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DECLARATION ON COOPERATION AND SUPERVISION 


OF CROSS-BORDER MANAGED FUTURES ACTIVITY 


The U.S. Commodity Futures Trading Commission, an independent agency 

established pursuant to the Commodity Futures Trading Act of 1974, and the Hong Kong 

Securities and Futures Commission, an independent agency established pursuant to the 

Securities and Futures Commission Ordinance of 1989, 

Sharing the goal of promoting customer protection; 

Observing the growth of global futures markets and cross-border fmancial activity 

including, in particular, the dramatic increase in cross-border managed futures activity and 

the continuous development and innovation in fmancial products and activities in the 

managed futures arena; and 

Believing that, in light of these developments it is appropriate to fonnalize and 

systematize mechanisms that currently exist and are operating for sharing infonnation and 

conducting supervisory reviews or examinations, where an Authority is located in one 

jurisdiction and a Managed Futures Person is located in another; 

Hereby make the following Declaration: 

DEFINITIONS 

I. For the purposes of this Declaration: 

(a) "Associated Persons" means persons and entities affiliated or associated with, 

or doing business relating to the futures and options management activities of, 

Managed Futures Persons and subject to the supervision of the Authorities; 
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(b) "Authority" means the Commodity Futures Trading Commission ("CFfC") or 

the Hong Kong Securities and Futures Commission ("SFC"); 

(c) "Books and Records" means documents, books and records of, and other 

infonnation about, Managed Futures Persons; 

(d) "Dual Registrants" means Managed Futures Persons tliat are authorized by, 

registered with or subject to the supervision of both Authorities or who are authorized 

by or registered with one Authority and manage or advise funds authorized by the 

other Authority; 

(e) "Inspection Report" means a report, prepared by an Authority, summarizing 

the results of a review or examiriation of a Managed Futures Person; 

(f) "Inspecting Authority" means the Authority performing an On-Site Inspection; 

(g) "Host Authority" means the Authority in whose jurisdiction a Managed 

Futures Person is situated; 

(h) "Managed Futures Persons" means commodity trading advisors and commodity 

pool operators subject to the respective laws and regulatory requirements of the 

United States or Hong Kong, and their Associated Persons; 

(i) "On-Site Inspection" means any review or examination by the Inspecting 

Authority, at the premises of the Managed Futures Person, of the Books and Records 

and premises of the Managed Futures Person. 

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SCOPE OF SUPERVISORY COOPERATION 

2. 	 The Authorities intend to provide to each other the fullest possible cooperation in 

assisting in the enforcement of their respective laws and regulatory requirements 

governing Managed Futures Persons. It is anticipated that such cooperation will 

include assistance in the oversight of Managed Futures Persofls located in the 

jurisdiction of a Host Authority and subject to the regulatory oversight of the other 

Authority. 

3. 	 Assistance under this Declaration may include: 

(a) 	 exchanging information concerning Managed Futures Persons; and 

(b) 	 assisting in the conduct of On-Site Inspections of Managed Futures' Persons. 

4. 	 The Authorities intend to keep each other advised of significant changes in the laws 

and regulatory requirements relevant to their cooperation under this Declaration. 

Nothing in this Declaration limits, expands or affects the respective jurisdictions of 

the Authorities. 

5. 	 To facilitate cooperation under this Declaration, the Authorities hereby designate 

contact persons as set forth in Attachment A. 

EXCHANGE OF INFORMATION 

6. 	 The Authorities intend to provide each other, and update on a regular basis, a list 

identifying the names of Dual Registrants. 

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7. 	 E.ach Authority intends to notify the other of the commencement of a review or 

examination of a Dual Registrant identified on the list referred to in Paragraph 6 

above. 

8. 	 The Authorities intend to provide to each other, on a routine basis and without 

advance request, copies of Inspection Reports of Dual Registrants. 

9. 	 Each Authority intends to provide the other, upon request and consistent with the laws 

and regulatory requirements which govern it, assistance in obtaining information 

concerning the contents of public and non-public Books and Records relating to 

Managed Futures Persons. Such assistance may include, without limitation: 

(a) 	 cooperation and consultation in reviewing, interpreting and analyzing such 

Books and Records and Inspection Reports; and 

(b) 	 obtaining information from the officers, directors, and other personnel of 

Managed Futures Persons. 

10. 	 Each Authority intends, upon request and consistent with the laws and regulatory 

requirements which govern it, to provide other information located in its jurisdiction 

that may be relevant to the other Authority's review, examination or detenninations 

pertaining to registration or authorization status of Managed Futures Persons. 

INSPECTIONS 

11. 	 The Authorities intend to comply with the following procedure for an On-Site 

Inspection: The Inspecting Authority will notify the Host Authority of its intent to 

perfonn an On-Site Inspection in the jurisdiction of the Host Authority by providing a 

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copy of the notice or request for Books and Records that it issues to the Managed 

Futures Person prior to the time that such notice or request is issued. In routine 

reviews or examinations, the Inspecting Authority will provide notice to the Host 

Authority one week prior to the Inspecting Authority's notification of the Managed 

Futures Person. In routine reviews or examinations, two weeks prior notice will be 

given to the Managed Futures Person of the On-Site Inspection. In other cases, the 

Authorities may agree to vary these notice periods. 

12. 	 In its discretion, the Host Authority may accompany the Inspecting Authority during 

the On-Site Inspection and, to the extent permitted by law, assist in all aspects of the 

On-Site Inspection. Such assistance may include, without limitation: 

(a) 	 compiling, reviewing, interpreting and analyzing Books and Records; 

{b) 	 interpreting and understanding the internal controls and other procedures of the 

Managed Futures Person; and 

(c) 	 obtaining such other information as may be relevant to the On-Site Inspection. 

APPLICABILITY OF MOU 

13. 	 This Declaration is being made within the framework of the Memorandum of 

Understanding, dated October 5, 1995 (the "MOU"), between the CFTC and the 

SFC, and nothing contained herein modifies or amends the MOU. 

14. 	 Materials and information provided hereunder are to be kept confidential and 

governed by the provisions of Section 3.6 of the MOU. 

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CONSULTATIONS 

15. 	 The Authorities intend to engage in regular consultations regarding managed futures 

activity in their markets, and to review this Declaration periodically for the puipose 

of assessing its operation. 

dilay ' this oft'V-.J~c, 1995 

FOR TiiE COMMODITY FUTURES 

TRADING COMMISSION OF TiiE 

UNITED STATES: 

Schapiro 

Chairman 

this~~Y ofWe~, 1995 

FOR TiiE HONG KONG SECURITIES 

AND FUTURES COMMISSION: 

Mary L. Anthony Neoli 

Chairman 

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