the pool as of the end of each of the pools two preceding fiscal years.

(i)Thenet asset valueper outstanding participation unit in the pool as of the end of each of the pools two preceding fiscal years, or

(ii)The total value of theparticipants interest or share in the pool as of the end of each of the pools two preceding fiscal years.

(3)A Statement of Financial Condition as of the close of the pools fiscal year and preceding fiscal year.

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

(A)The date of the most recent Statement of Financial Condition delivered to the National Futures Association pursuant to this paragraph (c); or

(ii)The close of the pools fiscal year, together with Statements of Operations, and Changes in Net Assets for the corresponding period of the previous fiscal year.

(5)Appropriate footnote disclosure and such further material information as may be necessary to make the required statements not misleading. For a pool that invests in other funds, this information must include, but is not limited to, separately disclosing the amounts of income, management and incentive fees associated with each investment in an investee fund that exceeds five percent of the pools net assets. The management and incentive fees associated with an investment in an investee fund that is less than five percent of the pools net assets may be combined and reported in the aggregate with the income, management and incentive fees of other investee funds that, individually, represent an investment of less than five percent of the pools net assets. If thecommodity pool operatoris not able to obtain the specific amounts of management and incentive fees charged by an investee fund, thecommodity pool operatormust disclose the percentage amounts and computational basis for each such fee and include a statement that the CPO is not able to obtain the specific fee amounts for this fund;

(6)Where the pool is comprised of more than one ownership class or series, information for the series or class on which the financial statements are reporting should be presented in addition to the information presented for the pool as a whole; except that, for a pool that is a series fund structured with a limitation on liability among the different series, the financial statements are not required to include consolidated information for all series.

(7)For a pool that has ceased operation prior to, or as of, the end of the fiscal year, thecommodity pool operatormay provide the following, within 90 days of the permanent cessation of trading, in lieu of the annual report that would otherwise be required by 4.22(c)or 4.7(b)(3):

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

(1)The date of the most recent Statement of Financial Condition filed with the National Futures Association pursuant to this paragraph (c); or

(B)The close of the pools fiscal year or the date of the cessation of trading, whichever is earlier; and

(A)An explanation of the winding down of the pools operations and written disclosure that all interests in, and assets of, the pool have been redeemed, distributed or transferred on behalf of the participants;

(B)If all funds have not been distributed or transferred toparticipantsby the time that the final report is issued, disclosure of the value of assets remaining to be distributed and an approximate timeframe of when the distribution will occur. If thecommodity pool operatordoes not distribute the remaining pool assets within the timeframe specified, thecommodity pool operatormust provide written notice to eachparticipantand to the National Futures Association that the distribution of the remaining assets of the pool has not been completed, the value of assets remaining to be distributed, and a time frame of when the final distribution will occur.

(C)If thecommodity pool operatorwill not be able to liquidate the pools assets in sufficient time to prepare, file and distribute the final annual report for the pool within 90 days of the permanent cessation of trading, thecommodity pool operatormust provide written notice to eachparticipantand to National Futures Association disclosing:

(1)The value of investments remaining to be liquidated, the timeframe within which liquidation is expected to occur, any impediments to liquidation, and the nature and amount of any fees and expenses that will be charged to the pool prior to the final distribution of the pools funds;

(2)Which financial reports thecommodity pool operatorwill continue to provide to poolparticipantsfrom the time that trading ceased until the final annual report is distributed, and the frequency with which such reports will beprovided, pursuant to the pools operative documents; and

(3)The timeframe within which thecommodity pool operatorwill provide the final report.

(iii)A report filed pursuant toparagraph (c)(7)of this section that would otherwise be required byparagraph (c)of this section is not required to be audited in accordance withparagraph (d)of this section if thecommoditypool operator:

(A)Obtains a written waiver of their right to receive an audited Annual Report from eachparticipantother than the pool operator, the poolscommodity trading advisor, anycontrolledby, or under commoncontrolwith the pool operator or trading advisor, and any principal of the foregoing; and

(B)At the time of filing the Annual Report with the National Futures Association, certifies that it has received a written waiver from eachparticipantfrom whom it is required to obtain a waiver to qualify for the relief available under this paragraph (c)(7). Thecommodity pool operatormust maintain the waivers in accordance with 4.23and must make the waivers available to theCommissionor National Futures Association upon request. Notwithstanding the provisions ofparagraph (g)(2)(ii)of this section, the relief made available by this paragraph (c)(7)(iii) will not be available where thecommodity pool operatorhas not previously distributed an audited Annual Report to poolparticipantsand submitted an audited Annual Report to the National Futures Association.

(8)For the purpose of the Annual Report distribution requirement, including any annual report distributed pursuant to 4.7(b)(3)or 4.12(b)(2)(iii), the term participant does not include acommoditypool operated by a pool operator that is the same as, or thatcontrols, iscontrolledby, or is under commoncontrolwith, the pool operator of a pool in which thecommoditypool has invested;Provided,That the Annual Report of such investing pool contain financial statements that include such information as theCommissionmay specify concerning the operations of the pool in which thecommoditypool has invested.

(1)Subject to the provisions of paragraphs (d)(2) and (g)(2) of this section, the financial statements in the Annual Report required by this section or by 4.7(b)(3)must be presented and computed in accordance with UnitedStatesgenerally accepted accounting principles consistently applied and must be audited by an independent public accountant;Provided, however,and subject to theexceptioninparagraph (c)(7)(iii)(B)of this section, that the requirement that the Annual Report be audited by an independent public accountant does not apply for any fiscal year during which the onlyparticipantsin the pool are one or more of the pool operator, the poolscommodity trading advisor, anycontrolledby, or under commoncontrolwith the pool operator or trading advisor, and any principal of the foregoing; andProvided further,that the CPO obtains a written waiver from each such poolparticipantof their right to receive an audited Annual Report for such fiscal year, maintains such waivers in accordance with 4.23, and makes such waivers available to theCommissionor National Futures Association upon request. The requirements of 1.16(g)of this chapter shall apply with respect to the engagement of such independent public accountants, except that any related notifications to be made may be made solely to the National Futures Association, and the certification must be in accordance with 1.16of this chapter, except that the following requirements of that section shall not apply:

(i)The audit objectives of 1.16(d)(1)concerning the periodic computation of minimum capital and property in segregation;

(ii)All other references in 1.16to the segregation requirements; and

(iii)Section 1.16(c)(5), (d)(2), (e)(2), and (f).

(i)Where acommoditypool is organized in a jurisdiction other than the United States, the financial statements in the Annual Report required by this section or by 4.7(b)(3)may be presented and computed in accordance with the generally accepted accounting principles, standards or practices followed in such other jurisdiction;Provided,That:

(A)The other jurisdiction follows accounting principles, standards or practices set forth inparagraph (d)(2)(ii)of this section and the Annual Report presents and computes the financial statements of the pool in accordance with the applicable accounting principles, standards or practices followed by such other jurisdiction;

(B)The Annual Report includes a condensed schedule of investments, or, if required by the applicable accounting principles, standards or practices followed by such other jurisdiction, a full schedule of investments;

(C)The Annual Report reports special allocations of ownership equity in accordance withparagraph (e)(2)of this section;

(D)The Disclosure Document or offering memorandum for the pool identifies the accounting principles, standards or practices of the other jurisdiction pursuant to which the Annual Report presents and computes the financial statements of the pool; and

(E)Where the accounting principles, standards or practices of the other jurisdiction require consolidated financial statements for the pool, such as a feeder fund consolidating with its master fund, all applicable disclosures required by United States generally accepted accounting principles for the feeder fund must be presented with the reporting pools consolidated financial statements.

(ii)For purposes ofparagraph (d)(2)(i)of this section, the following alternative accounting principles, standards or practices may be employed in the preparation and computation of the financial statements in the Annual Report of thecommoditypool;Provided,That any such alternative accounting principles, standards or practices so employed are those followed by the jurisdiction other than the UnitedStatesin which thecommoditypool is organized:

(A)International Financial Reporting Standards;

(B)Generally Accepted Accounting Practice in the United Kingdom;

(C)New Irish Generally Accepted Accounting Practice;

(D)Luxembourg Generally Accepted Accounting Principles; or

(E)Canadian Generally Accepted Accounting Principles.

(iii)To claim the relief available under this paragraph (d)(2), acommodity pool operatormust file a notice with the National Futures Association within 90 calendar days after the end of the pools first fiscal year.

(A)The notice must contain: The name, main business address, main telephone number and National Futures Association registration identification number of thecommodity pool operator; the name and identification number of thecommoditypool for which the pool operator is claiming relief; and the alternative accounting principles, standards or practices pursuant to which the financial statements in the Annual Report will be presented and computed;

(B)The notice must include a representation that thecommodity pool operatorcomplies with each of the conditions specified in paragraphs (d)(2)(i)(A) through (D) of this section and, if applicable,paragraph (d)(2)(i)(E)of this section; and

(C)The notice must be signed by thecommodity pool operatorin accordance withparagraph (h)of this section.

(1)The Statement of Operations required by this section must itemize brokerage commissions, management fees, advisory fees, incentive fees, interest income and expense, total realized net gain or loss fromcommodity interesttrading, and change in unrealized net gain or loss oncommodity interestpositions during the pools fiscal year. Gains and losses oncommodity interestsneed not be itemized bycommodityor by specific delivery or expiration date.

(i)Any share of a pools profits or transfer of a pools equity which exceeds the general partners or any other classs share of profits computed on the general partners or other classs pro rata capital contribution are special allocations. Special allocations of partnership equity or other interests must be recognized in the pools Statement of Operations in the same period as the net income, interest income, or other basis of computation of the special allocation is recognized. Special allocations must be recognized and classified either as an expense of the pool or, if not recognized as an expense of the pool, presented in the Statement of Operations as a separate, itemized allocation of the pools net income to arrive at net income available for pro rata distribution to all partners.

(ii)Special allocations of ownership interest also must be reported separately in the Statement of Partners Equity, in addition to the pro-rata allocations of net income, as to each class of ownership interest.

(3)Realized gains or losses on regulated commodities transactions presented in the Statement of Operations of acommoditypool may be combined with realized gains or losses from trading in non-commodity interest transactions,providedthat the gains or losses to be combined are part of a related trading strategy. Unrealized gains or losses on open regulatedcommoditypositions presented in the Statement of Operations of acommoditypool may be combined with unrealized gains or losses from open positions in non-commodity positions,providedthat the gains or losses to be combined are part of a related trading strategy.

(i)In the event thecommodity pool operatorfinds that it cannot distribute the Annual Report for a pool that it operates within the time specified inparagraph (c)of this section without substantial undue hardship, it may file with the National Futures Association an application for extension of time to a specified date not more than 90 calendar days after the date as of which the Annual Report was to have been distributed. The application must be made by the pool operator and must:

(A)Statethe name of the pool for which the application is being made;

(B)Statethe reasons for the requested extension;

(C)Indicate that the inability to make a timely filing is due to circumstances beyond thecontrolof the pool operator, if such is the case, and describe briefly the nature of such circumstances;

(D)Contain an undertaking to file the Annual Report on or before the date specified in the application; and

(E)Be filed with the National Futures Association prior to the date on which the Annual Report is due.

(ii)The application must be accompanied by a letter from the independent public accountant answering the following questions:

(A)What specifically are the reasons for the extension request?

(B)Doyouhave any indication from the part ofyouraudit completed to date that would leadyouto believe that thecommodity pool operatorwas or is not meeting the recordkeeping requirements of this part 4 or was or is not complying with the 4.20(c)prohibition on commingling of property of any pool with the property of any other person?

(iii)Within ten calendar days after receipt of an application for an extension of time, the National Futures Association shall:

(A)Notify thecommodity pool operatorof the grant or denial of the requested extension, or

(B)Indicate to the pool operator that additional time is required to analyze the request, in which case the amount of time needed will be specified.

(2)In the event acommodity pool operatorfinds that it cannot obtain information necessary to prepare annual financial statements for a pool that it operates within the time specified in eitherparagraph (c)of this section or 4.7(b)(3)(i), as a result of the pool investing in another collective investment vehicle, it may claim an extension of time under the following conditions:

(i)Thecommodity pool operatormust, within 90 calendar days of the end of the pools fiscal year, file a notice with the National Futures Association, except asprovidedinparagraph (f)(2)(v)of this section.

(ii)The notice must contain the name, main business address, main telephone number and the National Futures Association registration identification number of thecommodity pool operator, and name and the identification number of thecommoditypool.

(iii)The notice muststatethe date by which the Annual Report will be distributed and filed (the Extended Date), which must be no more than 180 calendar days after the end of the pools fiscal year. The Annual Report must be distributed and filed by the Extended Date.

(iv)The notice must include representations by thecommodity pool operatorthat:

(A)The pool for which the Annual Report is being prepared has investments in one or more collective investment vehicles (the Investments);

(B)For all reports prepared underparagraph (c)of this section and for reports prepared under 4.7(b)(3)(i) that are audited by an independent public accountant, thecommodity pool operatorhas been informed by the independent public accountant engaged to audit thecommoditypools financial statements that specified information required to complete the pools annual report is necessary inorderfor the accountant to render an opinion on thecommoditypools financial statements. The notice must include the name, main business address, main telephone number, and contactpersonof the accountant; and

(C)The information specified by the accountant cannot be obtained in sufficient time for the Annual Report to be prepared, audited, and distributed before the Extended Date.

(D)For unaudited reports prepared under 4.7(b)(3)(i), thecommodity pool operatorhas been informed by the operators of the Investments that specified information required to complete the pools annual report cannot be obtained in sufficient time for the Annual Report to be prepared and distributed before the Extended Date.

(v)For each fiscal year following the filing of the notice described inparagraph (f)(2)(i)of this section, for a particular pool, it shall be presumed that the particular pool continues to invest in another collective investment vehicle and thecommodity pool operatormay claim the extension of time;Provided, however,that if the particular pool is no longer investing in another collective investment vehicle, then thecommodity pool operatormust file electronically with the National Futures Association an Annual Report within 90 days after the pools fiscal year-end accompanied by a notice indicating the change in the pools status.

(vi)Any notice or statement filed pursuant to this paragraph (f)(2) must be signed by thecommodity pool operatorin accordance withparagraph (h)of this section.

(1)Acommodity pool operatormay initially elect any fiscal year for a pool, but the first fiscal year may not end more than one year after the pools formation. For purposes of this section, a pool shall be deemed to be formed as of the date the pool operator first receives funds, securities or other property for the purchase of an interest in the pool.

(i)If acommodity pool operatorelects a fiscal year other than the calendar year, it must give written notice of the election to allparticipantsand must file the notice with the National Futures Association within 90 calendar days after the date of the pools formation. If this notice is not given, the pool operator will be deemed to have elected the calendar year as the pools fiscal year.

(ii)For purposes of this paragraph (g)(2), the time period from the date on which thecommodity pool operatorfirst receives funds, securities or other property from aparticipantin the pool that is not apersonlisted in paragraphs (g)(2)(ii)(A)(1) through (g)(2)(ii)(A)(5) of this section to the end of the pools first fiscal year is the stub period of the pool. Where the stub period is four months or less, the first Annual Report for the pool may be unaudited;Provided, however,That:

(A)Throughout the stub period, the pool had no more than fifteenparticipantsand no more than $3,000,000 in aggregate gross capital contributions. For the purpose of satisfying these criteria, thecommodity pool operatormay exclude the followingpersonsand their contributions:

(1)The pool operator, the poolscommodity trading advisor, anycontrolledby, or under commoncontrolwith the pool operator or trading advisor, and any principal of the foregoing;

(2)A child, sibling, or parent of any of these participants;

(3)The spouse of anyparticipantspecified in paragraph (g)(2)(ii)(A)(1) or (2) of this section;

(4)Any relative of aparticipantspecified in paragraph (g)(2)(ii)(A)(1), (2) or (3) of this section, their spouse or a relative of their spouse, who has the same principal residence as suchparticipant; and

(5)An entity that is wholly-owned by one or moreparticipantsspecified in paragraph (g)(2)(ii)(A)(1), (2), (3) or (4) of this section; and

(B)The next Annual Report for the pool is audited and covers the stub period plus the pools first 12-month fiscal year.

(C)To claim the relief available underparagraph (g)(2)(ii)of this section, acommodity pool operatormust:

(1)Prior to the date upon which it is required to distribute and submit an audited Annual Report for the pools first fiscal year, obtain a written waiver of the poolparticipants right to receive an audited Annual Report for the pools first fiscal year from eachparticipantother than aparticipantwho is the pool operator, the poolscommodity trading advisor, anycontrolledby, or under commoncontrolwith the pool operator or trading advisor, or any principal of the foregoing. The waiver may be included in the subscription agreement for the pool or other agreement with theparticipant;Provided, however,That the waiver is a separate page in the agreement and the pool operator requires theparticipantto separately sign and date it. The waiver must be in a form substantially as follows: [Name of participant], aparticipantin [Name of pool], voluntarily waives the right under CFTC Regulation 4.22(d) to receive an audited Annual Report for the fiscal year ended [end date of the pools first fiscal year] and will accept in lieu thereof an unaudited Annual Report covering [the stub period] and an audited Annual Report covering [the start date of the stub period] through [the end date of the pools first twelve-month fiscal year].; and

(2)On or before the date upon which it is required to distribute and submit the Annual Report for the pools first fiscal year, file a notice with the National Futures Association, along with a certification that it has received the required written waiver from eachparticipantwho is not the pool operator, the poolscommodity trading advisor, anycontrolledby, or under commoncontrolwith the pool operator or trading advisor, or any principal of the foregoing, and who has been aparticipantin the pool for its first fiscal year.

(i)The notice must contain: The name, main business address, main telephone number and National Futures Association registration identification number of thecommodity pool o