Conduct of business of commodity futures trading adviser
28.—(1) No commodity futures trading adviser shall solicit, accept or receive from an existing or prospective client, funds, securities or other property in the commodity futures trading adviser’s name (or extend credit in lieu thereof) to purchase, margin, guarantee or secure any commodity futures contract of the client unless he is holding a commodity futures broker’s licence or commodity futures pool operator’s licence under Part III of the Act.
(2) No commodity futures trading adviser shall solicit or enter into an agreement with a prospective client unless, at or before the time he engages in the solicitation or enters into the agreement (whichever is earlier) he delivers or causes to be delivered to the prospective client, a disclosure document containing the following information:
(a)
(i)
the name, address of the main business office, main business telephone number and form of organisation of the commodity futures trading adviser;
(ii)
a description of the trading programme;
(iii)
the name of the commodity futures broker, bank or merchant bank with which the futures trading adviser will require the client to maintain his account; and
(iv)
the types of commodity futures contracts the commodity futures trading adviser intends to trade, with a description of any restrictions or limitations on such trading established by the commodity futures trading adviser;
(b)
the actual performance record of the commodity futures trading adviser over the past 3 years. The futures trading adviser shall describe the material differences among those accounts to which the performance record relates;
(c)
a complete description of each fee which the commodity futures trading adviser will charge the client —
(i)
wherever possible, the commodity futures trading adviser shall specify the dollar amount of each such fee;
(ii)
where any fee is determined by reference to a base amount term including, but not limited to, “net assets”, “gross profits”, “net profits” or “net gains”, the commodity futures trading adviser shall specifically define each such term; and
(iii)
where any fee is based on an increase in the value of the client’s commodity futures trading account, the commodity futures trading adviser shall specify how that increase is calculated, the period of time during which the increase is calculated, the fee to be charged at the end of that period and the value of the account at which payment of the fee commences;
(d)
(i)
any actual or potential conflict of interest on the part of the commodity futures trading adviser or any of the directors thereof; or on the part of any commodity futures broker with which the client will be required to maintain his account and any directors of the commodity futures broker;
(ii)
if there is any such actual or conflict of interest, the commodity futures trading adviser shall fully describe the nature of the conflict; and
(iii)
if any of the abovementioned persons does not have any such actual or potential conflict of interest, the commodity futures trading adviser shall make a statement to that effect with respect to each such person; and
(e)
(i)
a statement whether trading in commodity futures contracts will be done or is intended to be done by the commodity futures trading adviser or any of its directors for its or their own account; and
(ii)
if any of the abovementioned persons will not trade or does not intend to trade in commodity futures contracts for his own account, the commodity futures trading adviser shall make a statement to that effect with respect to each such person.
(3) No commodity futures trading adviser shall use a disclosure document dated more than 6 months preceding the date of its use.