17 CFR § 4.25 - Performance disclosures.
(a) General principles—(1) Capsule performance information—(i) For pools. Unless otherwise specified, disclosure of the past performance of a pool must include the following information. Amounts shown must be net of any fees, expenses or allocations to the commodity pool operator.
(A) The name of the pool;
(B) A statement as to whether the pool is:
(1) Privately offered pursuant to section 4(2) of the Securities Act of 1933, as amended (15 U.S.C. 77d(2)), or pursuant to Regulation D thereunder (17 CFR 230.501 et seq.);
(2) A multi-advisor pool as defined in § 4.10(d)(2); and
(3) A principal-protected pool as defined in § 4.10(d)(3);
(C) The date of inception of trading;
(D) The aggregate gross capital subscriptions to the pool;
(E) The pool's current net asset value;
(F) The largest monthly draw-down during the most recent five calendar years and year-to-date, expressed as a percentage of the pool's net asset value and indicating the month and year of the draw-down (the capsule must include a definition of “draw-down” that is consistent with § 4.10(k));
(G) The worst peak-to-valley draw-down during the most recent five calendar years and year-to-date, expressed as a percentage of the pool's net asset value and indicating the months and year of the draw-down; and
(H) Subject to § 4.25(a)(2) for the offered pool, the annual and year-to-date rate of return for the pool for the most recent five calendar years and year-to-date, computed on a compounded monthly basis;
(ii) For accounts. Disclosure of the past performance of an account required under this § 4.25 must include the following capsule performance information:
(A) The name of the commodity trading advisor or other person trading the account and the name of the trading program;
(B) The date on which the commodity trading advisor or other person trading the account began trading client accounts and the date when client funds began being traded pursuant to the trading program;
(C) The number of accounts directed by the commodity trading advisor or other person trading the account pursuant to the trading program specified, as of the date of the Disclosure Document;
(D)(1) The total assets under the management of the commodity trading advisor or other person trading the account, as of the date of the Disclosure Document; and
(2) The total assets traded pursuant to the trading program specified, as of the date of the Disclosure Document;
(E) The largest monthly draw-down for the trading program specified during the most recent five calendar years and year-to-date expressed as a percentage of client funds, and indicating the month and year of the draw-down;
(F) The worst peak-to-valley draw-down for the trading program specified during the most recent five calendar years and year-to-date, expressed as a percentage of net asset value and indicating the months and year of the draw-down; and
(G) The annual and year-to-date rate-of-return for the program specified, computed on a compounded monthly basis.
(H) Partially-funded accounts directed by a commodity trading advisor may be presented in accordance with § 4.35(a)(7).
(2) Additional requirements with respect to the offered pool.
(i) The performance of the offered pool must be identified as such and separately presented first;
(ii) The rate of return of the offered pool must be presented on a monthly basis for the period specified in § 4.25(a)(5), either in a numerical table or in a bar graph;
(iii) A bar graph used to present monthly rates of return for the offered pool:
(A) Must show percentage rate of return on the vertical axis and one-month increments on the horizontal axis;
(B) Must be scaled in such a way as to clearly show month-to-month differences in rates of return; and
(C) Must separately display numerical percentage annual rates of return for the period covered by the bar graph; and
(iv) The pool operator must make available upon request to prospective and existing participants all supporting data necessary to calculate monthly rates of return for the offered pool as specified in § 4.25(a)(7), for the period specified in § 4.25(a)(5).
(3) Additional requirements with respect to pools other than the offered pool. With respect to pools other than the offered pool for which past performance is required to be presented under this section:
(i) Performance data for pools of the same class as the offered pool must be presented following the performance of the offered pool, on a pool-by-pool basis.
(ii) Pools of a different class than the offered pool must be presented less prominently and, unless such presentation would be misleading, may be presented in composite form; Provided, however, that:
(A) The Disclosure Document must disclose how the composite was developed;
(B) Pools of different classes or pools with materially different rates of return may not be presented in the same composite.
(iii) For the purpose of § 4.25(a)(3)(ii), the following, without limitation, shall be considered pools of different classes: Pools privately offered pursuant to section 4(2) of the Securities Act of 1933, as amended (15 U.S.C. 77d(2)), or pursuant to Regulation D thereunder (17 CFR 230.501 et seq.), and public offerings; and principal-protected and non-principal-protected pools. Multi-advisor pools as defined in § 4.10(d)(2) will be presumed to have materially different rates of return from those of non-multi-advisor pools absent evidence sufficient to demonstrate otherwise.
(iv) Material differences among the pools for which past performance is disclosed, including, without limitation, differences in leverage and use of different trading programs, must be described.
(4) Additional requirements with respect to accounts.
(i) Unless such presentation would be misleading, past performance of accounts required to be presented under this section may be presented in composite form on a program-by-program basis using the format set forth in § 4.25(a)(1)(ii).
(ii) Accounts that differ materially with respect to rates of return may not be presented in the same composite.
(iii) The commodity pool operator must disclose all material differences among accounts included in a composite.
(5) Time period for required performance. All required performance information must be presented for the most recent five calendar years and year-to-date or for the life of the pool, account or trading program, if less than five years.
(6) Trading programs. If the offered pool will use any of the trading programs for which past performance is required to be presented, the Disclosure Document must so indicate.
(7) Calculation of, and recordkeeping concerning, performance information.
(i) All performance information presented in a Disclosure Document, including performance information contained in any capsule and performance information not specifically required by Commission rules, must be current as of a date not more than three months preceding the date of the Document, and must be supported by the following amounts, calculated on an accrual basis of accounting in accordance with generally accepted accounting principles, as specified below or by a method otherwise approved by the Commission.
(A) The beginning net asset value for the period, which shall be the same as the previous period's ending net asset value;
(B) All additions, whether voluntary or involuntary, during the period;
(C) All withdrawals and redemptions, whether voluntary or involuntary, during the period;
(D) The net performance for the period, which shall represent the change in the net asset value net of additions, withdrawals, and redemptions;
(E) The ending net asset value for the period, which shall represent the beginning net asset value plus or minus additions, withdrawals, redemptions and net performance;
(F) The rate of return for the period, which shall be calculated by dividing the net performance by the beginning net asset value or by a method otherwise approved by the Commission; and
(G) The number of units outstanding at the end of the period, if applicable.
(ii) All supporting documents necessary to substantiate the computation of such amounts must be maintained in accordance with § 1.31.
(8) Proprietary trading results.
(i) Proprietary trading results may not be included in a Disclosure Document unless such performance is prominently labeled as proprietary and is set forth separately after all disclosures in accordance with § 4.24(v), together with a discussion of any differences between such performance and the performance of the offered pool, including, but not limited to, differences in costs, leverage and trading methodology.
(ii) For the purposes of § 4.24(v) and this § 4.25(a), proprietary trading results means the performance of any pool or account in which fifty percent or more of the beneficial interest is owned or controlled by:
(A) The commodity pool operator, trading manager (if any), commodity trading advisor or any principal thereof
(B) An affiliate or family member of the commodity pool operator, trading manager (if any) or commodity trading advisor; or
(C) Any person providing services to the pool.
(9) Required legend. Any past performance presentation, whether or not required by Commission rules, must be preceded by the following statement, prominently displayed:
(b) Performance disclosure when the offered pool has at least a three-year operating history. The commodity pool operator must disclose the performance of the offered pool, in accordance with paragraphs (a)(1)(i) (A) through (H) and (a)(2) of this § 4.25, where:
(1) The offered pool has traded commodity interests for three years or more; and
(2) For at least such three-year period, seventy-five percent or more of the contributions to the pool were made by persons unaffiliated with the commodity pool operator, the trading manager (if any), the pool's commodity trading advisors, or the principals of any of the foregoing.
(c) Performance disclosure when the offered pool has less than a three-year operating history—(1) Offered pool performance.
(i) The commodity pool operator must disclose the performance of the offered pool, in accordance with paragraphs (a)(1)(i)(A) through (H) and (a)(2) of this § 4.25; or
(ii) If the offered pool has no operating history, the pool operator must prominently display the following statement:
(2) Other performance of commodity pool operator. (i)(A) Except as provided in § 4.25(a)(8), the commodity pool operator must disclose, for the period specified by § 4.25(a)(5), the performance of each other pool operated by the pool operator (and by the trading manager if the offered pool has a trading manager) in accordance with paragraphs (a)(1)(i) (C) through (H) and (a)(3) of this § 4.25, and the performance of each other account traded by the pool operator (and by the trading manager if the offered pool has a trading manager) in accordance with paragraphs (a)(1)(ii) (C) through (G) of this § 4.25. If the trading manager has been delegated complete authority for the offered pool's trading, and the trading manager's performance is not materially different from that of the pool operator, the performance of the other pools operated by and accounts traded by the pool operator is not required to be disclosed.
(B) In addition, if the pool operator, or if applicable, the trading manager, has not operated for at least three years any commodity pool in which seventy-five percent or more of the contributions to the pool were made by persons unaffiliated with the commodity pool operator, the trading manager, the pool's commodity trading advisors or their respective principals, the pool operator must also disclose the performance of each other pool operated by and account traded by the trading principals of the pool operator (and of the trading manager, as applicable) unless such performance does not differ in any material respect from the performance of the offered pool and the pool operator (and trading manager, if any) disclosed in the Disclosure Document.
(ii) If neither the pool operator or trading manager (if any), nor any of its trading principals has operated any other pools or traded any other accounts, the pool operator must prominently display the following statement: NEITHER THIS POOL OPERATOR (TRADING MANAGER, IF APPLICABLE) NOR ANY OF ITS TRADING PRINCIPALS HAS PREVIOUSLY OPERATED ANY OTHER POOLS OR TRADED ANY OTHER ACCOUNTS. If the commodity pool operator or trading manager, if applicable, is a sole proprietorship, reference to its trading principals may be deleted from the prescribed statement.
(3) Major commodity trading advisor performance.
(i) The commodity pool operator must disclose the perfor- mance of any accounts (including pools) directed by a major commodity trading advisor in accordance with paragraphs (a)(1)(ii) (C) through (G) of this § 4.25.
(ii) If a major commodity trading advisor has not previously traded accounts, the pool operator must prominently display the following statement:
(name of the major commodity trading advisor), A COMMODITY TRADING ADVISOR THAT HAS DISCRETIONARY TRADING AUTHORITY OVER (percentage of the pool's funds available for commodity interest trading allocated to that trading advisor) PERCENT OF THE POOL'S COMMODITY INTEREST TRADING HAS NOT PREVIOUSLY DIRECTED ANY ACCOUNTS.
(4) Major investee pool performance.
(i) The commodity pool operator must disclose the performance of any major investee pool.
(ii) If a major investee pool has not commenced trading, the pool operator must prominently display the following statement:
(5) With respect to commodity trading advisors and investee pools for which performance is not required to be disclosed pursuant to § 4.25(c) (3) and (4), the pool operator must provide a summary description of the performance history of each of such advisors and pools including the following information, provided that where the pool operator uses a two-part document pursuant to the rules promulgated by a registered futures association pursuant to Section 17(j) of the Act, such summary description may be provided in the second part of the two-part document:
(i) Monthly return parameters (highs and lows);
(ii) Historical volatility and degree of leverage; and
(iii) Any material differences between the performance of such advisors and pools as compared to that of the offered pool's major trading advisors and major investee pools.