Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 57585 

1 74 FR 8220 (February 24, 2009). 

2Commission regulations referred to herein are 

found at 17 CFR Ch. I (2009 edition). 

List of Items Controlled 

Unit: * * * 

Related Controls: * * * 

Related Definitions: * * * 

Items: 

* * * * * 

b. Accelerometers of any type, designed for 

use in inertial navigation systems or in 

guidance systems of all types, specified to 

function at acceleration levels greater than 

100 g. 

Note to paragraph (b): This paragraph (b) 

does not include accelerometers that are 

designed to measure vibration or shock. 

■ 11. In Supplement No. 1 to part 774 

(the Commerce Control List), Category 

7—Navigation and Avionics, Export 

Control Classification Number (ECCN) 

7A102 is amended: 

■ a. By revising the Heading, and 

■ b. By revising the ‘‘items’’ paragraph 

in the List of Items Controlled section, 

to read as follows: 

7A102 Gyros, other than those controlled 

by 7A002 (see List of Items Controlled), and 

specially designed components therefor. 

* * * * * 

List of Items Controlled 

Unit: * * * 

Related Controls: * * * 

Related Definitions: * * * 

Items: 

a. All types of gyros, usable in rockets, 

missiles, or unmanned aerial vehicles 

capable of achieving a ‘‘range’’ equal to or 

greater than 300 km, with a rated ‘‘drift rate’’ 

‘stability’ of less than 0.5 degrees (1 sigma or 

rms) per hour in a 1 g environment. 

b. Gyros of any type, designed for use in 

inertial navigation systems or in guidance 

systems of all types, specified to function at 

acceleration levels greater than 100 g. 

Technical Note: In this entry, the term 

‘stability’ is defined as a measure of the 

ability of a specific mechanism or 

performance coefficient to remain invariant 

when continuously exposed to a fixed 

operating condition. (This definition does not 

refer to dynamic or servo stability.) (IEEE 

STD 528–2001 paragraph 2.247). 

■ 12. In Supplement No. 1 to part 774 

(the Commerce Control List), Category 

7—Navigation and Avionics, Export 

Control Classification Number (ECCN) 

7A103 is amended by redesignating the 

Note as Note 1 and adding a Note 2 at 

the end of paragraph (a) of the ‘‘items’’ 

paragraph in the List of Items Controlled 

section, to read as follows: 

7A103 Instrumentation, navigation 

equipment and systems, other than those 

controlled by 7A003, and specially designed 

components therefor. 

* * * * * 

List of Items Controlled 

Unit: * * * 

Related Controls: * * * 

Related Definitions: * * * 

Items: 

a. * * * 

Note 1: 7A103.a does not control 

equipment containing accelerometers 

specially designed and developed as MWD 

(Measurement While Drilling) sensors for use 

in down-hole well services operations. 

Note 2: 7A103.a does not control inertial or 

other equipment using accelerometers or 

gyros controlled by 7A001 or 7A002 that are 

only NS controlled. 

* * * * * 

Dated: November 4, 2009. 

Matthew S. Borman, 

Acting Assistant Secretary for Export 

Administration. 

[FR Doc. E9–26961 Filed 11–6–09; 8:45 am] 

BILLING CODE 3510–33–P 

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: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is amending 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 amendments: 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; establish conditions for use 

of International Financial Reporting 

Standards (‘‘IFRS’’) in lieu of U.S. 

Generally Accepted Accounting 

Principles (‘‘U.S. GAAP’’) and a notice 

procedure for CPOs to claim such relief; 

and clarify and update several other 

requirements for periodic and annual 

reports prepared and distributed by 

CPOs. 

DATES: Effective date: This rule is 

effective December 9, 2009. 

Applicability dates: Amendments to 

§§ 4.7(b)(3) and 4.22(c) (other than 

4.22(c)(7)) are applicable to commodity 

pool annual reports for fiscal years 

ending December 31, 2009 and later. 

FOR FURTHER INFORMATION CONTACT: 

Eileen R. Chotiner, Senior Compliance 

Analyst, 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 

On February 24, 2009, the 

Commission published 1 for public 

comment proposed amendments to the 

reporting provisions applicable to CPOs 

under Part 4 of its regulations 

(‘‘Proposed Part 4 Amendments’’).2

Pursuant to regulations contained in 

Part 4, a registered CPO must distribute 

an account statement to each participant 

in each commodity pool that it operates 

within 30 days of the end of the 

reporting period, and must file with 

NFA, and provide to each participant, 

an annual financial report 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. The Part 4 Amendments 

codify existing staff interpretations, 

clarify reporting for series funds, extend 

financial reporting filing deadlines for 

CPOs operating commodity pools that 

that in invest in other funds, and 

streamline certain filing requirements 

for pools ceasing operation. 

II. Comments Received 

The Commission received four 

comment letters in response to the 

Proposed Part 4 Amendments. 

Comments were submitted by NFA; the 

Committee on Futures Regulation of the 

New York City Bar Association (‘‘NYC 

Bar’’); Arthur F. Bell & Associates, LLC, 

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57586 Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 

3American Institute of Certified Public 

Accountants (‘‘AICPA’’) Audit and Accounting 

Guide, Investment Companies paragraph 7.03. 

4AICPA Audit and Accounting Guide, 

Investment Companies, Chapter 5, Complex Capital 

Structures. 5 65 FR 81333 at 81334 (December 26, 2000). 

an accounting firm (‘‘Arthur Bell 

CPAs’’); and the Managed Funds 

Association (‘‘MFA’’). All of the 

commenters generally supported the 

proposed amendments. Each of the 

commenters, however, had specific 

suggestions regarding clarification of 

certain aspects of the proposal. The 

commenters’ suggestions are discussed 

below. 

III. The Final Regulations 

A. Periodic Account Statements for 

Regulation 4.7-Exempt Pools 

Regulation 4.7(b)(2) requires the CPO 

of a commodity pool for which the CPO 

has claimed an exemption under 

Regulation 4.7 (i.e., a ‘‘Regulation 4.7- 

exempt commodity pool’’) to provide 

each participant in the pool with 

periodic account statements 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 Commission proposed 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 was 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, particularly for non-unitized 

pools. The proposed amendments also 

would conform the account statement 

requirements for Regulation 4.7-exempt 

pools to those for non-exempt pools 

under Regulation 4.22(a). 

The Commission did not receive any 

comments regarding the proposed 

amendments to Regulation 4.7(b)(2). For 

the reasons set forth above and in the 

Proposed Part 4 Amendments, the 

Commission is adopting the 

amendments as proposed. 

B. Series Pools and Pools With Multiple 

Classes of Ownership Interests 

The ownership structure of a 

commodity pool may be organized to 

include more than one series or class of 

ownership interest. The commodity 

pool may have more than one 

ownership series or class due to 

differences in fees and expenses charged 

to the series or classes, currency 

denomination of the series or classes, 

trading strategies, cash management 

strategies, or other aspects of the 

operation of the pool. 

Pool financial statements prepared 

pursuant to both Regulation 4.22(c) and 

Regulation 4.7(b)(3) must be presented 

and computed in accordance with 

Generally Accepted Accounting 

Principles (‘‘GAAP’’). GAAP provides 

guidance regarding the presentation of 

financial statements for series funds 3

and for investment funds with multiple 

ownership classes.4 As noted in the 

Proposed Part 4 Amendments, 

Commission staff has received several 

inquiries 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. 

In order to address issues raised with 

series funds and to address the proper 

accounting treatment under GAAP, the 

Commission proposed 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. The Commission further 

proposed that for multi-class funds and 

for series funds that were not structured 

with a limitation on liability among the 

different series or classes, 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. 

The Commission also proposed 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. The 

Commission further noted that for both 

periodic account statements and annual 

financial reports, CPOs of series funds 

with a limitation on liability among the 

different series were not precluded by 

the proposed amendments from 

providing financial information to 

participants for other series or classes of 

a respective pool. 

The Commission did not receive any 

comment regarding the above proposals. 

For the reasons set forth above and in 

the Proposed Part 4 Amendments, the 

Commission is adopting the 

amendments as proposed. 

C. Changes to Fund of Funds Extension 

Provisions Under Regulation 4.22(f)(2) 

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. A CPO 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. 

The self-certification procedures for 

claiming an extension of the filing 

deadline for a fund of funds under 

Regulation 4.22(f)(2) currently are 

applicable only to CPOs that distribute 

annual reports that are audited by 

independent public accountants. CPOs 

of funds of funds that distribute 

unaudited annual financial reports to 

participants pursuant to Regulation 

4.7(b)(3) may not claim an extension of 

the filing deadline under Regulation 

4.22(f)(2). Such CPOs, however, may 

request from NFA up to a 90-day 

extension of the filing deadline under 

Regulation 4.22(f)(1). 

As discussed in the Proposed Part 4 

Amendments, in adopting Regulation 

4.22(f)(2), the Commission anticipated 

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.5 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), however, has 

increased significantly in recent years. 

To address this issue, the Commission 

proposed to extend from 60 to 90 days 

the maximum period of additional time 

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Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 57587 

that a CPO that operates a commodity 

pool that invests in other funds may 

claim under Regulation 4.22(f)(2). 

The Commission also proposed to 

extend the application of Regulation 

4.22(f)(2) to CPOs that operate 

Regulation 4.7-exempt commodity pools 

that do not prepare financial statements 

audited by independent public 

accountants. As noted in the Proposed 

Part 4 Amendments, 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. 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. To address this issue, the 

Commission proposed to permit CPOs 

of funds of funds for which unaudited 

annual reports are prepared to be able 

to claim the extension under Regulation 

4.22(f)(2). 

In addition, the Commission proposed 

to eliminate the requirement that a CPO 

that filed a claim of extension under 

Regulation 4.22(f)(2) for a particular 

pool restate certain representations in a 

statement filed with the pool’s annual 

reports in subsequent years. Instead, 

under the proposal, the CPO would be 

presumed to operate the pool as a fund 

of funds and otherwise continue to 

qualify for the automatic extension. The 

CPO, however, must provide NFA with 

notice if the pool no longer operates as 

a fund of funds and must distribute the 

pool’s annual report to pool participants 

and file a copy with NFA within 90 

days of the pool’s fiscal year-end, as 

required by Regulation 4.22(c). 

The Commission received several 

comments generally supporting the 

proposed amendments, and no 

commenter opposed the proposed 

amendments. NFA and Arthur Bell 

CPAs supported the proposed 

amendments to Regulation 4.22(f)(2) 

extending the amount of time within 

which funds of funds must file their 

reports from 150 to 180 days after fiscal 

year end. NFA, however, commented 

that multi-tiered funds of funds could 

still have difficulty obtaining necessary 

information if their investee funds are 

commodity pools and the CPOs of the 

investee funds had claimed an 

extension under Regulation 4.22(f)(2) of 

up to 180 days. In such situations, the 

CPO of the fund of funds may not 

receive annual reports for investee 

funds until 180 days after the end of the 

investee fund’s year-end, which would 

coincide with the due date for the CPO 

of the fund of funds to distribute an 

annual report to participants in the fund 

of funds. In its comment letter, NFA 

suggested that the Commission amend 

Regulation 4.22(f)(1) to provide for an 

additional extension of up to 210 days 

after the pool’s year end to provide 

CPOs of funds of funds with additional 

time to prepare and to distribute annual 

reports for the commodity pool. The 

Commission did not receive any 

comments regarding the proposal to 

eliminate, after the initial year, the 

requirement in Regulation 4.22(f)(2) that 

a CPO claiming an extension of time 

provide a statement containing 

representations regarding operating a 

fund of funds each year after the initial 

year. 

Arthur Bell CPAs further supported 

the proposal to extend the availability of 

the fund of funds extension to 

Regulation 4.7-exempt pools for which 

audited reports are not prepared, noting 

that even for an unaudited report, the 

additional time is necessary due to the 

requirement under GAAP to provide a 

condensed schedule of investments, 

which necessitates obtaining 

information from investee funds. 

The Commission has considered the 

comments received and is adopting the 

amendments to Regulations 4.22(f)(1) 

and (2) as proposed. The Commission 

acknowledges that a CPO of a multitiered fund of funds may face challenges 

in obtaining the appropriate detailed 

financial information from each investee 

fund. The Commission, however, must 

balance the challenges faced by the CPO 

of a fund of funds with the need of pool 

participants to receive financial 

information regarding the performance 

of a fund in as timely a manner as 

possible. Based upon its review of 

annual report filings of commodity 

pools over the last several years, the 

Commission does not believe that there 

is a sufficient basis to propose 

additional extension provisions under 

Regulation 4.22(f)(1) that would extend 

the filing deadline to 210 days after the 

end of a pool’s fiscal year end. 

Commission staff will monitor filings 

under the revised fund of funds 

timeframe closely to ascertain whether 

any further changes may be warranted. 

In addition, under the regulations as 

amended, CPOs that previously have 

claimed the fund of funds extension 

will not need to file new or revised 

notices with NFA in order to claim the 

additional 30 days to file and to 

distribute their qualifying pools’ annual 

reports. However, the Commission 

continues to expect 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. Procedures for Preparation and Filing 

of Reports for Liquidating Pools 

The Commission proposed to clarify 

and to streamline procedures for CPOs 

filing final reports for pools that had 

ceased operation. Currently, 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. 

The Commission proposed to eliminate 

the confusion created by the reference 

in Regulation 4.22(c) to two possible 

timeframes for filing a final annual 

report by amending the regulation to 

specify that the final annual report must 

be filed no later than 90 days after the 

pool ceases trading. Under the proposed 

amendment, if a CPO has not 

distributed all funds to participants by 

the date that the report is issued, the 

CPO 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 proposed amendment also would 

permit CPOs to prepare unaudited final 

reports as long as the CPO obtains from 

all participants, and files with NFA, 

written waivers of their right to receive 

an audited report. 

NFA supported the Commission’s 

proposal to clarify the timeframe within 

which the final report must be filed; 

however, MFA noted that requiring 

reports to be filed within 90 days of the 

cessation of trading would create 

reporting inefficiencies for CPOs and 

participants of pools that hold assets 

that are difficult to liquidate. MFA’s 

comment letter described scenarios in 

which inefficiencies would be created, 

such as when the pool holds assets that 

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57588 Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 

cannot be liquidated for an extended 

period of time, or the pool is involved 

in bankruptcy. The MFA comment letter 

also noted that a CPO may have 

difficulty in obtaining an audit opinion 

on financial statements for a pool that 

has significant assets that have not been 

liquidated. 

MFA suggested as an alternative to 

the proposal that CPOs that have 

determined to liquidate a pool provide 

notice to NFA and pool participants 

shortly after the pool ceases trading, and 

file the pool’s final annual report within 

90 days of returning funds to the 

participants. NFA suggested an 

alternative to the proposed requirement 

that CPOs that have not distributed all 

funds by the time the final report is filed 

provide notice to NFA when the final 

distribution is completed. NFA 

proposed that only those CPOs that have 

not returned funds within the time 

frame specified in the final annual 

report would provide notice to NFA, 

along with an explanation of why the 

distribution has not been completed. 

NFA would then monitor these pools 

until all funds are returned. 

The Commission has considered 

carefully the comments regarding the 

timeframe within which a CPO must 

provide a final report for a pool that has 

ceased operation and has determined to 

modify the proposed changes to address 

concerns raised by the commenters, 

including the addition of an option for 

CPOs that are unable to complete the 

liquidation of a pool in sufficient time 

to prepare, distribute and file the pool’s 

final report within 90 days of the 

permanent cessation of trading. Under 

the amended regulation, a CPO 

generally would be required to provide 

a liquidating pool’s final report within 

90 days of the cessation of trading. The 

final report may contain only the 

Statements of Operations and Changes 

in Net Assets; an explanation of the 

winding down of the pool’s operations; 

written disclosure that all interests in, 

and assets of, the pool have been 

redeemed, distributed or transferred on 

behalf of the participants; and, if all 

funds have not been distributed at the 

time the report is issued, disclosure of 

the value of the assets remaining to be 

distributed and the expected timeframe 

for their distribution. If the CPO has not 

completed the distribution of funds 

within the timeframe specified in the 

final report, the CPO will be required to 

provide notice to NFA and the pool’s 

participants containing information 

about the value of the pool’s remaining 

assets, the expected timeframe for 

liquidation, any fees and expenses that 

will continue to be charged to the pool, 

and the extent to which reports will 

continue to be provided to participants 

pursuant to the pool’s operative 

documents. The Commission notes that 

the latter requirement is for the purpose 

of disclosure, and is not intended to 

relieve CPOs of their obligation to 

continue to comply with the periodic 

and annual reporting requirements. In 

this connection, the Commission notes 

that MFA requested in its comment 

letter that CPOs that are unable to 

provide a final annual report within 90 

days be permitted to provide quarterly 

rather than monthly periodic account 

statements to participants. Pools 

operating pursuant to Regulation 4.7 

currently are permitted to provide 

quarterly statements; CPOs that are 

required to provide monthly account 

statements may request relief under 

Regulation 4.12(a). 

Both NFA and MFA commented on 

the waiver provisions of the proposed 

requirement that CPOs be permitted to 

prepare unaudited final reports as long 

as the CPO obtains from all participants, 

and files with NFA, written waivers of 

their right to receive an audited report. 

NFA recommended that rather than 

filing all waivers with NFA, the CPO file 

a certification with NFA that a waiver 

has been received from each participant. 

The CPO would be required to make the 

waivers available to NFA on request. 

MFA noted that for pools with many 

participants, obtaining the waivers 

would be difficult and suggested that 

the Commission instead adopt a 

negative consent procedure. The 

Commission has determined that it is 

not in the public interest to permit CPOs 

to provide unaudited reports to 

participants who are entitled to receive 

audited reports without the affirmative 

consent of the participants. However, it 

will be sufficient for the CPO to certify 

to NFA that it has obtained waivers 

from all of the pool’s participants, 

provided that the CPO maintain all the 

waivers and make them available to 

NFA or the Commission upon request. 

Finally, in order to accommodate the 

appropriate numbering of changes to 

Regulation 4.22(c), the Commission is 

redesignating existing paragraph 

4.22(c)(6) as 4.22(c)(8). 

E. Codifying Existing Policies Regarding 

Special Allocations of Ownership 

Equity, Unrealized Gains and Losses, 

and Investee Funds’ Income and 

Expenses 

The Commission proposed to codify 

staff interpretations regarding reporting 

in a pool’s annual financial report 

special allocations of partnership equity 

from limited partners to the general 

partner or any other special class of 

partner; combining gains and losses on 

regulated futures transactions with gains 

and losses on non-CFTC regulated 

transactions that are part of the same 

trading strategy in the Statement of 

Operations; and disclosing 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. 

One commenter specifically addressed 

the proposed requirement to disclose 

information on the amounts of income 

and expenses associated with a pool’s 

investments in investee funds. Arthur 

Bell CPAs noted that in some cases, it 

may not be possible for CPOs to obtain 

the information about investee funds’ 

fees and expenses that would be 

required under proposed Regulation 

4.22(c)(5)(i), stating that some investee 

funds are not obligated to report this 

information, and other funds may not 

maintain records of allocations of 

management and incentive fees or 

indirect expenses relative to the fund of 

fund’s investment. The comment letter 

from Arthur Bell CPAs suggested that 

the proposed regulation be revised to 

state that in such cases, a CPO would be 

permitted to disclose that certain 

information required under this section 

is not available, if the CPO has made a 

good faith effort to obtain the 

information. 

As noted in the proposing release, 

Division of Clearing and Intermediary 

Oversight (‘‘DCIO’’) staff has encouraged 

CPOs to disclose income and fee 

information for investee pools for many 

years, on the basis that such information 

is material for pool participants to 

comprehend fully the investment 

strategy and fee structure of a 

commodity pool. However, the 

illustration of investee fund disclosure 

that has been included as an attachment 

to DCIO’s annual guidance letter to 

CPOs allows that in unusual 

circumstances, a CPO may state that it 

does not have information on specific 

fees and expenses. In order to address 

the issue noted in the comment, the 

Commission is adopting this regulation 

generally as proposed, with the addition 

of an option for a CPO that does not 

have the specific amounts of fees and 

expenses to disclose instead the 

percentage amounts and computational 

basis for each such fee and include a 

statement that the CPO is not able to 

obtain the specific fee amounts for this 

fund. 

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Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 57589 

6 17 CFR 230.501(a) (2009). 7 47 FR 18618, 18619 (April 30, 1982). 

F. Use of International Financial 

Reporting Standards in the Preparation 

of Commodity Pool Annual Financial 

Reports 

Regulation 4.22(d) requires that 

audited and unaudited financial 

statements of commodity pools, 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’’). 

The Commission proposed to amend 

Regulation 4.22(d) to permit CPOs that 

operate commodity pools organized 

under the laws of a foreign jurisdiction 

to prepare financial statements for such 

pools using International Financial 

Reporting Standards (‘‘IFRS’’) as issued 

by the International Accounting 

Standards Board in lieu of U.S. GAAP. 

The proposal specified that the IFRS 

financial statements contain a 

condensed Schedule of Investments as 

set forth in Statement of Accounting 

Positions 95–2, 01–1, and 03–04 issued 

by the AICPA; report special allocations 

of partnership equity in accordance 

with Commission Interpretative Letter 

94–3; and, in the event that IFRS would 

require that the pool consolidate its 

financial statements with another entity, 

such as a feeder fund consolidating with 

its master fund, all applicable 

disclosures required by U.S. GAAP for 

the feeder must be presented with the 

reporting pool’s consolidated financial 

statements. In addition, the use of 

accounting standards other than U.S. 

GAAP must not conflict with any 

representations made in offering 

memoranda or similar documents 

provided to participants or potential 

participants in the pool. The proposal 

further required that a CPO may claim 

the above relief by filing a notice with 

NFA within 90 days of the end of the 

commodity pool’s fiscal year. 

The NYC Bar commented on two 

technical aspects of the proposal. First, 

with respect to the timeframe within 

which a CPO that is seeking relief from 

the U.S. GAAP requirement under 

proposed Regulation 4.22(d)(2)(ii), the 

NYC Bar stated that the proposed 

regulation and accompanying 

explanatory text were confusing as to 

when the notice must be filed. The NYC 

Bar suggested that the adopting release 

clarify that a notice claiming relief must 

be filed within 90 days after the end of 

the pool’s fiscal year in order to be 

effective. The Commission has 

considered the NYC Bar’s comments 

and has amended Regulation 

4.22(d)(2)(ii) to provide that the notice 

must be filed with NFA within 90 days 

after the end of the pool’s fiscal year. 

Second, the NYC Bar suggested that 

the provision in proposed Regulation 

4.22(d)(2)(i)(C) requiring that the CPO 

represent that the use of IFRS for the 

preparation of the commodity pool’s 

financial statements was not 

inconsistent with the pool’s ‘‘offering 

memorandum or similar document’’ be 

replaced with ‘‘offering memorandum or 

other operative document.’’ This 

suggestion was intended to provide for 

a broader range of operating documents 

in which such information may be 

provided. The Commission has 

considered the comment and agrees that 

including the information on the 

accounting standards to be followed by 

the pool in any operative document that 

is provided or available to participants 

is consistent with the objectives of the 

proposed regulation, and therefore is 

adopting a final regulation that requires 

such disclosure in the pool’s offering 

memorandum or any other operative 

document that is made available to 

participants or prospective participants. 

In addition, in developing these final 

regulations, the Commission has noted 

that the use of IFRS for preparing pool 

financial statements generally would 

extend to the computations that form 

the basis for the information reported in 

periodic account statements required by 

Regulations 4.22(a) and 4.7(b)(2). 

Therefore, the Commission is adopting 

changes to Regulations 4.22(a) and 

4.7(b)(2) to permit CPOs that have 

claimed the relief available in 

Regulation 4.22(d), as amended, to 

present the pool’s periodic account 

statements on the same basis as they are 

computing and presenting the pool’s 

financial statements. 

G. GAAP Requirements 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. Regulation 4.13 further 

provides an exemption from registration 

for CPOs of pools whose participants are 

SEC ‘‘accredited investors’’ 6 and that 

limit the pool’s trading of commodity 

interests to a de minimis amount, or that 

limit participation in the pool to certain 

highly sophisticated investors. 

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 proposed to amend 

Regulation 4.13(c) to delete the 

requirement that the annual reports for 

pools for which the CPO has claimed 

exemption from registration under 

Regulation 4.13 must be presented and 

computed in accordance with GAAP 

and, if audited by an independent 

public accountant, certified in 

accordance with Regulation 1.16. As 

noted in the Proposed Part 4 

Amendments, the annual reports are not 

required by Commission regulations to 

be prepared, distributed, or filed, and 

therefore the Commission does not need 

to prescribe the form of such reports. 

The Commission did not receive any 

comments regarding the proposed 

amendments to Regulation 4.13(c). The 

Commission has determined to adopt 

the amendments as proposed. 

H. Updating References to Financial 

Schedules 

The Commission proposed 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. No comments were 

received on this proposal. Therefore, the 

Commission is adopting amendments to 

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 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’), 5 U.S.C. 601 et seq., requires 

that agencies, in proposing rules, 

consider the impact of those rules on 

small businesses. The Commission has 

determined previously that registered 

CPOs are not small entities for the 

purpose of the RFA.7 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 

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57590 Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 

8 74 FR 8225 (February 24, 2009). 

9 Id. 

Regulation 4.13 would remove an 

existing requirement and does not 

impose any significant burdens. The 

Commission’s proposal solicited public 

comment on this analysis.8 No 

comments were received. Accordingly, 

the Chairman, on behalf of the 

Commission, hereby certifies, pursuant 

to 5 U.S.C. 605(b), that the action it is 

taking herein will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

This rulemaking modifies existing 

regulatory requirements by clarifying 

information that must be included in 

required periodic and annual reports, 

increasing slightly the burden for this 

collection of information due to 

including specific fee and expense 

information in annual reports for funds 

of funds. The proposing release 

included an estimate of the impact of 

these changes on the paperwork burden 

under existing information collection 

3038–0005, and also corrected a 

previous calculation error with respect 

to the total number of respondents. As 

required by the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3507(d)), the 

Commission submitted a copy of this 

section to the Office of Management and 

Budget (‘‘OMB’’) for its review. No 

comments were received in response to 

the Commission’s invitation in the 

notice of proposed rulemaking 9 to 

comment on any change in the potential 

paperwork burden associated with these 

rule amendments. The information 

collection burdens created by the 

Commission’s proposed rules, which 

were discussed in detail in the 

proposing release, are identical to the 

information collection burdens of the 

final rules. 

List of Subjects in 17 CFR Part 4 

Advertising, Brokers, Commodity 

futures, Commodity pool operators, 

Commodity trading advisors, Consumer 

protection, Reporting and recordkeeping 

requirements. 

■ Accordingly, 17 CFR Chapter I is 

amended 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, 6(c), 6b, 6c, 

6l, 6m, 6n, 6o, 12a, and 23. 

■ 2. In § 4.7: 

■ a. Add paragraphs (b)(2)(iii)(A) and 

(B) and (b)(2)(iv) and (v); 

■ b. Revise paragraphs (b)(3)(i) 

introductory text and (b)(3)(i)(B) and 

(C); 

■ c. Add paragraph (b)(3)(i)(D); and 

■ d. Revise paragraph (b)(3)(ii). 

The additions and revisions read as 

follows: 

§ 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. 

(iv) 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. 

(v) A commodity pool operator of a 

pool that meets the conditions specified 

in § 4.22(d)(2)(i) of this part to present 

and compute the commodity pool’s 

financial statements contained in the 

Annual Report in accordance with 

International Financial Reporting 

Standards issued by the International 

Accounting Standards Board and has 

filed notice pursuant to § 4.22(d)(2)(ii) 

of this part also may use such 

International Financial Reporting 

Standards in the computation and 

presentation of the account statement. 

(3) Annual report relief. (i) Exemption 

from the specific requirements of 

§ 4.22(c) and (d) of this part; 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 § 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, management and 

incentive fees associated with each 

investment in an investee fund that 

exceeds five percent of the pool’s net 

assets. The income, management and 

incentive fees 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, 

management and incentive fees of other 

investee funds that, individually, 

represent an investment of less than five 

percent of the pool’s net assets. If the 

commodity pool operator is not able to 

obtain the specific amounts of 

management and incentive fees charged 

by an investee fund, the commodity 

pool operator must disclose the 

percentage amounts and computational 

basis for each such fee and include a 

statement that the CPO is not able to 

obtain the specific fee amounts for this 

fund; 

(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. 

(ii) Except as provided in § 4.22(d)(2) 

of this part, such annual report must be 

presented and computed in accordance 

with generally accepted accounting 

principles consistently applied and, if 

certified by an independent public 

accountant, so certified in accordance 

with § 1.16 of this chapter as applicable. 

* * * * * 

§ 4.13 [Amended] 

■ 3. Amend § 4.13 by removing 

paragraph (c)(2) and redesignating 

paragraph (c)(3) as (c)(2). 

■ 4. In § 4.22: 

■ a. Revise paragraphs (a) introductory 

text, (a)(1) introductory text, and (a)(2) 

introductory text; 

■ b. Add paragraphs (a)(5) and (6); 

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Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 57591 

■ c. Revise paragraphs (c) introductory 

text, (c)(4), and (c)(5); 

■ d. Redesignate paragraph (c)(6) as 

paragraph (c)(8), and add new 

paragraphs (c)(6) and (7); and 

■ e. Revise paragraphs (d), (e) and (f)(2). 

The revisons and additions read as 

follows: 

§ 4.22 Reporting to pool participants. 

(a) Except as provided in paragraph 

(a)(4) or (a)(6) 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 

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: 

* * * * * 

(5) 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. 

(6) A commodity pool operator of a 

pool that meets the conditions specified 

in paragraph (d)(2)(i) of this section and 

has filed notice pursuant to paragraph 

(d)(2)(ii) of this section may elect to 

follow the same accounting treatment 

with respect to the computation and 

presentation of the account statement. 

* * * * * 

(c) Except as provided in paragraph 

(c)(7) or (c)(8) 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. For a pool 

that invests in other funds, this 

information must include, but is not 

limited to, separately disclosing the 

amounts of income, management and 

incentive fees associated with each 

investment in an investee fund that 

exceeds five percent of the pool’s net 

assets. The management and incentive 

fees 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, management and 

incentive fees of other investee funds 

that, individually, represent an 

investment of less than five percent of 

the pool’s net assets. If the commodity 

pool operator is not able to obtain the 

specific amounts of management and 

incentive fees charged by an investee 

fund, the commodity pool operator must 

disclose the percentage amounts and 

computational basis for each such fee 

and include a statement that the CPO is 

not able to obtain the specific fee 

amounts for this fund; 

(6) 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, 

within 90 days of the permanent 

cessation of trading, in lieu of the 

annual report that would otherwise be 

required by § 4.22(c) or § 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; and 

(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 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 timeframe of when the 

distribution will occur. If the 

commodity pool operator does not 

distribute the remaining pool assets 

within the timeframe specified, the 

commodity pool operator must provide 

written notice to each participant and to 

the National Futures Association that 

the distribution of the remaining assets 

of the pool has not been completed, the 

value of assets remaining to be 

distributed, and a time frame of when 

the final distribution will occur. 

(C) If the commodity pool operator 

will not be able to liquidate the pool’s 

assets in sufficient time to prepare, file 

and distribute the final annual report for 

the pool within 90 days of the 

permanent cessation of trading, the 

commodity pool operator must provide 

written notice to each participant and to 

National Futures Association disclosing: 

(1) The value of investments 

remaining to be liquidated, the 

timeframe within which liquidation is 

expected to occur, any impediments to 

liquidation, and the nature and amount 

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57592 Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 

of any fees and expenses that will be 

charged to the pool prior to the final 

distribution of the pool’s funds; 

(2) Which financial reports the 

commodity pool operator will continue 

to provide to pool participants from the 

time that trading ceased until the final 

annual report is distributed, and the 

frequency with which such reports will 

be provided, pursuant to the pool’s 

operative documents; and 

(3) The timeframe within which the 

commodity pool operator will provide 

the final report. 

(iii) A report filed pursuant to this 

paragraph (c)(7) that would otherwise be 

required by this paragraph (c) is not 

required to be audited in accordance 

with paragraph (d) of this section if the 

commodity pool operator obtains from 

all participants written waivers of their 

rights to receive an audited Annual 

Report, and at the time of filing the 

Annual Report with National Futures 

Association, certifies that it has received 

waivers from all participants. The 

commodity pool operator must maintain 

the waivers in accordance with § 1.31 of 

this chapter and must make the waivers 

available to the Commission or National 

Futures Association upon request. 

* * * * * 

(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 

audited by an independent public 

accountant. The requirements of 

§ 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 

§ 1.16 of this chapter, except that the 

following requirements of that section 

shall not apply: 

(i) The audit objectives of § 1.16(d)(1) 

concerning the periodic computation of 

minimum capital and property in 

segregation; 

(ii) All other references in § 1.16 to 

the segregation requirements; and 

(iii) Section 1.16(c)(5), (d)(2), (e)(2), 

and (f). 

(2)(i) The financial statements in the 

Annual Report required by this section 

or by § 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; 

(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 other operative 

document that is made available to 

participants; 

(D) Special allocations of ownership 

equity will be reported in accordance 

with § 4.22(e)(2); and 

(E) In the event that the International 

Financial Reporting Standards require 

consolidated financial statements for the 

pool, such as a feeder fund 

consolidating with its master fund, all 

applicable disclosures required by 

generally accepted accounting 

principles for the feeder fund must be 

presented with the reporting pool’s 

consolidated financial statements. 

(ii) The commodity pool operator of a 

pool that meets the conditions specified 

in this paragraph (d)(2) 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 after 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 § 4.22(d)(2)(A) through (D), 

and, if applicable, (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 

§ 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 ‘‘Extended 

Date’’), which must be no more than 180 

calendar days after the end of the pool’s 

fiscal year. The Annual Report must be 

distributed and filed by the Extended 

Date. 

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Federal Register / Vol. 74, No. 215 / Monday, November 9, 2009 / Rules and Regulations 57593 

(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) For all reports prepared under 

paragraph (c) of this section and for 

reports prepared under § 4.7(b)(3)(i) that 

are audited by an independent public 

accountant, the commodity pool 

operator has been informed by the 

independent public accountant engaged 

to audit the commodity pool’s financial 

statements that specified information 

required to complete the pool’s annual 

report 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. 

(D) For unaudited reports prepared 

under § 4.7(b)(3)(i), the commodity pool 

operator has been informed by the 

operators of the Investments that 

specified information required to 

complete the pool’s annual report 

cannot be obtained in sufficient time for 

the Annual Report to be prepared and 

distributed before the Extended Date. 

(v) For each fiscal year following the 

filing of the notice described in 

paragraph (f)(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 

file electronically with the National 

Futures Association an Annual Report 

within 90 days after the pool’s fiscal 

year-end accompanied by a notice 

indicating the change in the pool’s 

status. 

(vi) Any notice or statement filed 

pursuant to this paragraph (f)(2) must be 

signed by the commodity pool operator 

in accordance with paragraph (h) of this 

section. 

* * * * * 

Issued in Washington, DC, on November 2, 

2009, by the Commission. 

David Stawick, 

Secretary of the Commission. 

[FR Doc. E9–26789 Filed 11–6–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF THE TREASURY 

Office of Foreign Assets Control 

31 CFR Part 501 

Economic Sanctions Enforcement 

Guidelines 

AGENCY: Office of Foreign Assets 

Control, Treasury. 

ACTION: Final rule. 

SUMMARY: The Office of Foreign Assets 

Control (OFAC) of the U.S. Department 

of the Treasury is issuing this final rule, 

‘‘Economic Sanctions Enforcement 

Guidelines,’’ as enforcement guidance 

for persons subject to the requirements 

of U.S. sanctions statutes, Executive 

orders, and regulations. This rule was 

published as an interim final rule with 

request for comments on September 8, 

2008. This final rule sets forth the 

Enforcement Guidelines that OFAC will 

follow in determining an appropriate 

enforcement response to apparent 

violations of U.S. economic sanctions 

programs that OFAC enforces. These 

Enforcement Guidelines are published 

as an Appendix to the Reporting, 

Procedures and Penalties Regulations. 

DATES: This final rule is effective 

November 9, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Elton Ellison, Assistant Director, Civil 

Penalties, (202) 622–6140 (not a toll-free 

call). 

SUPPLEMENTARY INFORMATION: 

Electronic Availability 

This document and additional 

information concerning OFAC are 

available from OFAC’s Web site 

(http://www.treas.gov/ofac) or via 

facsimile through a 24-hour fax-ondemand service, tel.: (202) 622–0077. 

Procedural Requirements 

Because this final rule imposes no 

obligations on any person, but only 

explains OFAC’s enforcement policy 

and procedures based on existing 

substantive rules, prior notice and 

public comment are not required 

pursuant to 5 U.S.C. 553(b)(A). Because 

no notice of proposed rulemaking is 

required, the provisions of the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) do not apply. This final rule 

is not a significant regulatory action for 

purposes of Executive Order 12866. 

Although a prior notice of proposed 

rulemaking was not required, OFAC 

solicited comments on this final rule in 

order to consider how it might make 

improvements to these Guidelines. 

OFAC received a total of 11 comments. 

The collections of information related 

to the Reporting, Procedures and 

Penalties Regulations have been 

previously approved by the Office of 

Management and Budget (OMB) under 

control number 1505–0164. A small 

adjustment to that collection was 

submitted to OMB in order to take into 

account the voluntary self-disclosure 

process set forth in the Guidelines. An 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a valid control number 

assigned by OMB. This collection of 

information is referenced in subpart I of 

Part I, subpart G of part III and subpart 

B of part V of these Guidelines, which 

will constitute the new Appendix to 

part 501. The referenced subparts 

explain that the voluntary selfdisclosure of an apparent violation to 

OFAC will be considered in 

determining the appropriate agency 

response to the apparent violation and, 

in cases where a civil monetary penalty 

is deemed appropriate, the penalty 

amount. As set forth in subpart B of part 

V of the Guidelines, an apparent 

violation involving a voluntary selfdisclosure will result in a base penalty 

amount at least 50 percent less than the 

base penalty amount in similar cases 

that do not involve a voluntary selfdisclosure. This provides an incentive 

for persons who have or may have 

violated economic sanctions laws to 

voluntarily provide OFAC information 

that it can use to better implement its 

economic sanctions programs. The 

submitters who will likely seek to avail 

themselves of the benefits of voluntary 

self-disclosure are businesses, other 

entities, and individuals who find that 

they have or may have violated a 

sanctions prohibition and wish to 

disclose their actual or potential 

violation. 

The estimated total annual reporting 

and/or recordkeeping burden: 1,250 

hours. The estimated annual burden per 

respondent/record keeper: 10 hours. 

Estimated number of respondents and/ 

or record keepers: 125. Estimated 

annual frequency of responses: Once or 

less, given that OFAC expects that 

persons who voluntarily self disclose 

their violations will take better care to 

avoid future violations. 

WReier-Aviles on DSKGBLS3C1PROD with RULES