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February 09, 2006

Effective March 6, 2009, NFA withdrew this petition for rulemaking. View the Withdrawal of February 9, 2006 Petitions for Rulemaking letter for more information.

Via Overnight Delivery

Ms. Jean A. Webb
Office of the Secretariat
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581

Re: Petition for Rulemaking to Amend CFTC Regulations 4.7, 4.13 and 4.22

Dear Ms. Webb:

National Futures Association (NFA) respectfully petitions the Commission under CFTC Regulations 4.7, 4.13 and 4.22 to modify a number of reporting requirements currently imposed upon commodity pool operators. The information required by CFTC Regulation 13.2 follows.

I. Text of Proposed Rule Amendments

PART 4 - COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

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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.

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(b) Relief available to commodity pool operators.

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(2) Periodic reporting relief. Exemption from the specific requirements of Secs. 4.22(a) and (b); Provided, That a statement signed and affirmed in accordance with Sec. 4.22(h) is prepared and distributed to pool participants no less frequently than quarterly within 30 days after the end of the reporting period. This statement must indicate:

(i) The total net asset value of the exempt pool as of the end beginning of the reporting period;

(ii) The change in net asset value from the end of the previous reporting period; and The total amount of additions to the exempt pool during the reporting period;

(iii) The total amount of withdrawals from and redemption of participation units in the exempt pool during the reporting period;

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

(v) The total net asset value of the exempt pool as of the end of the reporting period; and

(vi)(A) 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.

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(3) Annual Report Relief. (i) Exemption from the specific requirements of Secs. 4.22(c) and (d); Provided, That within 90 calendar days after the end of the exempt pool's fiscal year, the commodity pool operator 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, signed and affirmed in accordance with the requirements of National Futures Association's electronic filing system, Sec. 4.22(h) which contains, at a minimum:

(A) A Statement of Financial Condition Assets and Liabilities as of the close of the exempt pool's fiscal year (elected in accordance with Sec. 4.22(g));

(B) A Statements of Income (Loss) Operations and Changes in Net Assets for that year; and

(C) Appropriate footnote disclosure and Disclosure of any other material information as may be necessary to make the required report not misleading.

(ii) Such Annual Report must be presented and computed in accordance with generally accepted accounting principles consistently applied, except that footnote disclosure, a Statement of Cash Flows, and a Schedule of Investments under the American Institute of Certified Public Accountants' Statement of Position 03-4 is not required. and, if certified by an independent public accountant, so certified in accordance with Sec. 1.16 as applicable.

(iii) Legend. (A) If a claim for exemption has been made pursuant to this section, the commodity pool operator must make a statement to that effect on the cover page of each Annual Report.

(B) If the Annual Report is not certified in accordance with Sec. 1.16 and the pool operator will not be preparing a certified Annual Report for a pool's particular fiscal year, the pool operator must make a statement to that effect state on the cover page of each Annual Report that the report is not certifiedand state that a certified audit will be provided upon the request of the holders of a majority of the units of participation in the pool who are unaffiliated with the commodity pool operator.

(iv) If the commodity pool operator prepares an Annual Report certified by an independent public accountant for a pool's particular fiscal year, the report must be certified in accordance with Sec. 1.16 as applicable. If the commodity pool operator files an Annual Report under section 4.7(b)(3)(i) and then prepares a certified report, it must electronically file the certified Annual Report with National Futures Association at the time it distributes the certified report to pool participants.

(v) Except as otherwise provided below, a commodity pool operator that makes a final distribution of all funds held by a pool must distribute to participants of that pool an Annual Report in conformity with subsections (b)(3)(i)(A)-(C) and (b)(3) (ii) for the fiscal year during which the pool made the final distribution of all pool funds (except that the Statement of Assets and Liabilities shall be as of the first month end after the permanent cessation of trading), and a written notice that all interests in, and assets of the pool have been redeemed, distributed or transferred on behalf of the participants and that no certified Annual Report will be prepared. The Annual Report and notice shall also be electronically filed with National Futures Association within 90 calendar days of the date of the final distribution of all funds held by the pool; provided, however, that a commodity pool operator must provide to participants and electronically file with National Futures Association a certified Annual Report upon receiving a request of the holders of a majority of the units of participation in the pool who are unaffiliated with the commodity pool operator.

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4.13 Exemption from registration as a commodity pool operator.

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(b)(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 represent in the notice of exemption that it has informed notify its the pool's participants in writing: (i) that it intends to withdraw from registration and claim the exemption,; (ii) whether it will continue to provide an Annual Report to pool participants; (iii) that it will not file with National Futures Association an Annual Report for the fiscal year during which the notice of exemption is submitted and for all subsequent years; and (iv) that it must provide each such participant was informed of its a right to redeem its interest in the pool prior to the person pool operator filing a notice of exemption from registration.

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(d)(1) Each person who applies for registration as a commodity pool operator subsequent to claiming relief under paragraph (a)(1) or (a)(2) of this section must include with its application the financial statements and other information required by 4.22(c)(1) through (5) for each pool that it has operated as an operator exempt from registration. That information must be presented and computed in accordance with generally accepted accounting principles consistently applied. If the person is granted registration as a commodity pool operator, it must comply with the provisions of this part with respect to each such pool.

(2) If a commodity pool operator either withdraws from registration and claims relief under paragraph (a)(3) or (a)(4) of this section or is registered as a commodity pool operator but claims an exemption under paragraph (a)(3) or (a)(4) of this section for one or more of its pools, the commodity pool operator is not required to file an Annual Report pursuant to 4.22(c) for the exempt pool for the fiscal year during which the claim for exemption is filed; provided that the operator includes the representations contained in the written notice to current participants required by (b)(2)(i)-(iv) above.

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(e)(2)(ii) Complies with paragraph (c)(1) of this section; and

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4.22 Reporting to Pool Participants.

(c) Except as provided in paragraph (c)(6) and (f) of this section, section 4.7(b)(3)(v) or section 4.13(d)(2), 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 file a copy of the Annual Report with the National Futures Association, within 90 calendar days after either the end of the pool's fiscal year or the permanent cessation of trading, whichever is earlier, but in no event longer than 90 days after funds are returned to pool participants date of any final distribution of all funds held by the pool, whichever occurs earliest; Provided, however, That if during any calendar fiscal year the commodity pool operator did not operate a commodity pool, the pool operator must so notify the National Futures Association within 30 90 calendar days after the end of such calendar fiscal year. The Annual Report must be electronically filed and affirmed in accordance with the requirements of National Futures Association's electronic filing system signed pursuant to paragraph (h) of this section and must contain the following:

(1) The net asset value of the pool as of the end of the current year and each of the pool's two preceding fiscal years.

(2)(i) The net asset value per outstanding participation unit in the pool as of the end of each of the current year and the pool's two preceding fiscal years, or (ii) The total value of the participant's interest or share in the pool as of the end of each of the current year and the pool's two preceding fiscal years.

(3) A statement of Financial Condition Assets and Liabilities as of the close end of the pool's current fiscal year and preceding fiscal year.

(4) Statement of Operations Income (Loss), Changes in Financial Position, and Changes in Net Assets Ownership Equity, for the period between (i) the later of: (A) the date of the most recent Statement of Assets and Liabilities Financial Condition delivered to National Futures Association the Commission pursuant to this paragraph (c), or (B) January 1, 1979, or (C) the date of the formation of the pool, and (ii) the close of the pool's fiscal year, together with Statements of Operations Income (Loss), Changes in Financial Position, and Changes in Net Assets Ownership Equity for the corresponding period of the pool's previous fiscal year.

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(e)(1) The Statements of Income (Loss) Operations required by this section must itemize brokerage commissions, management fees, advisory fees, incentive fees, interest income, interest 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) 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 instruments or contracts, provided that the gains and losses to be combined are part of a related trading strategy.

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(f)(1)(i) In lieu of the Annual Report required under paragraph (c) of this section, a commodity pool operator that makes a final distribution of funds held by a pool may distribute to participants of that pool unaudited financial statements for the fiscal year during which the pool made the final distribution of funds; Provided, however, that the commodity pool operator must also file with National Futures Association a written notice that all interests in, and assets of, the pool have been redeemed, distributed or transferred on behalf of the participants, and that all participants have waived in writing their rights to receive an audited Annual Report. The financial statements must contain, at a minimum:

    (1) A Statement of Assets and Liabilities as of the first month end after the permanent cessation of trading;

    (2) Statements of Operations and Changes in Net Assets for the period from the pool's prior fiscal year end to the first month end after the permanent cessation of trading; and

    (3) Disclosure of any other material information as may be necessary to make the required report not misleading; and

(f)(2) The financial statements must be presented and computed in accordance with generally accepted accounting principles consistently applied, except that footnote disclosure, a Statement of Cash Flows, and a Schedule of Investments under the American Institute of Certified Public Accountants' Statement of Position 03-4 are not required. The financial statements shall also be electronically filed with National Futures Association within 90 calendar days of the date the pool makes the final distribution of funds held by the pool, and a commodity pool operator must submit copies of the signed waivers by participants to National Futures Association upon request.

(f)(g)(1) In the event the commodity pool operator finds that it cannot distribute the Annual Report for a pool that it operates within the time specified in paragraph (c) of this section without substantial undue hardship, it may file with the National Futures Association an application for extension of time to a specified date not more than 90 calendar days after the date as of which the Annual Report was to have been distributed. The application must be made by the pool operator and must:

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(2) In the event a commodity pool operator finds that it cannot obtain information necessary to prepare an audited or unaudited Annual Report certified financial statements for a pool that it operates within the time specified in either paragraph (c) of this section, or 4.7(b)(3)(i) or 4.12(b)(iii), 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 National Futures Association, except as provided in paragraph (f)(g)(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 the 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 "Extended Date"), which must be no more than 150 180 calendar days after the end of the pool's fiscal year. The Annual Report must be distributed and filed by the Extended Date.

(iv) The notice must include representations by the commodity pool operator that:

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

    (B) The commodity pool operator has been informed by the certified public accountant selected engaged to audit the commodity pool's financial statements that specified information establishing the value of the Investments is necessary in order for the accountant to render an opinion on the commodity pool's financial statements. The notice must include the name, main business address, main telephone number, and contact person of the accountant; and

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

(v) For each fiscal year following the filing of the notice described in (f)(g)(2)(i) of this section, for a particular pool, it shall be presumed that the particular pool continues to invest in another collective investment vehicle and the commodity pool operator may claim the extension of time; provided, however, that if the particular pool is no longer investing in another collective investment vehicle, then the commodity pool operator must electronically file with National Futures Association a certified Annual Report within 90 days after the pool's fiscal year end accompanied by a notice indicating the change in the pool's status. by filing a statement containing the representations specified in paragraph (f)(2)(iv) of this section, at the same time as the pool's Annual Report.

(vi) Any notice or statement filed pursuant to paragraph (f)(g)(2) of this section must be signed by the commodity pool operator in accordance with paragraph (h)(i) of this section.

(3)(i) In the event the commodity pool operator finds that it cannot distribute the Annual Report by the Extended Date set forth in subsection (g)(2) of this section, the commodity pool operator may file with National Futures Association an application for extension of time to a specified date. The application must be made by the pool operator and must:

    (A) Contain the name, main business address, main telephone number, and the National Futures Association registration identification number of the commodity pool operator, and the name and the identification number of the commodity pool;

    (B) State the reasons for the requested extension;

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

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

    (E) Be filed with National Futures Association prior to the Extended Date.

(ii) For audited annual reports, the application must be accompanied by a letter from the public accountant stating:

    (A) The public accountant has read the application and agrees with the representations made by the commodity pool operator; and

    (B) There is no information from the part of the audit completed to date that would indicate that the commodity pool operator was or is not complying with the prohibition in 4.20(c) regarding the commingling of property of any commodity pool with the property of any other person.

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

    (A) Notify the commodity pool operator as to whether the requested extension has been granted or denied; or

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

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

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(h)(i)(1) Each Account Statement and Annual Report, including an Account Statement or Annual Report provided pursuant to 4.7(b) or 4.12(b), must contain an oath or affirmation that, to the best of the knowledge and belief of the individual making the oath or affirmation, the information contained in the document is accurate and complete; Provided, however, That it shall be unlawful for the individual to make such oath or affirmation if the individual knows or should know that any of the information in the document is not accurate and complete.

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(i)(j) The Account Statement or Annual Report may be distributed to a pool participant by means of electronic media if the participant so consents; Provided, That prior to the transmission of any Account Statement or Annual Report by means of electronic media, a commodity pool operator must disclose to the participant that it intends to distribute electronically the Account Statement or Annual Report or both documents, as the case may be, absent objection from the participant, which objection, if any, the participant must make no later than 10 business days following its receipt of the disclosure.

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(j)(k)(1) An Account Statement or Annual Report may contain a facsimile signature, Provided, That:

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II. Nature of NFA's Interest

As you know, NFA is a futures association registered under Section 17 of the Commodity Exchange Act. Pursuant to a December 18, 2002 Order, the Commission authorized NFA to maintain and serve as the official custodian of commodity pool operator ("CPO") Annual Reports and, therefore, CPOs are required to file their Annual Reports with NFA in accordance with Commission requirements. NFA is interested in ensuring that CPOs are regulated in the most efficient and effective manner. For the reasons explained below, NFA believes that the proposed changes to Commission Regulations will assist CPOs in complying with the Commission's filing requirements, without sacrificing any customer protections.

III. Supporting Arguments

Over the years, the Commission and NFA have experienced continuing problems with CPOs filing their pool Annual Reports late. Although there are many complicated issues associated with the late filing of these statements, one thing that is clear is that numerous CPOs find it extremely difficult to comply with the deadlines imposed in the current filing requirements. NFA believes that the bulk of the problem with late filings can be addressed through amendments to Commission rules.

In reaching this conclusion, NFA reviewed the 2004 pool statements that were filed late to determine if any patterns exist that might identify solutions to the problem. This analysis showed that most pool financial statements are received within 30 days of the deadline. However, a significant percentage of statements are over 30 days late. For 2004, 33% or 600 statements were filed more than 30 days after the filing deadline. Over ninety percent of these 600 pools were one of three types of pools - a 4.7 exempt pool, including funds of funds, a 4.13 exempt pool, or a liquidated pool. Within these three categories, 4.7 exempt pools accounted for 75% of the statements. Clearly, CPOs offering these types of pools find it difficult to comply with the current regulatory filing requirements.

NFA believes that the following proposed amendments to CFTC Regulations will make it easier for firms to comply with those requirements, without sacrificing any regulatory protections. NFA has discussed these proposed amendments with several public accounting firms, which have also found the current requirements difficult for CPOs to comply with and, therefore, indicated support for the amendments.

4.7 Exempt Pools Including Fund of Funds

CPOs offering 4.7 pools experience difficulties complying with the current requirements' deadlines because they must await valuation information from a third party regarding pool assets prior to preparing and filing statements. CPOs offering funds of funds, which have experienced tremendous growth in the last few years, encounter their own particular problems complying with the current requirements. Although Commission Regulations provide an automatic extension to CPOs offering funds of funds, which extends the due date from March 31st to May 31st and even allows for an extra 30 days to June 30 upon request, many CPOs offering these pools still file their Annual Reports late. These CPOs invest their fund in other funds and, therefore, must rely upon certified statements from these investee pools to complete their own certified statements. Additionally, to further complicate matters, these investee funds can themselves be tiered by being a fund of funds and, therefore, must await certified reports from other investee funds that may or may not have filing deadlines (e.g., off-shore or 4.13 exempt investee pools) to complete and file their own reports.

NFA believes that two issues need to be addressed relating to 4.7 pool Annual Reports. First, in the context of funds of funds, NFA believes it appropriate to amend current Regulation 4.22(f)(2) to lengthen the automatic extension for all fund of funds statements from 60 days to 90 days, with the ability to request additional time if the 90 days is not sufficient. NFA also recommends that the amount of additional time that can be requested due to circumstances beyond the CPO's control be to a specified date, and not be limited to 30 days. NFA must approve each one of these requests and we believe it will be more effective and efficient if pool operators' request the amount of time they believe they need, with NFA retaining the authority to approve or deny these requests.1

Lengthening the automatic extension for all fund of funds statements from 60 days to 90 days would primarily benefit single tier funds of funds and reduce the number of their statements filed late. However, this relief is limited and provides little, if any, benefit to a multi-tiered fund of funds that must await statements from its last investee fund to prepare its own Annual Report. NFA considered whether it would be beneficial to simply propose extending the due dates for all funds of funds to 9 months to accommodate these multi-tiered funds. But because such an extension also lengthens the due dates for investee funds of funds and provides no incentive for these investee funds to complete their own financials early, NFA felt that the last pool in the chain of a multi-tiered fund of funds would be in no better position than under the current regulations. In other words, that pool is still relying upon other pools that now have more time to complete their financial reports. Therefore, to provide relief to multi-tiered fund of funds, NFA believes it is critical to provide a more flexible approach for requesting an extension due to circumstances beyond the CPO's control to a specified date beyond the 90 day automatic extension.

As previously noted, of the 600 pool statements more than 30 days late for 2004, 75% are Regulation 4.7 exempt pools and of that percentage, about 40% are fund of funds. NFA therefore believes that extending deadlines should not be the only tool utilized to address the late filing issue for 4.7 pools, including funds of funds, that must rely on others to provide valuation information. CPOs offering 4.7 pools are relieved from the obligation to file an annual certified statement pursuant to Regulation 4.22 provided the CPO, in the alternative, files and distributes an unaudited Annual Report meeting the requirements of Regulation 4.7(b)(3). Unfortunately, certain provisions of that regulation make it impractical for a CPO to file an unaudited Annual Report.

Regulation 4.7(b)(3)'s unaudited Annual Report requirements, particularly those relating to the schedule of investments and appropriate footnote disclosure, are too complicated and simply not workable. Evidence of this can be seen by the fact that for 2004 less than 7% of the over 2,100 pools exempt under Regulation 4.7 availed themselves of this alternative. In addition, most CPOs offering 4.7 pools already have a requirement pursuant to their limited partnership agreements to provide audited statements to the pool's limited partners. Because of the complexity of the current requirement, many of these CPOs would have to incur the expense of hiring a CPA to prepare the interim "simplified" unaudited statement as well as an audited statement.

Given these circumstances, NFA proposes that Regulation 4.7(b)(3) be amended to ensure that the relief contemplated provides a true alternative for CPOs. Specifically, this rule's terms should be simplified to provide an incentive for CPOs to file unaudited financial reports within 90 calendar days of a pool's fiscal year end. Although these reports should be prepared in accordance with generally accepted accounting principles, NFA's proposed amendments to Regulation 4.7(b)(3) provide additional flexibility by eliminating the requirements of footnote disclosures, a Statement of Cash Flows, and a Schedule of Investments under the American Institute of Certified Public Accountants' Statement of Position 03-4. NFA's proposed amendments also require a CPO to file a certified Annual Report with NFA when it distributes the report to pool participants. NFA recognizes that in many instances CPOs would have to do both an unaudited and audited statement but, under the proposed simplified regulatory requirement, the CPO could prepare the unaudited statement itself without incurring the cost of a CPA.

4.13 Exempt Pools

When an existing commodity pool files for an exemption under Regulation 4.13, the pool is required to file a final Annual Report pursuant to Regulation 4.22(c). Thirteen percent of the 600 statements more than 30 days late in 2004 are from existing pools filing an exemption pursuant to Regulation 4.13(a)(3) and (a)(4)'s restrictions on futures trading and investor sophistication. NFA proposes amending Regulation 4.13(d) to provide that if a CPO either withdraws from registration and claims relief under Regulation 4.13 or is registered as a CPO but claims an exemption under Regulation 4.13 for one or more of its pools, the CPO is not required to file an Annual Report pursuant to 4.22(c) for the fiscal year when the claim for exemption is filed. However, the CPO must provide a written notice to current participants that it will not file an Annual Report for that fiscal year and all subsequent fiscal years.

NFA believes that current participants in pools filing an exemption notice pursuant to Regulation 4.13 receive sufficient regulatory protections pursuant to Regulation 4.13(e)(2) prior to the exemption becoming effective and no regulatory purpose is served by requiring these CPOs to file a final Annual Report.

Liquidated Pools

Just under 5% of the 600 pools more than 30 days late in filing an Annual Report for 2004 liquidated and distributed assets to participants. CPOs are reluctant to prepare and file final certified Annual Reports pursuant to Regulation 4.22(c) for these pools because the cost involved merely dilutes the assets that would otherwise be available for distribution to participants.

Over the years, NFA has received few, if any, complaints about pools upon liquidation. Therefore, we believe that relief is warranted with regard to this issue. NFA proposes amending Commission Regulation 4.22 to permit a CPO that makes a final distribution of funds held by a pool to distribute to participants and file unaudited financial statements for the fiscal year during which the pool made the final distribution. This statements must contain, at a minimum: (1) a Statement of Assets and Liabilities as of the first month end after the permanent cessation of trading; (2) Statements of Operations and Changes in Net Assets for the period from the pool's prior fiscal year end to the first month end after the permanent cessation of trading; and (3) disclosure of any other material information. The CPO must also distribute and file with NFA a written notice that all interests in, and assets of the pool have been redeemed, distributed or transferred on behalf of the participants and that all participants have waived in writing their rights to receive an audited Annual Report.

NFA's proposal requires the financial statements to be presented and computed in accordance with generally accepted accounting principles consistently applied, except that footnote disclosure, a Statement of Cash Flows, and a Schedule of Investments under the American Institute of Certified Public Accountants' Statement of Position 03-4 are not required. The Annual Report shall be electronically filed with NFA within 90 calendar days of the date the pool makes the final distribution of funds, and a CPO must submit copies of the signed waiver by participants to NFA upon request.

Since 4.7 exempt pools are limited to qualified eligible persons, NFA proposes a slightly different requirement upon the liquidation of these pools. Specifically, NFA proposes amending Regulation 4.7 to permit a CPO that makes a final distribution of funds held by a pool to distribute to participants and file an unaudited Annual Report for the fiscal year during which the pool made the final distribution. This report would have to meet the same requirements as set forth in proposed Regulation 4.22(f) but the CPO does not have to obtain from the participants a statement that all participants have waived in writing their rights to receive an audited Annual Report. Instead, the CPO would be required to provide to participants and electronically file with NFA a certified Annual Report upon receiving a request of the holders of a majority of the units of participation in the pool who are unaffiliated with the commodity pool operator.

Additional Clarifying Points

NFA also proposes several clarifying amendments to Part 4. For example, NFA also proposes amending Regulation 4.22(c)(1) and (2) to clarify that the comparative basis for the net asset value calculations referenced therein are the pool's current year and its preceding fiscal years. The proposed amendment also delete references to the Statement of Changes in Financial Position as it no longer exists and rename various other financial statements to conform with accounting practices.

III. Request for No-Action Relief

We recognize that, due to the requirements of the Administrative Procedures Act, proposed changes are unlikely to become effective before the 2005 Annual Reports are due. Therefore, we request that the Commission grant no-action relief to pools that comply with the proposed requirements and include that relief in the proposing release.

NFA respectfully requests that the Commission amend Regulations 4.7, 4.13 and 4.22 and provide temporary no-action relief as described above.

Very truly yours,
Thomas W. Sexton, III
Vice President and General Counsel


1 NFA believes this logic applies equally to any pool seeking an extension of a filing deadline. Therefore, NFA recommends that 4.22 also be amended to delete the 90 day limit for extensions imposed upon non-fund of funds pools seeking a filing extension (See 4.22(g)(1) formerly 4.22(f)(1).

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