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Notice I-99-03a

March 12, 1999

COMPLIANCE RULES

* * *

Part 2 - RULES GOVERNING THE BUSINESS CONDUCT
OF MEMBERS REGISTERED
WITH THE COMMISSION
* * *

RULE 2-35. CPO/CTA DISCLOSURE DOCUMENTS.

    (a) Required Delivery of Pool Disclosure Document and Statement of Additional Information

      (1) The Disclosure Document required by CFTC Regulation 4.21(a) must be as clear and concise as possible, using plain English principles, and must contain only the information required or allowed by subsection (b).

      (2) In addition to the Disclosure Document, the CPO of a commodity pool required to register its securities under the Securities Act of 1933 must deliver (or cause to be delivered) a separate Statement of Additional Information to a prospective participant prior to accepting or receiving funds from the prospective participant. The information that may be included in the Statement of Additional Information is described in subsection (c).

      (3) The CPO of a commodity pool that is not required to register its securities under the Securities Act of 1933 may, but is not required to, prepare and distribute a Statement of Additional Information containing any or all of the information described in subsection (c). The Statement of Additional Information may be bound together with the Disclosure Document as long as the Disclosure Document comes first. If the Statement of Additional Information is separately bound, the CPO is not required to provide it to a prospective participant unless the prospective participant requests it.

      (4) If a Statement of Additional Information is required under paragraph (2) of this section, the cover page of the Disclosure Document required under paragraph (1) of this section and the Statement of Additional Information required under paragraph (2) of this section shall state that the Disclosure Document is in two parts, both of which must be provided to a prospective participant prior to investing in the offered pool. If a Statement of Additional Information is prepared and separately distributed under paragraph (3) of this section, the cover page of the Disclosure Document required under paragraph (1) of this section shall state that the Statement of Additional Information is available free of charge and shall indicate how to obtain a copy of the Statement of Additional Information.

    (b) Disclosures Required in the Disclosure Document

      (1) The Disclosure Document required under subsection (a)(1) of this Rule must include the following:

        (i) The information required by CFTC Regulation 4.24, and the performance disclosures required by CFTC Regulation 4.25, provided, however, that a CPO may provide the performance information required under CFTC Regulation 4.25(c)(5) in the Statement of Additional Information; and

        (ii) Any other information necessary to understand the fundamental characteristics of the pool or keep the Disclosure Document from being misleading.

      (2) The Disclosure Document required under subsection (a)(1) for pools required to register their securities under the Securities Act of 1933 shall include any other information that the Securities and Exchange Commission or state securities administrators require to be included in Part I of a two-part disclosure document. For all other pools, Disclosure Documents required under subsection (a)(1) may include such information.

    (c) Information Included in the Statement of Additional Information

      (1) If the CPO of a commodity pool prepares a Statement of Additional Information, the cover page must include the following:

        (i) The name of the commodity pool;

        (ii) A brief statement that the Statement of Additional Information is the second part of a two-part document and that it should be read in conjunction with the pool's Disclosure Document, with instructions on how to obtain a free copy of the Disclosure Document;

        (iii) The date of the most recent Disclosure Document for the pool; and

        (iv) The date of the Statement of Additional Information.

      (2) The cover page must be immediately followed by a table of contents.

      (3) The Statement of Additional Information may also include:

        (i) Disclosures, not included in the Disclosure Document, that are required by the Securities and Exchange Commission or state securities administrators;

        (ii) Statements that expand on or explain the disclosures in the Disclosure Document, provided that the statements are not misleading or inconsistent with applicable statutes, rules, or regulations; and

        (iii) Any other information about the commodity pool; its investments; its CPO, CTA(s), service providers, and their principals and employees; the commodity futures markets; or any other markets, including cash markets, that affect the value of the pool's investments, provided that the information is not misleading or otherwise inconsistent with applicable statutes, rules, or regulations.

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