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November 07, 1996
Amendments to NFA Compliance Rule 2-13
CFTC Regulation § 4.21(a) allows CPOs to provide accredited investors with a notice of intended offering and statement of terms of the intended offering ("notice of intended offering”) prior to delivering a disclosure document if the notice of intended offering complies with rules adopted by NFA. The CFTC has recently approved amendments to NFA Compliance Rule 2-13 which govern notices of intended offerings.
The full text of Compliance Rule 2-13, as amended, is included in this notice and should be read in its entirety. The principal provisions concerning notices of intended offerings are summarized below.
CPOs may provide accredited investors with a notice of intended offering that includes any or all of the following information:
- the name of the CPO and the pool;
- a brief description of the limited partnership interests being sold;
- when the interests will be sold and a brief description of the manner in which they will be sold;
- the type of pool, and the name of the CTA if it is a single- advisor pool;
- limitations on who may invest in the pool;
- any legend required by a regulator; and
- who to contact to obtain a copy of the disclosure document.
The accredited investor must receive a copy of the disclosure document before investing in the pool. The notice of intended offering cannot be given in any manner that is likely to reach non-accredited investors. Finally, a CPO cannot rely on Compliance Rule 2-13 alone but must make sure the notice of intended offering complies with all relevant securities laws.
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Part 2 — RULES GOVERNING THE BUSINESS CONDUCT OF MEMBERS REGISTERED WITH THE COMMISSION
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Rule 2-13. CPO/CTA REGULATIONS.
(a) Any Member who violates any of CFTC Regulations 4.1 and 4.16 through 4.41 shall be deemed to have violated an NFA requirement.
(b) Each Member CPO which delivers or causes to be delivered a Disclosure Document under CFTC Regulation 4.21 must include in the Disclosure Document a break-even analysis which includes a tabular presentation of fees and expenses. The break-even analysis must be presented in the manner prescribed by NFA's Board of Directors.
(c) Each Member required to file any document with or give notice to the CFTC under CFTC Regulations 4.7, 4.22, 4.26 or 4.36 shall also file one copy of such document with or give such notice to NFA at its Chicago office no later than the date such document or notice is due to be filed with or given to the CFTC. Any CPO Member may file with NFA a request for an extension of time in which to file the annual report required by CFTC Regulation 4.22(c) or a request for approval of a change to its fiscal-year election by following the procedures set forth in NFA Financial Requirements Schedule E.
(d) A Member CPO may deliver a notice of intended offering and statement of terms to prospective participants who are accredited investors, as defined in 17 C.F.R. 230.501(a), prior to the delivery of a Disclosure Document, provided that the notice of intended offering and statement of terms clearly states that the offering will be made only by means of a Disclosure Document and includes no more than the following additional information:
- (1) the name of the CPO, issuer, underwriter, and selling agent;
(2) the name of the pool;
(3) the title, amount, minimum escrow, and basic terms of the equity interests the CPO proposes to offer;
(4) the date the offering will be commenced and the length of time it will remain open, and a brief statement of the manner of the offering;
(5) the type of pool (e.g., multi-advisor, single-advisor, principal-protected, speculative or hedge) and interests to be traded and, for a single-advisor pool, the name of the CTA;
(6) any limitations regarding who may invest in the pool or the amount of any investment;
(7) any statement or legend required by any applicable laws, regulations, or rules or by any state, federal, or foreign regulator; and
(8) the name and address and/or telephone number to write or call in order to obtain a copy of the Disclosure Document.
Unless the pool is offered under CFTC Regulation § 4.7, the CPO must provide a Disclosure Document to the accredited investor upon request and, in any event, prior to accepting or receiving funds, securities, or other property from the accredited investor for the purpose of investing in the pool. A notice of intended offering and statement of terms may not be distributed by any means that is likely to reach persons who do not qualify as accredited investors under 17 C.F.R. 230.501(a).