Commodity Pool Operator Periodic Account Statements and Annual Financial Reports, 8220-8228 [E9-3840]

Agencies

• Commodity Futures Trading Commission

[Federal Register Volume 74, Number 35 (Tuesday, February 24, 2009)]
[Proposed Rules]
[Pages 8220-8228]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-3840]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 4

RIN 3038-AC38


Commodity Pool Operator Periodic Account Statements and Annual 
Financial Reports

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rules.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is proposing to amend its regulations governing the periodic 
account statements that commodity pool operators (``CPOs'') are 
required to provide to commodity pool participants and the annual 
financial reports that CPOs are required to provide to commodity pool 
participants and file with the National Futures Association (``NFA''). 
The proposed amendments would: Specify detailed information that must 
be included in the periodic account statements and annual reports for 
commodity pools with more than one series or class of ownership 
interest; clarify that the periodic account statements must disclose 
either the net asset value per outstanding participation unit in the 
pool, or the total value of a participant's interest or share in the 
pool; extend the time period for filing and distributing annual reports 
of commodity pools that invest in other funds; codify existing 
Commission staff interpretations regarding the proper accounting 
treatment and financial statement presentation of certain income and 
expense items in the periodic account statements and annual reports; 
streamline annual reporting requirements for pools ceasing operation; 
and clarify and update several other requirements for periodic and 
annual reports prepared and distributed by CPOs.

DATES: Comments must be received on or before March 26, 2009.

ADDRESSES: You may submit comments, identified by RIN 3038-AC38 by any 
of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov/
search/index.jsp. Follow the instructions for submitting comments.
     E-mail: secretary@cftc.gov. Include ``Commodity Pool 
Operator Periodic and Annual Reports'' in the subject line of the 
message.
     Fax: (202) 418-5521.
     Mail: Send to David Stawick, Secretary, Commodity Futures 
Trading Commission, 1155 21st Street, NW., Washington, DC 20581.
     Courier: Same as Mail above.
    All comments received will be posted without change to https://
www.cftc.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Eileen R. Chotiner, Futures Trading 
Specialist, at (202) 418-5467, Division of Clearing and Intermediary 
Oversight, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW., Washington, DC 20581. Electronic mail: 
echotiner@cftc.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    Commission Regulation 4.22(a) \1\ requires a registered CPO to 
distribute an account statement to each participant in each commodity 
pool that it operates within 30 days of the end of the reporting 
period.\2\ Regulation 4.22(c) requires a CPO to file with NFA, and to 
provide to each participant, an annual financial report, audited by an 
independent public accountant, for each commodity pool that it operates 
within 90 days of the end of the pool's fiscal year or the permanent 
cessation of the pool's trading.\3\
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    \1\ The regulations of the Commission cited in this release may 
be found at 17 CFR Ch. I (2008).
    \2\ Pursuant to Regulation 4.22(b), account statements must be 
provided monthly for pools with net asset values greater than 
$500,000 at the beginning of the pool's fiscal year; otherwise, 
account statements may be provided quarterly.
    \3\ NFA is a registered futures association pursuant to Section 
17 of the Commodity Exchange Act (``Act''), 7 U.S.C. 21.
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    CPOs operating pools offered solely to qualified eligible persons 
(``QEPs'') pursuant to Regulation 4.7 may claim relief from certain 
reporting requirements.\4\ In this regard, a CPO that has claimed an 
exemption from certain regulatory requirements pursuant to Regulation 
4.7 must distribute periodic account statements to each participant of 
an exempt pool at least quarterly, and also must file with NFA and 
distribute to participants in the exempt pool an annual report within 
90 days of the end

[[Page 8221]]

of the pool's fiscal year or the permanent cessation of the pool's 
trading. Annual reports for Regulation 4.7 exempt pools are not 
required to be audited by an independent public accountant.\5\
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    \4\ Regulation 4.7(a) defines ``qualified eligible person'' to 
include participants that meet certain eligibility criteria 
regarding their net worth, income, and investments.
    \5\ Regulation 4.7(b)(3) permits the CPO of a Regulation 4.7-
qualifying pool to claim exemption from the specific annual report 
content requirements and annual report certification requirements, 
respectively, of Regulations 4.22(c) and (d).
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II. Proposed Changes to Periodic Account Statements and Annual 
Financial Reports

A. Periodic Account Statements for Regulation 4.7--Exempt Pools

    Regulation 4.7(b)(2) requires the CPO of a Regulation 4.7-exempt 
commodity pool to provide each participant in the pool with an account 
statement that must indicate: (1) The net asset value of the exempt 
pool as of the end of the reporting period; (2) the change in net asset 
value of the exempt pool from the end of the previous reporting period; 
and (3) the net asset value per outstanding unit of participation in 
the exempt pool as of the end of the reporting period. The account 
statement must be prepared in accordance with generally accepted 
accounting principles (``GAAP''), signed and affirmed by the CPO, and 
distributed to pool participants no less frequently than quarterly 
within 30 calendar days of the end of the reporting period.
    The Commission is proposing to amend Regulation 4.7(b)(2) to 
clarify that the periodic account statement provided to each pool 
participant must disclose either the net asset value per outstanding 
participation unit, or the total value of the participant's interest or 
share, in the commodity pool as of the end of the reporting period. The 
proposal is intended to ensure that pool participants receive 
sufficient information to determine the value of their investments in 
the commodity pool from the periodic account statement. Furthermore, 
the proposal is consistent with the comparable provision of Regulation 
4.22(a) for pools that are not Regulation 4.7-exempt, which specifies 
that either the net asset value per outstanding participation unit or 
the total value of the participant's interest or share in the pool be 
included in an account statement.

B. Series Pools and Pools With Multiple Classes of Ownership Interests

    A commodity pool may contain an organizational structure that 
includes more than one series or class of ownership interest. Different 
ownership series or classes may exist due to differences in fees and 
expenses, currency denomination, trading, cash management strategies, 
and other aspects of the operation of the pool.
    GAAP provides guidance regarding the presentation of financial 
statements for series funds \6\ and for investment funds with multiple 
ownership classes,\7\ and pool financial statements prepared pursuant 
to both Regulation 4.22(c) and Regulation 4.7(b)(3) must be in 
accordance with GAAP. Commission staff has received many questions from 
CPOs, their attorneys and accountants, and NFA regarding the proper 
presentation of periodic account statements and annual financial 
reports for series funds and multi-class pools. Therefore, the 
Commission is proposing to amend Regulations 4.7(b)(2) and 4.22(a) to 
specify that, for series funds structured with a limitation on 
liability among the different series, the periodic account statement 
may include only the information for the series being reported, 
although additional information on other series may be provided; 
however, for other series funds and for multi-class funds, net asset 
value and other information required by the regulations must be 
presented for both the pool as a whole as well as for each series or 
class of ownership interest.
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    \6\ American Institute of Certified Public Accountants 
(``AICPA'') Audit and Accounting Guide, Investment Companies 
paragraph 7.03.
    \7\ AICPA Audit and Accounting Guide, Investment Companies, 
Chapter 5, Complex Capital Structures.
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    The Commission also is proposing to amend Regulations 4.7(b)(3) and 
4.22(c) to clarify that, for series funds structured with a limitation 
on liability among the different series, the annual report may include 
only the information for the series being reported. For both periodic 
account statements and annual financial reports, CPOs of series funds 
with a limitation on liability among the different series are not 
precluded by these amendments from providing financial information to 
participants for other series or classes of the pool.

C. Changes to Extension Provisions Under Regulation 4.22(f)

    Regulations 4.7(b)(3) and 4.22(c) require a CPO to provide to each 
participant in each commodity pool that the CPO operates an annual 
report for the commodity pool within 90 calendar days of the end of the 
pool's fiscal year. The CPO is further required to submit a copy of the 
annual report electronically to NFA.
    Regulation 4.22(f)(2) permits a CPO of a commodity pool that 
invests in other funds (referred to as a ``fund of funds'') to claim up 
to an additional 60 days to distribute the pool's annual report to pool 
participants and to file a copy with NFA. CPOs may claim the Regulation 
4.22(f)(2) fund of funds 60-day extension by filing with NFA an initial 
notice, containing specified representations, in advance of the annual 
report's due date for the first year the extension is claimed. In 
subsequent years, the CPO may confirm that the circumstances 
necessitating the relief continue to apply by restating certain 
representations in a statement filed at the same time as the pool's 
annual report.
    Regulation 4.22(f)(2) currently is applicable only to CPOs that 
distribute annual reports that are audited by independent public 
accountants. CPOs of commodity pools that are permitted to distribute 
unaudited annual financial reports to participants pursuant to 
Regulation 4.7(b)(3) may request from NFA up to a 90-day extension of 
the filing deadline under Regulation 4.22(f)(1).
    In adopting Regulation 4.22(f)(2), the Commission anticipated, 
based upon its experience, that a substantial majority of the CPOs of 
funds of funds would be able to distribute to the participants and to 
file with NFA the pools' annual reports within 150 days of the end of 
the respective commodity pool's fiscal year.\8\ The Commission further 
noted that CPOs that could not meet the 150-day filing timeframe under 
Regulation 4.22(f)(2) could continue to request an extension of time to 
distribute and to file the pools' annual reports pursuant to Regulation 
4.22(f)(1).\9\
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    \8\ 65 FR 81333 at 81334 (December 26, 2000).
    \9\ However, the CPO of a commodity pool that operated as a fund 
of funds and claimed an automatic extension of 60 days pursuant to 
Regulation 4.22(f)(2) for the filing of the pool's annual report 
would be limited to requesting no more than an additional 30-day 
extension under Regulation 4.22(f)(1). Thus, under Regulations 
4.22(f)(1) and (2), all pool annual reports must be distributed to 
pool participants and filed with NFA within 180 days of the end of 
the pool's fiscal year.
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    In recent years, however, the number of CPOs that have requested 
additional extensions under Regulation 4.22(f)(1) after having claimed 
the 60-day extension under Regulation 4.22(f)(2) has increased 
significantly. According to data provided by NFA for pool annual 
reports with a fiscal year ending in 2006, CPOs claimed the 60-day fund 
of funds extension under Regulation 4.22(f)(2) for over 650 commodity 
pools. Subsequently, CPOs of approximately 50 percent of such pools 
filed requests with NFA for an additional extension of up to 30 
calendar days pursuant to Regulation 4.22(f)(1). Similarly, for

[[Page 8222]]

pools with fiscal years ending in 2007, CPOs claimed the 60-day filing 
extension under Regulation 4.22(f)(2) for over 500 commodity pools. 
Subsequently, CPOs of approximately 45 percent of such pools filed 
requests with NFA for an additional extension of up to 30 calendar days 
under Regulation 4.22(f)(1).
    To address this issue, the Commission is proposing to extend from 
60 to 90 days the maximum amount of additional time that a CPO that 
operates a commodity pool that invests in other funds may claim under 
Regulation 4.22(f)(2). Therefore, under the proposal, annual financial 
reports for funds of funds may be distributed to pool participants and 
filed with NFA a maximum of 180 days from the end of a qualifying 
pool's fiscal year. This amendment would eliminate the need for CPOs to 
file an additional request under Regulation 4.22(f)(1), and also would 
reduce the administrative burden to NFA of processing these additional 
requests. The Commission, however, expects CPOs to distribute pool 
annual reports to participants as soon after the end of the pool's 
fiscal year-end as possible, notwithstanding the availability of the 
additional extension.\10\
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    \10\ In this regard, the Commission would expect that pool 
annual financial reports would be issued to the pool's participants 
shortly after the completion of the reports by the independent 
public accountant or, for unaudited annual financial reports, by the 
CPO.
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    The 180-day timeframe for CPOs of funds of funds to prepare and to 
distribute pool annual reports also would be consistent with the 
timeframe within which registered investment advisers distribute annual 
reports to investors in funds of funds under the Securities and 
Exchange Commission's (``SEC's'') custody rule.\11\ Registered 
investment advisers are not required to comply with certain provisions 
of the SEC's custody rule with respect to the accounts of limited 
partnerships, limited liability companies, or other pooled investment 
vehicles that are subject to audit at least annually and for which the 
audited financial statements are distributed to partners, members or 
other beneficial owners within 120 days of the fund's fiscal year-end 
or, in the case of a fund of funds, within 180 days of the end of its 
fiscal year.
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    \11\ 17 CFR 275.206(4)-2(b)(3). ``Fund of funds'' is defined for 
purposes of the custody rule at 275.206(4)-2(b)(3)(c)(4).
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    The Commission also is proposing to extend the application of 
Regulation 4.22(f)(2) to CPOs that operate Regulation 4.7-exempt 
commodity pools that do not prepare audited financial statements 
certified by independent public accountants. As previously noted, a CPO 
operating a pool that meets the criteria of Regulation 4.7 may claim 
exemption from certain annual reporting requirements, including the 
requirement of Regulation 4.22(d) that the financial statements 
contained in the annual report be audited by an independent public 
accountant.
    Regulation 4.22(f)(2) was adopted, in large part, to address 
difficulties that CPOs experience in obtaining timely information about 
their pools' investments in other funds in order for the pools' public 
accountants to prepare audited financial statements. Annual reports 
that are not audited, however, are still required to be prepared in 
accordance with GAAP. The CPOs of unaudited funds of funds have 
explained that they often experience difficulties in obtaining the 
information necessary from investee funds to complete the preparation 
of the pools' financial statements by the time specified in Regulation 
4.22(c). In order to complete the financial statements of the pools, 
the CPOs need information establishing the value of the pools' material 
investments from the investee funds. These investments may be in a 
number of investee funds, such as other commodity pools, securities 
funds, or hedge funds, both domestic and offshore. The information that 
the CPOs require frequently is unavailable until the investee funds 
complete their own audited financial statements. Thus, in many cases, 
the CPOs cannot obtain the information they require about the investee 
funds in time for the annual financial reports of the pools to be 
prepared and distributed by the due date. Under the proposed amendment, 
CPOs of funds of funds for which unaudited annual reports are prepared 
also would be able to claim the extension under Regulation 4.22(f)(2).
    In addition, the Commission is proposing to remove the requirement 
that a CPO that has filed a claim of extension under Regulation 
4.22(f)(2) for a particular pool must restate certain representations 
in a statement filed with the pool's annual reports in subsequent 
years. Instead, having filed the initial claim, the CPO will be 
presumed to operate the pool as a fund of funds and otherwise continue 
to qualify for the automatic extension; however, if the pool no longer 
operates as a fund of funds, then its CPO must provide NFA with notice 
of the change in the pool's status and must file the pool's annual 
report within 90 days of the pool's fiscal year-end, as required by 
Regulation 4.22(c).
    If the proposed extension of the time period under Regulation 
4.22(f)(2) is adopted, CPOs that have claimed the fund of funds 
extension will not need to file new notices with NFA in order to claim 
the additional 30 days to file and to distribute their qualifying 
pools' annual reports. As noted previously, however, the Commission 
expects CPOs to file and to distribute their pools' annual reports as 
soon as possible after the pools' fiscal year-ends to ensure that 
participants obtain information that is as current as possible.

D. Streamlined Filing Procedures for Liquidating Pools

    Regulation 4.22(c) requires a CPO of a commodity pool that has 
ceased operation to distribute a final annual report to commodity pool 
participants and to file a copy with NFA within 90 days of the pool's 
permanent cessation of trading, but in no event longer than 90 days 
after funds are returned to pool participants. Due to confusion created 
by the reference in Regulation 4.22(c) to two possible timeframes for 
filing a final annual report, the Commission is proposing to amend this 
regulation to specify that the final annual report must be filed no 
later than 90 days after the pool ceases trading. A CPO that has not 
distributed all funds to participants by the date that the report is 
issued must provide information about the return of funds to pool 
participants, including an estimate of the value of funds remaining to 
be distributed and the anticipated timeframe of when those funds are 
expected to be returned. When the remaining funds are returned to 
participants, the CPO should send a notice to all participants and to 
NFA.
    The Commission further acknowledges that the cost of preparing 
audited financial statements, which may reduce significantly the amount 
of funds available to return to participants, particularly where the 
pool has ceased operation due to material trading and investment 
losses, may exceed the benefits to the pool participants. In these 
situations, the most significant information for participants is 
disclosure of the factors that led to the decline in the pool's value, 
the fees and expenses attributable to the pool leading up to the 
liquidation, the manner in which the pool's operations were concluded, 
and when and how much of the participants' investment has been, or will 
be, returned.
    The Commission therefore is proposing to simplify the reporting 
requirements for CPOs of pools ceasing operation in order to assist 
them in providing participants with the most timely and meaningful 
information.

[[Page 8223]]

This information would include a Statement of Operations and a 
Statement of Changes in Net Assets since the last fiscal year-end 
annual report, an explanation of the winding down of the pool's 
operations, and a written disclosure that all interests in, and assets 
of, the pool have been redeemed, distributed, or transferred on behalf 
of the participants. If the report would otherwise be required to be 
audited pursuant to Regulation 4.22(d), the CPO may prepare an 
unaudited annual report provided that the CPO obtains from all 
participants, and files with NFA, written waivers of each of the 
participant's rights to receive an audited annual report. This latter 
provision is consistent with case-by-case exemptions that Commission 
staff has provided to CPOs of pools that have ceased operation.
    In order to clarify that the requirement to file an annual 
financial report upon the permanent cessation of trading applies to 
Regulation 4.7-exempt pools, the Commission proposes to add to the 
introductory text of Regulation 4.7(b)(3) the language that appears in 
the introductory text of Regulation 4.22(c) to this effect, subject to 
the clarification proposed above. Commission staff has confirmed that 
Regulation 4.7-exempt pools are subject to the same requirements as 
non-exempt pools with respect to their final annual reports in the 
annual report guidance letter issued to CPOs each year by Commission 
staff.\12\
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    \12\ CPO guidance letters issued by the Commission's Division of 
Clearing and Intermediary Oversight (``DCIO'') are available at 
https://www.cftc.gov/industryoversight/intermediaries/
guidancecporeports.html.
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E. Codifying Existing Policies Regarding Special Allocations of 
Ownership Equity, Unrealized Gains and Losses, and Investee Funds' 
Income and Expenses

1. Special Allocations of Ownership Interests
    CFTC Interpretative Letter No. 94-3, Special Allocations of 
Investment Partnership Equity,\13\ describes the procedures for 
reporting in a pool's annual financial report special allocations of 
partnership equity from limited partners to the general partner.\14\ 
These special allocations must be recognized in the financial 
statements in the same reporting period as the net income, interest 
income, or other basis of computation of the special allocation; 
classified in the Statement of Operations as either an expense or a 
special allocation of net income; separately reported in the Statement 
of Partnership Equity; and deducted in the computation of the GAAP-
required disclosures.
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    \13\ Available at https://www.cftc.gov/tm/tm94-03.htm.
    \14\ ``Special allocations'' are generally distributions of 
profits or transfers of equity that exceed a class's proportionate 
share of profits based upon the class's proportionate capital 
contribution to the pool. As noted in Interpretative Letter No. 94-
3, a partnership agreement may often provide that a special 
allocation is to be made for the advisory services provided by the 
general partner, and that the amount of the allocation is based upon 
a percentage of the partnership's net income.
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    At the time Interpretative Letter 94-3 was issued, no specific 
accounting standard existed to address special allocations of 
partnership equity. Subsequently, the AICPA issued the Audit and 
Accounting Guide, Audits of Investment Companies, which contains a 
provision stating that special allocations of investment partnership 
equity can be accounted for in one of two ways. Pursuant to the Audit 
and Accounting Guide, the amounts of any special allocations may be 
presented in either the Statement of Operations or the Statement of 
Changes in Partners' Capital in accordance with the partnership 
agreement, and the method of computing such payments or allocations 
should be described in the notes to the financial statements.\15\
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    \15\ AICPA Audit and Accounting Guide, Investment Companies, 
paragraph 7.49.
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    Commission staff has consistently taken the position that requiring 
a CPO to report a special allocation in a pool's Statement of 
Operations provides the pool's participants with more complete 
information of the impact of a distribution of a special allocation to 
their respective capital accounts, notwithstanding the flexibility 
provided by the Audit and Accounting Guide.\16\ The Commission, 
therefore, is proposing to amend Regulation 4.22(e) to incorporate the 
requirements currently detailed in Interpretative Letter No. 94-3. CPOs 
may continue to use the sample financial statement reporting formats 
set forth in the Interpretative Letter.
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    \16\ This position has been stated in DCIO's annual CPO guidance 
letters.
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2. Combining Gains and Losses on Regulated Futures Transactions With 
Gains and Losses on Non-CFTC Regulated Transactions in the Statement of 
Operations
    Regulation 4.22(e) provides that a commodity pool's Statement of 
Operations must itemize the pool's total realized net gain or loss from 
commodity interest trading and the change in unrealized net gain or 
loss in commodity interest positions during the pool's fiscal year. 
Regulation 4.22(e) does not provide explicitly for separate disclosure 
on the Statement of Operations of realized and unrealized gains and 
losses on non-commodity interest trading activities.
    In 1995, Commission staff issued an interpretation of the 
requirements for itemization of realized and unrealized gains or losses 
in the commodity pool's Statement of Operations.\17\ The interpretation 
noted that trading is often done by commodity pools using strategies 
that combine financial instruments from different types of markets, 
and, to reflect meaningfully the results of such trading strategies, 
permits the separate reporting of realized and unrealized gains and 
losses that combines the results of commodity interest trading and non-
commodity interest trading that are part of the same trading strategy. 
The interpretation further noted that reporting realized and unrealized 
gains and/or losses for commodity interest transactions separately from 
other financial instruments that are part of the pool's trading 
strategy may be misleading to pool participants as the separate 
reporting may distort the real results of the pool's trading 
strategies.
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    \17\ CFTC Letter No. 95-52, Comm. Fut. L. Rep. (CCH) ] 26,421.
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    In order to formally establish staff's interpretation, the 
Commission is proposing to amend Regulation 4.22(e) to state that 
realized and unrealized gains and losses on regulated commodities 
transactions presented in the Statement of Operations of a commodity 
pool may be combined with realized or unrealized gains and losses, 
respectively, from non-commodity interest trading, provided that the 
gains and losses to be combined are part of a related trading strategy. 
Furthermore, gains or losses from foreign currency translations and 
conversions also may be included with the related trading strategy, or 
reported separately.\18\
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    \18\ The proposed treatment of gains or losses from foreign 
currency translation is consistent with AICPA Audit and Accounting 
Guide, Audits of Investment Companies, paragraphs 7.51 and 7.54.
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3. Fees and Expenses of Investee Funds
    Commission Regulation 4.22(e) requires a CPO to itemize in the 
Statement of Operations brokerage commissions, management fees, 
advisory fees, incentive fees, interest income and expense, total 
realized net gain or loss from commodity interest trading, and change 
in unrealized net gain or loss on commodity interest positions during 
the pool's fiscal year directly incurred by the pool during the course 
of the reporting period. A purpose of this provision is to ensure

[[Page 8224]]

that pool participants receive a detailed listing of the fees and other 
expenses incurred by the pool for the reporting period.
    For over a decade, consistent with the policy of detailed 
disclosure of material fees and expenses set forth in Regulation 
4.22(e), Commission staff has encouraged CPOs to disclose separately in 
pool annual reports income received from, and fees paid to, investee 
pools.\19\ Specifically, CPOs were encouraged to disclose in the notes 
to the financial statements the amounts of management and incentive 
fees and expenses indirectly incurred as a result of investing in any 
fund where the investment in the fund exceeded five percent of the 
pool's net asset value. Commission staff took the position that such 
income, fees, and expenses should be disclosed separately for each fund 
in which a CPO invested five or more percent of a pool's net asset 
value. Income, fees, and expenses incurred from investments in one or 
more funds where each investment in a fund represented less than five 
percent of the pool's net asset value could be combined and reported in 
the aggregate; the total income on the detail schedule should agree 
with the amount of income reported for the income from investments in 
other funds in the pool's Statement of Operations.\20\ The rationale 
for this disclosure is that such information is material for pool 
participants to comprehend fully the investment strategy and fee 
structure of a commodity pool. In addition, the five percent threshold 
is consistent with the reporting thresholds set forth in the relevant 
accounting requirements regarding disclosure of investments in other 
funds.\21\
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    \19\ Commission staff has discussed these disclosures in the 
annual CPO guidance letters.
    \20\ Fees and expenses are generally reported net of any income 
by the investee fund to the CPO.
    \21\ AICPA Statement of Position (``SOP'') 03-04, Reporting 
Financial Highlights and Schedule of Investments by Nonregistered 
Investment Partnerships: An Amendment to the Audit and Accounting 
Guide, Audits of Investment Companies.
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    Accordingly, the Commission is proposing that information on the 
amounts of income and expenses associated with a pool's investments in 
investee funds, and identifying by name the investee funds in which 
investments exceed five percent of the pool's net assets, be required 
in annual reports for pools prepared under both Regulation 4.22(c) and 
Regulation 4.7(b)(3).

F. Use of GAAP

1. Regulations 4.22(c) and 4.7(b)(3)
    Commission regulations require that audited and unaudited financial 
statements, as well as periodic account statements, be presented and 
computed in accordance with GAAP. This provision consistently has been 
interpreted by Commission staff to mean GAAP as established in the 
United States (``U.S. GAAP''). Nevertheless, Commission staff has, on a 
case-by-case basis, provided limited relief to CPOs that operate 
commodity pools organized under the laws of a foreign jurisdiction by 
allowing the financial statements of such pools to be prepared and 
presented in accordance with International Financial Reporting 
Standards (``IFRS'') instead of U.S. GAAP.\22\ In cases where staff has 
provided relief, the relief was conditioned upon the offshore pool 
following certain key elements of U.S. GAAP standards, including 
preparing a condensed Schedule of Investments; \23\ reporting special 
allocations of partnership equity in accordance with CFTC 
Interpretative Letter 94-3, proposed to be codified as Regulation 
4.22(e)(2); and, in the event that IFRS would require consolidated 
financial statements for the pool, adequately reporting results of 
operations and financial position specific to each class of the pool's 
investors. In addition, using accounting standards other than U.S. GAAP 
must not conflict with any representations made to participants or 
potential participants in the pool.
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    \22\ The annual CPO guidance letters issued by Commission staff 
have discussed the conditions under which such exemptions may be 
granted and the procedure for making exemption requests. See, e.g., 
Section III of the January 16, 2008 annual guidance letter at http:/
/www.cftc.gov/stellent/groups/public/@iointermediaries/documents/
generic/cpoannualguidanceletter2007.pdf.
    \23\ As required by AICPA SOP 95-2, subsequently amended by SOP 
01-1 and SOP 03-4.
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    Because these criteria under which CPOs have been granted relief 
from the requirement to prepare pool financial reports in accordance 
with U.S. GAAP have remained constant, the Commission is proposing that 
CPOs be permitted to claim relief to prepare financial statements 
pursuant to IFRS by filing a notice that includes representations 
regarding the operations of their offshore pools, the preparation of 
the pools' financial statements in accordance with IFRS, and the 
additional information that will be included in the reports in order 
for the financial statements to be consistent with U.S. GAAP. If IFRS 
would require consolidated financial statements for a pool, such as 
those with complex capital structures (for example, master-feeder 
structures or funds of funds), such financial statements must contain 
disclosures that adequately report results of operations and financial 
position specific to each class of the pool's investors.
    Under the proposal, the notice must be filed with NFA prior to the 
due date for the report, and the CPO can continue to prepare annual 
reports for future years in accordance with IFRS as long as all 
representations made in the initial notice remain in effect. A single 
notice may be filed for more than one pool operated by the CPO as long 
as all the representations in the notice apply to each of the pools 
named therein.
    Commission staff also has provided relief on a case-by-case basis 
to CPOs operating offshore commodity pools permitting the use of 
accounting standards established in other jurisdictions, including the 
United Kingdom, Ireland, and Luxembourg. However, the Commission 
currently is proposing to establish the notice procedure solely for 
pools that are following IFRS, due to IFRS's global nature and the 
various efforts under way in the U.S. and other countries to achieve 
convergence between IFRS and local accounting standards.\24\ CPOs of 
offshore pools that meet the criteria specified in proposed Regulation 
4.22(d)(2) but are using accounting standards other than IFRS may 
continue to seek case-by-case relief from the U.S. GAAP requirement by 
filing relief requests with Commission staff.
---------------------------------------------------------------------------

    \24\ See, e.g., the February 27, 2006 Memorandum of 
Understanding between the Financial Accounting Standards Board and 
the International Accounting Standards Board on convergence of IFRS 
and U.S. GAAP: https://www.fasb.org/intl/mou_02-27-06.pdf.
---------------------------------------------------------------------------

2. GAAP Requirement in Regulation 4.13
    Regulation 4.13 provides an exemption from registration for CPOs 
that operate only one pool at a time, for which no advertising is done 
and no compensation is received; or that operate pools that include no 
more than 15 participants each, and the aggregate subscriptions to all 
pools do not exceed $400,000. In 2003, the Commission adopted 
additional registration exemptions for CPOs of pools whose participants 
are SEC ``accredited investors'' \25\ and that limit their trading of 
commodity interests to a de minimis amount, or that limit participation 
to certain highly sophisticated investors. In proposing the Regulation 
4.13(a)(3) and (4) exemptions that were adopted in 2003, the Commission 
stated that ``this relief is intended to encourage and

[[Page 8225]]

facilitate participation in the commodity interest markets by 
additional collective investment vehicles and their advisers, with the 
added benefit to all market participants of increased liquidity.'' \26\
---------------------------------------------------------------------------

    \25\ 17 CFR 230.501(a) (2008).
    \26\ 68 FR 12625 (March 17, 2003).
---------------------------------------------------------------------------

    Regulation 4.13(c) specifies that, if a CPO that has claimed an 
exemption from registration under Regulation 4.13 distributes an annual 
report to pool participants, the annual report must be presented and 
computed in accordance with GAAP and, if audited by an independent 
public accountant, certified in accordance with Regulation 1.16. The 
Commission has reconsidered this requirement and determined that it 
does not need to prescribe the form of an annual report that is not 
required by its regulations to be prepared, distributed, or filed. 
Accordingly, the Commission is proposing to remove the requirement in 
Regulation 4.13(c) that an annual report distributed to participants in 
a pool for which exemption under Regulation 4.13 has been claimed must 
be prepared in accordance with GAAP. The Commission expects, however, 
that CPOs will prepare their pools' reports pursuant to the terms of 
the pools' operating documents.

III. Updating References to Financial Schedules

    The Commission is proposing to update both the periodic and annual 
reporting provisions of Part 4 to conform with current accounting 
practices with respect to the references to various financial 
schedules. These changes would delete references to the Statement of 
Changes in Financial Position, which no longer exists; rename the 
Statement of Income (Loss) as the Statement of Operations; and rename 
the Statement of Changes in Net Asset Value as the Statement of Changes 
in Net Assets.

IV. Related Matters

Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires that agencies, in proposing regulations, consider the impact 
of those regulations 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 regulations on such entities 
in accordance with the RFA.\27\ The Commission has determined 
previously that registered CPOs are not small entities for the purpose 
of the RFA.\28\ The proposed amendments to Regulation 4.7 and 
Regulation 4.22 would apply only to registered CPOs. With respect to 
CPOs exempt from registration, the Commission has previously determined 
that a CPO is a small entity if it meets the criteria for exemption 
from registration under current Regulation 4.13(a)(2). The proposed 
amendment to Regulation 4.13 would remove an existing requirement and 
does not impose any significant burdens. Therefore, the Chairman, on 
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 
605(b), that the action proposed to be taken herein will not have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \27\ 47 FR 18618 (April 30, 1982).
    \28\ 47 FR at 18619.
---------------------------------------------------------------------------

A. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') \29\ imposes certain 
requirements on federal agencies (including the Commission) in 
connection with their conducting or sponsoring any collection of 
information as defined by the PRA. Pursuant to the PRA, the Commission 
has submitted a copy of this section to the Office of Management and 
Budget (``OMB'') for its review.
---------------------------------------------------------------------------

    \29\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    Collection of Information. (Rules Relating to the Operations and 
Activities of Commodity Pool Operators and Commodity Trading Advisors 
and to Monthly Reporting by Futures Commission Merchants, OMB Control 
Number 3038-0005.)
    The proposed amendments will not require a new collection of 
information on the part of any entities subject to the proposed 
amendments. Specifically, the proposed amendments will modify existing 
regulatory requirements by clarifying information that must be included 
in required periodic and annual reports. The expected effect of the 
proposed amended regulations will be to increase slightly the burden 
for this collection of information due to including specific fee and 
expense information in annual reports for funds of funds. This increase 
affects only annual reports for pools that invest in other funds and 
therefore are required to include the additional fee and expense 
information, and does not affect reports for pools that do not invest 
in other funds. In addition, because the previous submission of this 
collection contained a calculation error with respect to the total 
number of respondents, the burden has been recalculated and the 
corrected numbers are included in the current estimate. The Commission 
estimates the burden of this collection of information as follows:
    Estimated Annual Reporting Burden:
    Number of Respondents: 9,200.
    Total Annual Responses: 28,275.
    Total Annual Hours: 167,550.
    The Commission considers comments by the public on this proposed 
collection of information in--
    Evaluating whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have a practical 
use;
    Evaluating the accuracy of the Commission's estimate of the burden 
of the proposed collection of information, including the validity of 
the methodology and assumptions used;
    Enhancing the quality, utility, and clarity of the information to 
be collected; and
    Minimizing the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.
    Organizations and individuals desiring to submit comments on the 
information collection should contact the Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 10235, New 
Executive Office Building, Washington, DC 20503, Attn: Desk Officer of 
the Commodity Futures Commission. OMB is required to make a decision 
concerning the collection of information contained in these proposed 
regulations between 30 and 90 days after publication of this document 
in the Federal Register. Therefore, a comment to OMB is best assured of 
having its full effect if OMB receives it within 30 days of 
publication. This does not affect the deadline for the public to 
comment to the Commission on the proposed regulations. Copies of the 
information collection submission to OMB are available from the CFTC 
Clearance Officer, 1155 21st Street, NW., Washington, DC 20581 or (202) 
418-5160.

B. Cost-Benefit Analysis

    Section 15(a) of the Act 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

[[Page 8226]]

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 has considered the costs and benefits of this 
proposed regulation in light of the specific provisions of Section 
15(a) of the Act, as follows:
    1. Protection of market participants and the public. The proposed 
amendments should not affect the protection of market participants and 
the public as they primarily clarify existing reporting requirements 
for commodity pools.
    2. Efficiency and competition. The Commission anticipates that the 
proposed amendments will benefit efficiency by streamlining the annual 
report filing process for funds of funds and pools ceasing operation. 
The proposal will also reduce the number of requests for additional 
extensions for funds of funds that must be processed by NFA. The 
proposed amendments are considered by the Commission as benefiting 
efficiency and not impacting competition.
    3. Financial integrity of futures markets and price discovery. The 
proposed amendments should have no effect, from the standpoint of 
imposing costs or creating benefits, on the financial integrity of 
futures markets or the price discovery function of such markets.
    4. Sound risk management practices. The proposed amendments should 
have no effect, from the standpoint of imposing costs or creating 
benefits, on sound risk management practices.
    5. Other public interest considerations. The Commission believes 
that the proposed clarification of requirements for periodic reporting 
of multi-class or series pools is beneficial in that it results in the 
provision of more meaningful information to participants in those 
pools.
    After considering these factors, the Commission has determined to 
propose the amendments discussed above. The Commission invites public 
comment on its application of the cost-benefit provision. Commenters 
also are invited to submit any data that they may have quantifying the 
costs and benefits of the proposal with their comment letters.

List of Subjects in 17 CFR Part 4

    Advertising, Commodity futures, Commodity pool operators, Consumer 
protection, Reporting and recordkeeping requirements.

    For the reasons discussed in the preamble, the Commission proposes 
to amend 17 CFR part 4 as follows:

PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

    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. Amend Sec.  4.7 to revise paragraphs (b)(2)(iii), (b)(3)(i) 
introductory text, (b)(3)(i)(B), and (b)(3)(i)(C), and to add paragraph 
(b)(3)(i)(D) 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.

* * * * *
    (b) * * *
    (2) * * *
    (iii)(A) Either the net asset value per outstanding participation 
unit in the exempt pool as of the end of the reporting period, or
    (B) The total value of the participant's interest or share in the 
exempt pool as of the end of the reporting period;
    (C) Where the pool is comprised of more than one ownership class or 
series, the net asset value of the series or class on which the account 
statement is reporting, and the net asset value per unit or value of 
the participant's share, also must be included in the statement 
required by this paragraph (b)(2); except that, for a pool that is a 
series fund structured with a limitation on liability among the 
different series, the account statement required by this paragraph 
(b)(2) is not required to include the consolidated net asset value of 
all series of the pool.
    (3) Annual report relief. (i) Exemption from the specific 
requirements of Sec. Sec.  4.22(c) and (d); Provided, That within 90 
calendar days after the end of the exempt pool's fiscal year or the 
permanent cessation of trading, whichever is earlier, the commodity 
pool operator electronically files 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, affirmed in accordance with Sec.  
4.22(h) which contains, at a minimum:
* * * * *
    (B) A Statement of Operations for that year;
    (C) 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 and expenses associated with each investment in an investee 
fund that exceeds five percent of the pool's net assets. The income and 
expenses associated with an investment in an investee fund that is less 
than five percent of the pool's net assets may be combined and reported 
in the aggregate with the income and expenses of other investee funds 
that, individually, represent an investment of less than five percent 
of the pool's net assets;
    (D) 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.
* * * * *


Sec.  4.22  [Amended]

    3. Amend Sec.  4.13 by removing paragraph (c)(2) and redesignating 
paragraph (c)(3) as (c)(2).
    4. Amend Sec.  4.22 to revise paragraphs (a) introductory text, 
(a)(1) introductory text, (a)(2) introductory text, (c) introductory 
text, (c)(4), (c)(5), (d), (e) and (f)(2), and to add paragraphs 
(a)(2)(vii) and (c)(7) to read as follows:


Sec.  4.22  Reporting to pool participants.

    (a) Except as provided in paragraph (a)(4) of this section, each 
commodity pool operator registered or required to be registered under 
the Act must periodically distribute to each participant in each pool 
that it operates, within 30 calendar days after the last date of the 
reporting period prescribed in paragraph (b) of this section, an 
Account Statement, which shall be presented in the form of a Statement 
of Operations and a Statement of Changes

[[Page 8227]]

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 with paragraph (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:
* * * * *
    (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:
* * * * *
    (vii) 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.
* * * * *
    (c) Except as provided in paragraph (c)(6) of this section, each 
commodity pool operator registered or required to be registered under 
the Act must distribute an Annual Report to each participant in each 
pool that it operates, and must 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 pool's fiscal year or the permanent cessation of trading, whichever 
is earlier; Provided, however, that if during any calendar year the 
commodity pool operator did not operate a commodity pool, the pool 
operator must so notify the National Futures Association within 30 
calendar days after the end of such calendar year. The Annual Report 
must be affirmed pursuant to paragraph (h) of this section and must 
contain the following:
* * * * *
    (4) Statements of Operations, and Changes in Net Assets, for the 
period between:
    (i) The later of:
    (A) The date of the most recent Statement of Financial Condition 
delivered to the National Futures Association pursuant to this 
paragraph (c), or
    (B) The date of the formation of the pool, and
    (ii) The close of the pool's 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.
    (i) For a pool that invests in other funds, this information must 
include, but is not limited to, separately disclosing the amounts of 
income and expenses associated with each investment in an investee fund 
that exceeds five percent of the pool's net assets. The income and 
expenses associated with an investment in an investee fund that is less 
than five percent of the pool's net assets may be combined and reported 
in the aggregate with the income and expenses of other investee funds 
that, individually, represent an investment of less than five percent 
of the pool's net assets;
    (ii) 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, the commodity pool operator may provide the 
following in lieu of the annual report that would otherwise be required 
by Sec.  4.22(c) or Sec.  4.7(b)(3):
    (i) Statements of Operations and Changes in Net Assets for the 
period between:
    (A) The later of:
    (1) The date of the most recent Statement of Financial Condition 
filed with the National Futures Association pursuant to this paragraph 
(c), or
    (2) The date of the formation of the pool; and
    (B) The close of the pool's fiscal year or the date of the 
cessation of trading, whichever is earlier,
    (ii)(A) An explanation of the winding down of the pool's 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 yet been distributed or transferred to 
participants by the time that the final report is issued, disclosure of 
the value of assets remaining to be distributed and an approximate time 
frame of when the distribution will occur. At the time of the final 
distribution of the pool's assets, the commodity pool operator must 
provide written notice to each participant and to the National Futures 
Association that all interests in, and assets of, the pool have been 
redeemed, distributed or transferred on behalf of the participants.
    (iii) A report filed pursuant to paragraph (c)(7) of this section 
that would otherwise be required by Sec.  4.22(c) is not required to be 
certified in accordance with paragraph (d) of this section if the 
commodity pool operator obtains from all participants, and files with 
the National Futures Association no later than the time that the 
commodity pool operator files the Annual Report, written waivers of 
their rights to receive an audited Annual Report.
* * * * *
    (d)(1) The financial statements in the Annual Report must be 
presented and computed in accordance with generally accepted accounting 
principles consistently applied and must be certified by an independent 
public accountant. The requirements of Sec.  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 Sec.  1.16 of this chapter, except that the 
following requirements of that section shall not apply:
    (i) The audit objectives of Sec.  1.16(d)(1) of this chapter 
concerning the periodic computation of minimum capital and property in 
segregation;
    (ii) All other references in Sec.  1.16 of this chapter to the 
segregation requirements; and
    (iii) Sections 1.16(c)(5), (d)(2), (e)(2), and (f) of this chapter.
    (2)(i) The financial statements in the Annual Report required by 
this section or by Sec.  4.7(b)(3) may be presented and computed in 
accordance with International Financial Reporting Standards issued by 
the International Accounting Standards Board if the following 
conditions are met:
    (A) The pool is organized under the laws of a foreign jurisdiction;
    (B) The Annual Report will include a condensed schedule of 
investments, or, if required by the alternate accounting standards, a 
full schedule of investments;

[[Page 8228]]

    (C) The preparation of the pool's financial statements under 
International Financial Reporting Standards is not inconsistent with 
representations set forth in the pool's offering memorandum or similar 
document;
    (D) Special allocations of ownership equity will be reported in 
accordance with Sec.  4.22(e)(2); and
    (E) In the event that the International Financial Reporting 
Standards require consolidated financial statements for the pool, such 
financial statements must contain disclosures that adequately report 
results of operations and financial position specific to each class of 
the pool's investors.
    (ii) The commodity pool operator of a pool that meets the 
conditions specified in paragraph (d)(2) of this section may claim 
relief from the requirement in paragraph (d)(1) of this section by 
filing a notice with the National Futures Association, within 90 
calendar days of the end of the pool's fiscal year.
    (A) The notice must contain the name, main business address, main 
telephone number and the National Futures Association registration 
identification number of the commodity pool operator, and name and the 
identification number of the commodity pool.
    (B) The notice must include representations regarding the pool's 
compliance with each of the conditions specified in Sec.  
4.22(d)(2)(i)(A) through (D), and, if applicable, (d)(2)(i)(E); and
    (C) The notice must be signed by the commodity pool operator in 
accordance with paragraph (h) of this section.
    (e)(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 from commodity interest trading, and change in unrealized net gain 
or loss on commodity interest positions during the pool's fiscal year. 
Gains and losses on commodity interests need not be itemized by 
commodity or by specific delivery or expiration date.
    (2)(i) Any share of a pool's profits or transfer of a pool's equity 
which exceeds the general partner's or any other class's share of 
profits computed on the general partner's or other class's pro rata 
capital contribution are ``special allocations.'' Special allocations 
of partnership equity or other interests must be recognized in the 
pool's 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 pool's 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 a commodity pool may be 
combined with realized gains or losses from trading in non-commodity 
interest transactions, provided that the gains or losses to be combined 
are part of a related trading strategy. Unrealized gains or losses on 
open regulated commodity positions presented in the Statement of 
Operations of a commodity pool may be combined with unrealized gains or 
losses from open positions in non-commodity positions, provided that 
the gains or losses to be combined are part of a related trading 
strategy.
    (f) * * *
    (2) In the event a commodity pool operator finds that it cannot 
obtain information necessary to prepare annual financial statements for 
a pool that it operates within the time specified in either paragraph 
(c) of this section or Sec.  4.7(b)(3)(i), as a result of the pool 
investing in another collective investment vehicle, it may claim an 
extension of time under the following conditions:
    (i) The commodity pool operator must, within 90 calendar days of 
the end of the pool's fiscal year, file a notice with the National 
Futures Association, except as provided in paragraph (f)(2)(v) of this 
section.
    (ii) The notice must contain the name, main business address, main 
telephone number and the National Futures Association registration 
identification number of the commodity pool operator, and name and the 
identification number of the commodity pool.
    (iii) The notice must state the date by which the Annual Report 
will be distributed and filed (the