[Federal Register Volume 72, Number 9 (Tuesday, January 16, 2007)]
[Rules and Regulations]
[Pages 1658-1664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-174]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 4

RIN 3038-AC33


Electronic Filing of Notices of Exemption and Exclusion Under 
Part 4 of the Commission's Regulations

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is amending Commission regulations to require that notices of 
exemption or exclusion under Part 4 of the Commission's regulations 
submitted to National Futures Association (``NFA'') be filed 
electronically. Under the regulations the Commission is amending, the 
submission of a notice through NFA's electronic exemption filing system 
by a person duly authorized to bind the submitter will be permitted in 
lieu of the manual signature currently required by each of these 
regulations.
    In addition, the Commission also is adopting technical amendments 
that remove the procedure for making filings with the Commission 
required by Part 4, and revising other sections of Part 4 to refer to 
filings made with NFA rather than the Commission.

DATES: Effective Date: February 15, 2007.

FOR FURTHER INFORMATION CONTACT: Eileen R. Chotiner, Futures Trading 
Specialist, at (202) 418-5467, or Kevin P. Walek, Assistant Director, 
at (202) 418-5463, Division of Clearing and Intermediary Oversight, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581. Electronic mail: [email protected] 
or [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

A. Exemptions and Exclusions Under Part 4 of the Commission's 
Regulations

    On October 13, 2006, the Commission published for public comment 
proposed amendments to Part 4 of its regulations.\1\

[[Page 1659]]

Part 4 of the Commission's regulations applies to the operation of 
commodity pool operators (``CPOs'') and commodity trading advisors 
(``CTAs''). Generally, a person who operates a commodity pool must 
register with the Commission as a CPO,\2\ and a person who manages 
clients' trading must register with the Commission as a CTA.\3\ Under 
Commission Regulation 4.5, certain ``otherwise regulated persons'' are 
excluded from the CPO definition. These persons include registered 
investment companies, banks and trust companies, insurance companies, 
and fiduciaries of ERISA pension plans. A person who qualifies for the 
exclusion must file a notice of eligibility with NFA.\4\
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    \1\ Commission regulations cited to herein are found at 17 CFR 
Ch. I (2006).
    \2\ Regulation 4.10(d)(1) defines a pool as ``any investment 
trust, syndicate or similar form of enterprise operated for the 
purpose of trading commodity interests.''
    \3\ The Commodity Exchange Act (``Act'') defines a CTA as any 
person who ``for compensation or profit, engages in the business of 
advising others * * * as to the value of or the advisability of 
trading in'' commodity interests. 7 U.S.C. 1a(6) (2000).
    \4\ NFA is a registered futures association under the Act. 7 
U.S.C. 21 (2000). As discussed below, the Commission has delegated 
to NFA the responsibility for administrating the Commission's 
registration program.
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    Commission regulations also make certain exemptions from CPO and 
CTA registration available to persons who meet specified criteria. 
Regulation 4.13 permits exemption from registration for CPOs that limit 
their activities to small or family pools; or whose participants are 
highly sophisticated; or whose pools limit participants to SEC 
``accredited investors'' \5\ as that term is defined in the regulations 
promulgated by the Securities and Exchange Commission (``SEC'') and 
limit trading of commodity interests to a minimum amount specified in 
the regulation. A notice claiming exemption from registration as a CPO 
must be filed with NFA.
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    \5\ 17 CFR 230.501(a) (2006).
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    A CTA is exempt from registration if it meets criteria specified in 
Regulation 4.14, including: it furnishes trading advice solely to 
commodity pools for which it is the registered CPO or for which it is 
exempt from CPO registration; it provides advice solely incidental to 
the conduct of one of certain businesses or professions listed in the 
Act or the Commission's regulations; it is registered with the 
Commission in another capacity and its advice is solely in connection 
with acting in that other capacity; it does not manage client accounts 
or provide commodity trading advice based on, or tailored to, the 
financial positions of particular clients; or it is an SEC-registered 
investment adviser whose futures advice is incidental to providing 
securities trading advice to the ``otherwise regulated'' trading 
vehicles specified in Regulation 4.5, or to CPOs of pools operated 
pursuant to the exemptions in Regulations 4.13(a)(3) and (4). A notice 
must be filed to claim the exemption available to SEC-registered 
investment advisers who meet the criteria set forth in Regulation 
4.14(a)(8); the other exemptions from CTA registration do not require 
the filing of an exemption notice to be effective.\6\
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    \6\ A statutory exemption from CTA registration exists in 
Section 4m(1) of the Act for a person who has not had more than 15 
clients during a 12-month period and is not otherwise holding itself 
out as a CTA. 7 U.S.C. 6m (2000). A person who qualifies for this 
exemption is not required to file a notice claiming the exemption.
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    Registered CPOs are required to provide a disclosure document to 
prospective participants that includes disclosure of risks and 
information such as the business backgrounds of persons involved with 
the pool, investment objectives, fees, conflicts, material litigation, 
and past performance. The CPO must provide unaudited periodic reports 
and certified annual reports on the pool's financial operations to the 
pool's participants. Disclosure documents and annual reports also must 
be filed with NFA. Further, the CPO is required to make and keep 
specified books and records for a period of five years, and make them 
available for inspection by the CFTC, NFA, and the United States 
Department of Justice. Registered CTAs must provide to prospective 
participants, and file with NFA, disclosure documents containing 
information about their trading programs, and also must comply with 
specified recordkeeping requirements.
    The Commission has established a simplified regulatory framework 
for registered CPOs and CTAs who operate or advise pools and accounts 
whose participants meet the criteria specified in Regulation 4.7. 
Relief from full compliance with the disclosure, reporting, and 
recordkeeping requirements is available where, for example, pool 
participants are CFTC or SEC registrants, ``inside employees'' of the 
CPO or CTA, or persons who earn $200,000 annually and who have assets 
worth at least $2 million. A CPO offering a pool whose futures trading 
is incidental to its securities trading and is limited to 10 percent of 
the pool's net assets may claim exemption from some disclosure, 
reporting and recordkeeping requirements pursuant to Regulation 
4.12(b). A person claiming exemption under Regulations 4.7 or 4.12(b) 
must file a notice with NFA.
    In a Notice and Order issued in 1997,\7\ the Commission authorized 
NFA to process: (1) Notices of eligibility for exclusion from the 
definition of CPO for certain otherwise regulated persons, pursuant to 
Commission Regulation 4.5; (2) notices of claim for exemption from 
certain Part 4 requirements with respect to commodity pools and CTAs 
whose participants or clients are qualified eligible persons, pursuant 
to Commission Regulation 4.7; (3) claims of exemption from certain Part 
4 requirements for CPOs with respect to pools that principally trade 
securities, pursuant to Commission Regulation 4.12(b); (4) statements 
of exemption from registration as a CPO, pursuant to Commission 
Regulation 4.13; and (5) notices of exemption from registration as a 
CTA for certain persons registered with the SEC as an investment 
adviser, pursuant to Regulation 4.14(a)(8). The Commission also made 
NFA the custodian of those records.\8\
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    \7\ 62 FR 52088 (October 6, 1997).
    \8\ At the time NFA was authorized to process these notices, 
Commission regulations required that copies of the notices also be 
filed with the Commission. In December 2002, the Commission revised 
its regulations to require that such notices be filed solely with 
NFA. 67 FR 77409 (December 18, 2002).
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B. Electronic Filing of Part 4 Notices

    NFA petitioned the Commission to amend its regulations to require 
that the notices required under Regulations 4.5, 4.7, 4.12(b), 4.13, 
and 4.14(a)(8) be filed electronically with NFA, and that submission of 
a notice by a representative duly authorized to bind the person be 
permitted in lieu of the manual signature currently specified under 
each regulation that requires a notice filing. After considering the 
comments received, the Commission has determined to amend Regulations 
4.5, 4.7, 4.12(b), 4.13, and 4.14(a)(8) as set forth herein to 
effectuate this purpose.
    Firms that are registered with the Commission in any capacity and 
non-registrants will both access NFA's electronic filing system through 
the use of a designated user ID and password. Registered firms will 
establish access for appropriate staff using the security manager 
process in place for their existing Online Registration System 
(``ORS'') accounts, the process that is currently used for registration 
and other electronic filings with NFA.\9\ In order to

[[Page 1660]]

enable non-registrants, who are not required to have ORS accounts, to 
file exemption notices, NFA has established a new process that contains 
similar safeguards regarding the identity of the filers and provides 
the non-registrant with the ability to establish one or more system 
users. For both registrants and non-registrants, the person who submits 
a notice must be a representative duly authorized to bind the 
submitter. The person or firm that is making the filing, or on whose 
behalf the filing is made, is responsible for ensuring that only 
persons who are duly authorized to bind the filer are granted the 
ability to submit notices.
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    \9\ The Commission previously has adopted amendments to its 
regulations to enable NFA to utilize an online system for 
registration functions (67 FR 38,869 (June 6, 2002)). The Commission 
also adopted amendments to its regulations to require electronic 
filing of financial statements of commodity pools (71 FR 8939 
(February 22, 2006)) and introducing brokers (71 FR 67462 (November 
22, 2006)).
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    The electronic filing system will allow filers to select the 
applicable exemption type and complete a form that will provide the 
information required for the exemption filing. Each form contains a 
statement by the representative submitting the form that the 
information contained therein is accurate and complete, to the best of 
his or her knowledge, and that the submitter is duly authorized to bind 
the person making the claim. Submission of the electronic form will 
record the data regarding the filing in NFA's database system. The 
system also will allow the filer to create a printer-friendly version 
of exemption notices for the filer's records.
    The amendments will no longer require persons filing the notices 
with NFA to do so in paper form. Therefore, the Commission has 
concluded that electronic transmission of a written notification to 
participants, such as by electronic mail or facsimile, is consistent 
with the requirement to provide the information in writing and is 
amending each of the regulations with a participant notification 
requirement, with the exception of Regulation 4.5, to make explicit 
that notice may be delivered through electronic transmission. In 
adopting such amendment, the Commission has reasoned that the provision 
of written notice necessarily requires that the exemption filer 
establish with the participant a method to deliver the written 
communication. Should a participant have provided an email address or 
facsimile number to the exemption filer for the purpose of receiving 
communications from that person, the participant can reasonably be 
expected to receive such written communications from the party, 
including the written notification required under Commission 
regulations, through such method of electronic transmission.
    As discussed in the proposal, the Commission is not revising 
Regulation 4.5 with respect to disclosure to participants. Regulation 
4.5 requires that the qualifying entity disclose in writing to 
participants that it is operating pursuant to the terms of Regulation 
4.5. When it adopted Regulation 4.5, the Commission noted that the 
qualifying entity may satisfy this requirement by including the 
information in any document that its other federal or state regulator 
requires to be furnished routinely to participants. If no such document 
is furnished routinely, the information may be disclosed in any 
instrument establishing the entity's investment policies and objectives 
that the other regulator requires to be made available to the entity's 
participants.\10\ Therefore, the Commission is amending Regulation 4.5 
to contain clarification regarding the provision of disclosure 
according to the requirements of other regulators.
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    \10\ 50 FR 15879 (April 23, 1985).
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C. Technical Amendments

    As proposed, the Commission is removing and reserving Regulation 
4.2, which specifies technical requirements, such as address, for 
material filed with the Commission under Part 4 of its regulations. 
Amendments to Commission regulations adopted in 2002 \11\ no longer 
require that any filings required under Part 4 be submitted to the 
Commission and thus the continued existence of Regulation 4.2 is no 
longer necessary. Further, two provisions within Part 4 inadvertently 
were not amended in 2002 and continue to include references to filing 
with the Commission. Accordingly, the Commission is adopting technical 
amendments to Regulations 4.8 and 4.12(b) to conform these sections to 
the current filing requirements in the other regulations to which they 
refer.
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    \11\ See note 2.
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II. Comments

    The Commission received two comment letters on the proposed 
amendments, from NFA and the Committee on Futures Regulation of the New 
York City Bar Association (``Bar Association''). NFA supported the 
proposed amendments and stated that electronic filing of Part 4 notices 
would increase efficiency, reduce staff time currently devoted to 
processing notices, and eliminate data entry errors because the person 
claiming the notice will enter the information directly into the 
system. Both NFA and the Bar Association commented regarding Advisory 
18-96, which is discussed in detail in Section III, below.

III. Advisory 18-96

    NFA also petitioned the Commission to amend Advisory 18-96, which 
was issued by the Commission's former Division of Trading and Markets, 
now the Division of Clearing and Intermediary Oversight.\12\ Advisory 
18-96 makes available exemptions from disclosure and reporting 
requirements under Regulations 4.21 and 4.22, and specified 
recordkeeping requirements under Regulation 4.23, to registered CPOs of 
commodity pools organized and operated outside the United States and 
offered solely to non-United States persons.\13\ In considering NFA's 
petition, the Commission reexamined Advisory 18-96 and concluded that 
additional exemptions from CPO registration adopted in 2003 have 
essentially superseded the provisions of Advisory 18-96. Specifically, 
Regulation 4.13(a)(4) permits a CPO to claim exemption from CPO 
registration where the pool is offered pursuant to an exemption from 
registration under the Securities Act of 1933 and its participants are 
limited to natural persons who are qualified eligible persons 
(``QEPs'') under Regulation 4.7(a)(2), and non-natural persons that are 
either QEPs under Regulation 4.7 or accredited investors under 17 CFR 
230.501(a)(1)-(3), (a)(7) and (a)(8). Since non-United States persons 
are included in the definition of QEP in Regulation 4.7(a)(2), CPOs 
meeting the criteria of Advisory 18-96 may instead claim the exemption 
available under Regulation 4.13(a)(4), which offers more extensive 
relief than that available under Advisory 18-96.
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    \12\ In 1997, the Commission also authorized NFA to process 
notices of exemption pursuant to Advisory 18-96. See note 1. Since 
1997, NFA has received approximately 500 notices of exemption 
pursuant to Advisory 18-96.
    \13\ ``Non-United States person'' is defined in Regulation 
4.7(a)(1)(iv).
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    Based on the overlap between the terms of Advisory 18-96 and 
Regulation 4.13(a)(4), the Commission suggested in the proposing 
release that it may be appropriate to supersede Advisory 18-96 
prospectively, and requested comments on this approach. The Commission 
asked in particular for comment on whether there are any conflicts 
between the criteria and relief in Advisory 18-96 and Regulation 
4.13(a)(4), and whether the unavailability of Advisory 18-96 on a 
prospective basis would result in any adverse consequences for CPOs. 
The

[[Page 1661]]

Commission proposed that CPOs that have previously claimed relief under 
Advisory 18-96 would be permitted to continue to rely on the terms of 
Advisory 18-96, or could choose to claim exemption pursuant to 
Regulation 4.13(a)(4).
    The Bar Association's sole comment related to Advisory 18-96. The 
letter noted that, while most the provisions of Advisory 18-96 have 
been superseded, there is still a benefit to retaining Advisory 18-96. 
Specifically, unlike Regulation 4.13(a)(4), the Advisory does not 
contain a requirement that a CPO inform participants in writing 
regarding the CPO's unregistered status and exemption from certain 
requirements. The Bar Association asserted that practitioners who 
advise offshore hedge funds believe that it is unnecessary and 
potentially confusing to the non-U.S. domiciled investors to explain 
why the sponsor is not registered with a U.S. futures regulator, and 
recommended that Advisory 18-96 be retained as an option for CPOs.
    NFA agreed in its comment letter that section (a) of Advisory 18-96 
could be retired without consequence due to the existence of Regulation 
4.13(a)(4), but suggested that the Commission consider the consequences 
of superseding section (b) of the Advisory. Section (b) of Advisory 18-
96 provides relief from the requirement that a CPO maintain a pool's 
books and records at the CPO's main business office inside the U.S. 
where the main business office of the pool is located outside the U.S., 
as long as the CPO maintains the pool's original books and records at 
the pool's main office located outside the U.S., keeps duplicate books 
and records of the commodity pool at a designated office in the U.S., 
and makes the original records available within 72 hours upon the 
request of the Commission, the United States Department of Justice or 
NFA. NFA noted that pools that qualify for relief under Section (b) of 
Advisory 18-96 do not necessarily qualify for relief under Regulation 
4.13(a)(4); therefore, superseding the Advisory would preclude new 
offshore pools from taking advantage of this relief.
    Based on the comments received, the Commission has determined that 
it should retain provisions of Advisory 18-96 that continue to be 
applicable to the activities of U.S. CPOs operating offshore pools. 
Accordingly, Advisory 18-96 will remain in effect, and relief may 
continue to be claimed by CPOs by filing a paper notice with NFA. The 
Commission will further consider whether it would be appropriate to 
propose future amendments to Part 4 to codify the relief provided by 
Advisory 18-96.

IV. Amendments

    Regulations 4.5, 4.7, 4.12(b), 4.13, and 4.14(a)(8) require that 
the notice claiming the exclusion or exemption available pursuant to 
each such regulation must be filed in paper form. The Commission is 
amending Regulations 4.5, 4.7, 4.12(b), 4.13, and 4.14(a)(8) Regulation 
to provide that the notice claiming exclusion or exemption must be 
filed electronically with NFA through compliance with NFA's electronic 
filing procedures.

V. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires that agencies, in proposing rules, consider the impact of 
those rules on small businesses. The Commission previously has 
established certain definitions of ``small entities'' to be used by the 
Commission in evaluating the impact of its rules on such entities in 
accordance with the RFA.\14\ The proposed rule amendments will not 
place any burdens, whether new or additional, on CPOs and CTAs who 
would be affected hereunder, as the proposed amendments simply alter 
the mechanism for filing notices of exemption and do not affect the 
substance of those filings or the nature of the qualifying criteria. 
The Commission's proposal solicited public comment on this 
analysis.\15\ No comments were received. Accordingly, the Chairman, on 
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 
605(b), that the action it is taking herein will not have a significant 
economic impact on a substantial number of small entities.
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    \14\ 47 FR 18618 (April 30, 1982).
    \15\ 71 FR 60454 at 60456 (October 1, 2006).
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B. Paperwork Reduction Act

    This rulemaking alters the method of collection of information 
required under Commission regulations, but does not alter the substance 
of the filings. Therefore, the Commission certified in its proposal 
that the proposed rule amendments, if promulgated in final form, would 
not impact the total annual reporting or recordkeeping burden 
associated with the applicable collection of information. As required 
by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the 
Commission submitted a copy of this section to the Office of Management 
and Budget (``OMB'') for its review. No comments were received in 
response to the Commission's invitation in the notice of proposed 
rulemaking \16\ to comment on any change in the potential paperwork 
burden associated with these rule amendments.
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    \16\ Id.
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C. Cost-Benefit Analysis

    Section 15(a) of the Act, as amended by Section 119 of the CFMA, 
requires the Commission to consider the costs and benefits of its 
action before issuing a new regulation under the Act. By its terms, 
Section 15(a) does not require the Commission to quantify the costs and 
benefits of a new regulation or to determine whether the benefits of 
the regulation outweigh its costs. Rather, Section 15(a) simply 
requires the Commission to ``consider the costs and benefits'' of its 
action.
    Section 15(a) of the Act further specifies that costs and benefits 
shall be evaluated in light of five broad areas of market and public 
concern: Protection of market participants and the public; efficiency, 
competitiveness, and financial integrity of futures markets; price 
discovery; sound risk management practices; and other public interest 
considerations. Accordingly, the Commission could in its discretion 
give greater weight to any one of the five enumerated areas and could 
in its discretion determine that, notwithstanding its costs, a 
particular regulation was necessary or appropriate to protect the 
public interest or to effectuate any of the provisions or to accomplish 
any of the purposes of the Act.
    The Commission's proposal contained an analysis of its 
consideration of these costs and benefits and solicited public comment 
thereon.\17\ No comments were received with respect to the analysis of 
the Commission's consideration. Therefore, pursuant to such 
consideration, the Commission has decided to adopt these amendments as 
discussed above.
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    \17\ 71 FR at 54791-2.
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List of Subjects in 17 CFR Part 4

    Advertising, Brokers, Commodity futures, Commodity pool operators, 
Commodity trading advisors, Consumer Protection, Reporting and 
recordkeeping requirements.


0
Accordingly, 17 CFR Chapter I is amended as follows:

PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

0
1. The authority citation for part 4 continues to read as follows:


[[Page 1662]]


    Authority: 7 U.S.C. 1a, 2, 4, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a, 
and 23.

0
2. Remove and reserve Sec.  4.2.

0
3. Revise paragraphs (c) introductory text, (c)(2)(i), (d)(1) and (2), 
and (f) of Sec.  4.5 to read as follows:


Sec.  4.5  Exclusion for certain otherwise regulated persons from the 
definition of the term ``commodity pool operator.''

* * * * *
    (c) Any person who desires to claim the exclusion provided by this 
section shall file electronically a notice of eligibility with the 
National Futures Association through its electronic exemption filing 
system; Provided, however, That a plan fiduciary who is not a named 
fiduciary as described in paragraph (a)(4) of this section may claim 
the exclusion through the notice filed by the named fiduciary.
* * * * *
    (2) * * *
    (i) Will disclose in writing to each participant, whether existing 
or prospective, that the qualifying entity is operated by a person who 
has claimed an exclusion from the definition of the term ``commodity 
pool operator'' under the Act and, therefore, who is not subject to 
registration or regulation as a pool operator under the Act; Provided, 
that such disclosure is made in accordance with the requirements of any 
other federal or state regulatory authority to which the qualifying 
entity is subject. The qualifying entity may make such disclosure by 
including the information in any document that its other federal or 
state regulator requires to be furnished routinely to participants or, 
if no such document is furnished routinely, the information may be 
disclosed in any instrument establishing the entity's investment 
policies and objectives that the other regulator requires to be made 
available to the entity's participants; and
* * * * *
    (d)(1) Each person who has claimed an exclusion hereunder must, in 
the event that any of the information contained or representations made 
in the notice of eligibility becomes inaccurate or incomplete, amend 
the notice electronically through National Futures Association's 
electronic exemption filing system as may be necessary to render the 
notice of eligibility accurate and complete.
    (2) This amendment required by paragraph (d)(1) of this section 
shall be filed within fifteen business days after the occurrence of 
such event.
* * * * *
    (f) Any notice required to be filed hereunder must be filed by a 
representative duly authorized to bind the person specified in 
paragraph (a) of this section.
* * * * *

0
4. In Sec.  4.7, revise paragraph (d)(1) 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.

* * * * *
    (d) Notice of claim for exemption. (1) A notice of a claim for 
exemption under this section must:
    (i) 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;
    (ii)(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;
    (iii) 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;
    (iv) Specify the relief claimed under Sec.  4.7;
    (v) Where the claimant is a commodity pool operator, state the 
closing date of the offering or that the offering will be continuous;
    (vi) Be filed by a representative duly authorized to bind the 
commodity pool operator or commodity trading advisor;
    (vii) Be filed electronically with the National Futures Association 
through its electronic exemption filing system; and
    (viii)(A)(1) Where the claimant is a commodity pool operator, 
except as provided in paragraph (d)(1)(ii)(A) of this section with 
respect to single-investor pools and in paragraph (d)(1)(viii)(A)(2) of 
this section, be received by the National Futures Association:
    (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 National Futures Association 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)(viii)(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.
* * * * *

0
5. In Sec.  4.8, revise paragraphs (a) and (b) to read as follows:

[[Page 1663]]

Sec.  4.8  Exemption from certain requirements of rule 4.26 with 
respect to pools offered or sold in certain offerings exempt from 
registration under the Securities Act.

    (a) Notwithstanding paragraph (d) of Sec.  4.26 and subject to the 
conditions specified herein, the registered commodity pool operator of 
a pool offered or sold solely to ``accredited investors'' as defined in 
17 CFR 230.501 in an offering exempt from the registration requirements 
of the Securities Act of 1933 pursuant to Rule 505 or 506 of Regulation 
D, 17 CFR 230.505 or 230.506, may solicit, accept and receive funds, 
securities and other property from prospective participants in that 
pool upon filing with the National Futures Association and providing to 
such participants the Disclosure Document for the pool.
    (b) Notwithstanding paragraph (d) of Sec.  4.26 and subject to the 
conditions specified herein, the registered commodity pool operator of 
a pool offered or sold in an offering exempt from the registration 
requirements of the Securities Act of 1933 pursuant to Rule 505 or 506 
of Regulation D, 17 CFR 230.505 or 230.506, that is operated in 
compliance with, and has filed the notice required by Sec.  4.12(b) may 
solicit, accept and receive funds, securities and other property from 
prospective participants in that pool upon filing with the National 
Futures Association and providing to such participants the Disclosure 
Document for the pool.
* * * * *

0
6. In Sec.  4.12, revise paragraphs (b)(1)(ii), (b)(3) and (b)(5)(i) to 
read as follows:


Sec.  4.12  Exemption from provisions of part 4.

* * * * *
    (b) * * *
    (1) * * *
    (ii) Each existing participant and prospective participant in the 
pool for which it makes such request is informed in writing of the 
restrictions set forth in paragraph (b)(1)(i) (C) and (D) of this 
section prior to the date the pool commences trading commodity 
interests. The pool operator may furnish this information by way of the 
pool's Disclosure Document, Account Statement, a separate notice or 
other similar means, including written communication delivered through 
electronic transmission.
* * * * *
    (3) Any registered commodity pool operator who desires to claim the 
relief available under this Sec.  4.12(b) must file electronically a 
claim of exemption with National Futures Association through its 
electronic exemption filing system. Such claim must:
    (i) Provide the name, main business address and main business 
telephone number of the registered commodity pool operator, or 
applicant for such registration, making the request;
    (ii) Provide the name of the commodity pool for which the request 
is being made;
    (iii) Contain representations that the pool will be operated in 
compliance with Sec.  4.12(b)(1)(i) and the pool operator will comply 
with the requirements of Sec.  4.12(b)(1)(ii);
    (iv) Specify the relief sought under Sec.  4.12(b)(2); and
    (v) Be filed by a representative duly authorized to bind the pool 
operator.
* * * * *
    (5) * * *
    (i) If a claim of exemption has been made under Sec.  
4.12(b)(2)(i), the commodity pool operator must make a statement to 
that effect on the cover page of each offering memorandum, or amendment 
thereto, that it is required to file with the National Futures 
Association pursuant to Sec.  4.26.
* * * * *

0
7. In Sec.  4.13, revise paragraphs (a)(5), (b)(1) introductory text, 
(b)(1)(iii), (b)(2) and (b)(4), and revise paragraph (e)(2), to read as 
follows:


Sec.  4.13  Exemption from registration as a commodity pool operator.

* * * * *
    (a) * * *
    (5)(i) Eligibility for exemption under this section is subject to 
the person furnishing in written communication physically delivered or 
delivered through electronic transmission to each prospective 
participant in the pool:
    (A) A statement that the person is exempt from registration with 
the Commission as a commodity pool operator and that therefore, unlike 
a registered commodity pool operator, it is not required to deliver a 
Disclosure Document and a certified annual report to participants in 
the pool; and
    (B) A description of the criteria pursuant to which it qualifies 
for such exemption from registration.
    (ii) The person must make these disclosures by no later than the 
time it delivers a subscription agreement for the pool to a prospective 
participant in the pool.
    (b)(1) Any person who desires to claim the relief from registration 
provided by this section, must file electronically a notice of 
exemption from commodity pool operator registration with the National 
Futures Association through its electronic exemption filing system. The 
notice must:
* * * * *
    (iii) Be filed by a representative duly authorized to bind the 
person.
    (2) The person must file the notice by no later than the time it 
delivers a subscription agreement for the pool to a prospective 
participant in the pool; Provided, That where a person registered with 
the Commission as a commodity pool operator intends to withdraw from 
registration in order to claim exemption hereunder, the person must 
notify its pool's participants in written communication physically 
delivered or delivered through electronic transmission that it intends 
to withdraw from registration and claim the exemption, and it must 
provide each such participant with a right to redeem its interest in 
the pool prior to the person filing a notice of exemption from 
registration.
* * * * *
    (4) Each person who has filed a notice of exemption from 
registration under this section must, in the event that any of the 
information contained or representations made in the notice becomes 
inaccurate or incomplete, amend the notice through National Futures 
Association's electronic exemption filing system as may be necessary to 
render the notice accurate and complete. This amendment must be filed 
electronically within 15 business days after the pool operator becomes 
aware of the occurrence of such event.
* * * * *
    (e)(2) If a person operates one or more commodity pools described 
in paragraph (a)(3) or (a)(4) of this section, and one or more 
commodity pools for which it must be, and is, registered as a commodity 
pool operator, the person is exempt from the requirements applicable to 
a registered commodity pool operator with respect to the pool or pools 
described in paragraph (a)(3) or (a)(4) of this section; Provided, That 
the person:
    (i) Furnishes in written communication physically delivered or 
delivered through electronic transmission to each prospective 
participant in a pool described in paragraph (a)(3) or (a)(4) of this 
section that it operates:
    (A) A statement that it will operate the pool as if the person was 
exempt from registration as a commodity pool operator;
    (B) A description of the criteria pursuant to which it will so 
operate the pool;
    (ii) Complies with paragraph (c) of this section; and

[[Page 1664]]

    (iii) Provides to each existing participant in a pool that the 
person elects to operate as described in paragraph (a)(3) or (a)(4) of 
this section a right to redeem the participant's interest in the pool, 
and informs each such participant of that right no later than the time 
the person commences to operate the pool as described in paragraph 
(a)(3) or (a)(4) of this section.
* * * * *

0
8. In Sec.  4.14, introductory text of paragraph (a) and introductory 
text of paragraph (a)(8) is republished and paragraph (a)(8)(iii)(A) 
introductory text and paragraphs (a)(8)(iii)(A)(3), (a)(8)(iii)(B) and 
(a)(8)(iii)(D) are revised to read as follows:


Sec.  4.14  Exemption from registration as a commodity trading advisor.

* * * * *
    (a) A person is not required to register under the Act as a 
commodity trading advisor if:
* * * * *
    (8) It is a registered as an investment adviser under the 
Investment Advisers Act of 1940 or with the applicable securities 
regulatory agency of any State, or it is exempt from such registration, 
or it is excluded from the definition of the term ``investment 
adviser'' pursuant to the provisions of section 202(a)(2) and 
202(a)(11) of the Investment Advisers Act of 1940, Provided, That:
* * * * *
    (iii)(A) A person who desires to claim the relief from registration 
provided by this Sec.  4.14(a)(8) must file electronically a notice of 
exemption from commodity trading advisor registration with the National 
Futures Association through its electronic exemption filing system. The 
notice must:
* * * * *
    (3) Be filed by a representative duly authorized to bind the 
person.
    (B) The person must file the notice by no later than the time it 
delivers an advisory agreement for the trading program pursuant to 
which it will offer commodity interest advice to a client; Provided, 
That where the advisor is registered with the Commission as a commodity 
trading advisor, it must notify its clients in written communication 
physically delivered or delivered through electronic transmission that 
it intends to withdraw from registration and claim the exemption and 
must provide each such client with a right to terminate its advisory 
agreement prior to the person filing a notice of exemption from 
registration.
* * * * *
    (D) Each person who has filed a notice of exemption from 
registration under this section must, in the event that any of the 
information contained or representations made in the notice becomes 
inaccurate or incomplete, amend the notice electronically through 
National Futures Association's electronic exemption filing system as 
may be necessary to render the notice accurate and complete. This 
amendment must be filed within 15 business days after the trading 
advisor becomes aware of the occurrence of such event.
* * * * *

    Issued in Washington, DC, on January 5, 2007 by the Commission.
Eileen A. Donovan,
Acting Secretary of the Commission.
[FR Doc. E7-174 Filed 1-12-07; 8:45 am]
BILLING CODE 6351-01-P