PART IV | CONDUCT OF COMMODITY TRADING BUSINESS |
| Minimum financial requirements for commodity brokers and commodity futures brokers, etc. |
17.—(1) Every commodity broker, commodity futures broker and spot commodity broker shall not allow his adjusted net capital to fall, for 4 consecutive weeks, below the amount equal to or in excess of —| (a) | $250,000; or | | (b) | 10% of the amount of customer funds required to be segregated under these Regulations, |
(2) In the case where a commodity broker or commodity futures broker is a member of a Commodity Futures Exchange or a commodity market, if the adjusted net capital of such broker falls below $400,000 or is less than 12.5% of the amount of customer funds required to be segregated under these Regulations, whichever is the higher, he shall —| (a) | immediately inform the Exchange or market concerned; and | | (b) | immediately operate his business in such manner and on such conditions as the Exchange or market may decide. |
|
| (3) The Commodity Futures Exchange or commodity market referred to in paragraph (2) shall also notify the Board, which may review, affirm, modify or set aside the conditions stipulated by the market or Exchange, and may in addition issue such directions to the commodity broker or commodity futures broker as it thinks fit, and the broker shall comply with the direction. |
(4) In the case where a commodity broker, commodity futures broker or spot commodity broker is not a member of a Commodity Futures Exchange or a commodity market, if the adjusted net capital of such broker falls below $400,000 or is less than 12.5% of the amount of customer funds required to be segregated, whichever is the higher, he shall immediately —| (a) | notify the Board; and | | (b) | operate his business in such manner and on such conditions as the Board may decide. |
|
| (5) The Board may, after assessing the financial condition of any commodity broker, commodity futures broker or a spot commodity broker, including a member of a commodity market or Commodity Futures Exchange, direct the broker to meet such other financial requirements as the Board may determine. |
|
| Statements of financial condition, computation of adjusted net capital, etc. |
18.—(1) Every commodity broker, commodity futures broker and spot commodity broker shall prepare statements in the form determined by the Board in respect of each quarter for his business as a broker.| (2) The assets and liabilities of the business shall be brought into account in the statements at such amounts to be classified and described such that the statements give a true and fair view of the state of affairs of the business. |
| (3) Each statement prepared under paragraph (1) shall be signed by the commodity broker, commodity futures broker or spot commodity broker, or a director thereof and shall be lodged with the Board no later than 30 days after the end of each quarter. |
| (4) If the adjusted net capital of a commodity broker, commodity futures broker or spot commodity broker, not being a member of a commodity market or Commodity Futures Exchange, falls below $400,000 or is less than 12.5% of the amount of customer funds required to be segregated, whichever is the higher, for 5 consecutive business days, he shall immediately submit the statements specified in this regulation to the Board on a weekly basis until the adjusted net capital of the broker exceeds $400,000 or is greater than 12.5% of the customer funds required to be segregated, for 8 consecutive weeks, following which the broker shall submit the statements quarterly. |
| (5) The weekly statements required to be submitted under paragraph (4) shall be signed by the commodity broker, commodity futures broker or spot commodity broker, or a director thereof and shall be lodged with the Board no later than 3 business days after the end of each week. |
| (6) Notwithstanding anything contained in regulation 17 and this regulation, a commodity broker, commodity futures broker or spot commodity broker who only trades in commodity contracts, commodity futures contracts or spot commodity contracts for himself or for customers which are related corporations may, with the approval of the Board, maintain an adjusted net capital of not less than $25,000 in addition to an irrevocable letter of credit issued on his behalf by a bank acceptable to the Board for an amount of not less than $1 million made in favour of the Board or, with the approval of the Board, in favour of the commodity market or Commodity Futures Exchange of which the broker is a member. |
|
| Records to be kept by trading adviser and pool operator |
19.—(1) Every commodity trading adviser , commodity futures trading adviser, commodity pool operator and commodity futures pool operator shall keep such accounting and other records as will —| (a) | sufficiently explain the transactions and financial position of his business; and | | (b) | enable true and fair profit and loss accounts and balance-sheets to be prepared from time to time, |
| and shall cause these records to be kept in such a manner as to enable them to be conveniently and properly audited. |
(2) A commodity trading adviser or commodity futures trading adviser shall be deemed to have failed to comply with paragraph (1), in relation to records, unless the records are kept in sufficient detail to show —| (a) | the particulars of all his clients (including their names and addresses); | | (b) | a list or other record of all clients’ accounts directed by the trading adviser and of all transactions effected therefor; | | (c) | copies of confirmation of each transaction mentioned in sub-paragraph (b), each contract confirmation note and each monthly statement received from a commodity broker or commodity futures broker; | | (d) | powers of attorney and all other documents, or signed copies thereof, authorising the trading adviser to operate that client’s account on a discretionary basis; | | (e) | a signed and dated acknowledgment from each client that he has received and understood the contents of the disclosure statement specified in Form 1 in the Second Schedule for the trading programme pursuant to which the trading adviser will direct his account or will guide his trading; | | (f) | all other written agreements, or copies thereof, including risk disclosure documents entered into by the trading adviser with any of his clients; | | (g) | the original or a copy of each report, letter, circular, memorandum, publication, writing, advertisement or other literature or advice distributed or caused to be distributed by the trading adviser to any existing or prospective client, showing the first date of its distribution; | | (h) | an itemised record of all commodity contract or commodity futures contract transactions for the personal account of the trading adviser or of a director of the trading adviser, showing the transaction date, the quantity of contracts, the type of contracts and price, the delivery month, the commodity broker or commodity futures broker carrying the account, whether the contract was purchased or sold, and the gain or loss realised; | | (i) | each confirmation of a commodity contract or commodity futures contract transaction and each monthly statement furnished by a commodity broker or commodity futures broker to the trading adviser relating to the personal account of the trading adviser, or to a personal account of a director of such trading adviser; and | | (j) | books and records of all other transactions in all other business dealings in commodity contracts or commodity futures contracts and of all cash market transactions by the trading adviser or any of his directors. |
|
(3) A commodity pool operator or commodity futures pool operator shall be deemed to have failed to comply with paragraph (1), in relation to records, unless the records are kept in sufficient detail to show —| (a) | an itemised daily record of each commodity contract or commodity futures contract transaction the date of such contract, the quantity of contracts, type of contract and price, delivery month, whether purchase or sale, the commodity broker or commodity futures broker carrying the account and the commodity trading adviser or commodity futures trading adviser involved, if any, and the gain or loss realised; | | (b) | a journal or other equivalent record showing all receipts and disbursements of money, securities and other property; | | (c) | a signed and dated acknowledgment from every participant that he has received and understood the contents of the disclosure document as specified in Form 2 in the Second Schedule; | | (d) | a subsidiary ledger or other equivalent record for each participant’s name and address and all funds, securities and other property that the pool has received from or distributed to each participant; | | (e) | copies of each confirmation of a commodity contract or commodity futures contract transaction of the pool and each monthly statement for the pool received from a commodity broker or commodity futures broker; | | (f) | all cancelled cheques, bank statements, journals, ledgers, invoices, computer generated records, data and memoranda prepared or received in connection with the operation of the pool; | | (g) | the original or a copy of each report, letter, circular, memorandum, publication, writing, advertisement or other literature or advice distributed or caused to be distributed by the pool operator from any commodity trading adviser or commodity futures trading adviser of the pool, showing the first date of distribution or receipt; | | (h) | an itemised daily record of each commodity contract or commodity futures contract transaction of the pool operator for his own account and any of the directors of the pool operator, showing the transaction date, quantity of contracts, type of contract and price, delivery month, the commodity broker or commodity futures broker carrying the account, whether the contract was purchased or sold, and the gain or loss realised; | | (i) | each confirmation of a commodity contract or commodity futures contract transaction and each monthly statement furnished by a commodity broker or commodity futures broker to the pool operator relating to a personal account of the pool operator or to a personal account of a director of the pool operator; and | | (j) | books and records of all other transactions in all other activities in which the pool operator engages, including cancelled cheques, bank statements, journals, ledgers, invoices, computer generated records and all other records, data and memoranda which have been prepared in the course of engaging in those activities. |
|
|
20.—(1) Every commodity pool operator and commodity futures pool operator shall periodically distribute to each participant in each pool that he operates, within 30 days after the last date of the reporting period specified in paragraph (7) (hereinafter referred to as the reporting period), a profit and loss statement and a statement of changes in net asset value for that period.| (2) The statements referred to in paragraph (1) shall be presented and computed in accordance with generally accepted accounting principles, and shall be signed by the pool operator or by 2 directors thereof. |
(3) The profit and loss statement referred to in paragraph (1) shall set out as separate items —| (a) | the total amount of realised net gain or loss on commodity contract or commodity futures contract positions liquidated during the reporting period; | | (b) | the change in unrealised net gain or loss on contract positions during the reporting period; | | (c) | the total amount of net gain or loss from all other transactions in which the pool engaged during the reporting period including interest and dividends earned; | | (d) | the total amount of all management fees and advisory fees relating to the pool during the reporting period; | | (e) | the total amount of all brokerage commissions relating to the pool during the reporting period; and | | (f) | the total amount of all other expenses incurred or accrued by the pool during the reporting period. |
|
(4) The statement of changes in net asset value as referred to in paragraph (1) shall set out separately —| (a) | the net asset value of the pool as at the beginning of the reporting period; | | (b) | the total amount of additions to the pool made during the reporting period; | | (c) | the total amount of withdrawals from and redemption of participation units in the pool for the reporting period; | | (d) | the total net income or loss of the pool during the reporting period; | | (e) | the net asset value of the pool as at the end of the reporting period; and | | (f) | the net asset value of each outstanding participation unit in the pool as at the end of the reporting period or the total value of each participant’s interest or share in the pool as at the end of the reporting period, whichever is applicable. |
|
| (5) The statement of changes in net asset value shall also disclose any material dealings between the pool, the commodity pool operator or commodity futures pool operator, commodity trading adviser or commodity futures trading adviser, commodity broker or commodity futures broker, or any director thereof that previously has not been disclosed in the pool’s disclosure document or any amendment thereto, or other statements or annual reports. |
(6) The statement of changes in net asset value shall be distributed —| (a) | at least monthly, in the case of pools with net assets of more than $500,000 at the beginning of the pool’s financial year; and | | (b) | at least quarterly, in the case of pools with net assets of $500,000 or less. |
|
| (7) Every commodity pool operator or commodity futures pool operator shall distribute an annual report to each participant in each pool that he operates, and shall file a copy of the annual report with the Board within 3 months after the end of the pool’s financial year or such extension of time as permitted by the Board subject to such conditions as the Board thinks fit to impose. |
(8) The annual report referred to in paragraph (7) shall contain the following:| (a) | the net asset value of the pool as at the end of each of the pool’s 2 preceding financial years; | | (b) | the net asset value of each outstanding participation unit in the pool as at the end of each of the pool’s 2 preceding financial years, or the total value of each participant’s interest or share in the pool as at the end of each of the pool’s 2 preceding financial years, whichever is applicable; and | | (c) | appropriate disclosure and such further material information as may be necessary to ensure the accuracy of the required statements. |
|
| (9) The financial statements in the annual report shall be presented and computed in accordance with generally accepted accounting principles and shall be certified by an auditor. |
| (10) The profit and loss statement required to be distributed under this regulation shall set out all brokerage commissions, management fees, advisory fees and incentive fees relating to the pool, interest income and expense, total realised net gain or loss from contracts and change in unrealised net gain or loss on contract positions during the pool’s financial year. |
|
| Segregation of customer’s funds by brokers |
21.—(1) Every commodity broker, commodity futures broker and spot commodity broker shall —| (a) | treat and deal with all money, securities or property received by him from a customer to margin, guarantee or secure contracts in commodity trading, commodity futures trading or spot commodity trading, or accruing to a customer as a result of such trading, as belonging to that customer; and | | (b) | account in a separate trust account, designated or evidenced as such, for all the money, securities or property received from the customer or accruing to the customer pursuant to sub-paragraph (a), |
| and shall not commingle that money, security or property with his own funds or use them to margin, guarantee or to secure the contracts or extend the credit of any other customer or person other than the person for whom they are held. |
(2) Notwithstanding paragraph (1), the money, securities or property received by a commodity broker, commodity futures broker or spot commodity broker, from his customers may, for convenience and for the benefit of his customers, be commingled and deposited in the same account or accounts with —| (a) | any bank; | | (b) | a clearing house, whether in or outside Singapore; | | (c) | another commodity broker, commodity futures broker or spot commodity broker; or | | (d) | any person who may be approved by the Board for the purpose. |
|
(3) Subject to regulation 22, a commodity broker, commodity futures broker or spot commodity broker shall not withdraw money received by him and deposited in a separate trust account as referred to in paragraph (1), otherwise than for the purpose of —| (a) | making a payment to, or in accordance with the instructions of, a person entitled to the money; | | (b) | purchasing, margining, guaranteeing, securing, transferring, adjusting or settling dealings in commodity contracts, commodity futures contracts or spot commodity contracts effected by the broker on the instructions of a customer of the broker; | | (c) | defraying brokerage and other proper charges incurred in respect of dealings in the commodity contracts, commodity futures contracts or spot commodity contracts effected by the broker on the instructions of a customer of the broker; | | (d) | reimbursing himself to the extent of any residual financial interest that he may have in the account as is referred in paragraph (4); | | (e) | investing the money in such manner as may be permitted under these Regulations or otherwise by the Board; or | | (f) | making a payment that is otherwise authorised under law. |
|
| (4) Notwithstanding paragraph (1), a commodity broker, commodity futures broker or spot commodity broker may have a residual financial interest in a customer’s trust account and may from time to time advance from his own funds sufficient money to prevent any or all of his customers’ trust accounts from becoming under-margined. |
| (5) The Board may exempt a commodity broker, commodity futures broker, spot commodity broker, or any class of brokers or any transaction or class of transactions relating to trading in commodity contracts, commodity futures contracts or spot commodity contracts from the requirements in paragraph (1), subject to such terms and conditions as, in the opinion of the Board, provides reasonable protection for customers. |
|
22.—(1) All customer’s moneys shall be segregated as belonging to customers and separately accounted for.| (2) Any customer’s moneys received shall be paid without delay into a customer’s account unless authorised otherwise by the customer concerned. |
(3) Every commodity broker, commodity futures broker, spot commodity broker, commodity pool operator and commodity futures pool operator shall maintain accounts in such a way that the outstanding balance can be easily and readily identified with —| (a) | each customer’s transaction; and | | (b) | the respective dates on which each transaction occurred. |
|
(4) Every commodity broker, commodity futures broker, spot commodity broker, commodity pool operator and commodity futures pool operator shall at all times keep such books and accounts as may be necessary —| (a) | to show all his dealings with all his customer’s moneys held, received or paid by him, and any other money dealt by the broker or pool operator through his customers’ accounts; | | (b) | to distinguish such money held, received or paid by him on account of every customer; and | | (c) | to distinguish such money from his own money or other money held, received or paid by him on any other account. |
|
| (5) All customers’ moneys when deposited with any bank, merchant bank, a commodity broker, commodity futures broker, spot commodity broker or any other person approved by the Board, shall be deposited under an account name which clearly identifies such moneys as customers’ moneys and shows that such moneys are segregated in the manner required under regulation 21. |
| (6) Every commodity broker, commodity futures broker, spot commodity broker, commodity pool operator and commodity futures pool operator shall obtain and retain in his files acknowledgment from such bank, merchant bank, such other commodity broker, commodity futures broker, spot commodity broker or such other person approved by the Board, that he was informed that the customer’s moneys deposited therein belong to customers and are being held in accordance with these Regulations. |
(7) A commodity broker, commodity futures broker or spot commodity broker may hold any of his customers’ moneys in any of the following forms:| (a) | in any Government securities within the meaning of the Government Securities Act (Cap. 121A); | | (b) | in any debt instruments of the government of the country in which is situated the commodity market, commodity futures market or Commodity Futures Exchange where the commodity broker, commodity futures broker or spot commodity broker normally transacts his business; and | | (c) | in any other securities or instruments as may be approved by the Board. |
|
| (8) A commodity broker, commodity futures broker or spot commodity broker holding any of his customers’ moneys other than in a form of deposit with a bank or merchant bank shall keep a record of such accounts. |
(9) The record referred to in paragraph (8) shall include the following:| (a) | the dates of all transactions made; | | (b) | the names of the persons through whom the transactions were made; | | (c) | the amount of money involved in each transaction; | | (d) | a description of each transaction; | | (e) | the place, if any, where each customer’s moneys, securities and properties are being kept; | | (f) | the date on which the subject-matter of each transaction was released or otherwise disposed of and the amount of money received from each realisation or disposition, if any; and | | (g) | the name of the person to whom (and through whom, if any) the subject-matter of each transaction was disposed of. |
|
| (10) All securities and properties held or received by a commodity broker, commodity futures broker, spot commodity broker, commodity pool operator or commodity futures pool operator, on account of a customer in connection with any commodity contracts, commodity futures contracts or spot commodity contracts concluded or to be concluded, or cleared or to be cleared, on any commodity market, commodity futures market, spot commodity market or a Commodity Futures Exchange, shall be separately accounted for and segregated as belonging to the customer. |
(11) Every commodity broker, commodity futures broker, spot commodity broker, commodity pool operator or commodity futures pool operator shall at all times keep such books and accounts as may be necessary —| (a) | to show all his dealings with customers’ securities and properties held or received by him; | | (b) | to distinguish such securities and properties held or received by him on account of each customer; and | | (c) | to distinguish such securities and properties from his own securities and properties and other securities and properties held or received by him. |
|
(12) Every commodity broker, commodity futures broker and spot commodity broker shall compute as at the close of each business day —| (a) | the total amount of customer funds on deposit in segregated accounts on behalf of customers; | | (b) | the total amount of such customer funds required by the Act and these Regulations to be kept in deposit in segregated accounts on behalf of such customers; and | | (c) | the amount of his residual interest in such customer funds, |
| and such computation must be completed prior to noon on the next business day and must be kept, together with all supporting data. |
|
|
| 23. The position limits for commodity futures contracts listed on a Commodity Futures Exchange shall be the quantity determined by that Exchange and approved by the Board. |
| Issues of contract confirmation |
24.—(1) A commodity broker, commodity futures broker or spot commodity broker shall, not later than 2 business days after any transaction in commodity trading, furnish to his customers a written confirmation of each contract executed by the broker on behalf of that customer.(2) The written confirmation referred to in paragraph (1) shall include the following information:| (a) | the name or style under which the broker carries on his business, and the address of the principal place at which he carries on business; | | (b) | where the broker is dealing as principal, a statement that he is acting as such; | | (c) | the name and address of the person to whom the broker gives the confirmation; | | (d) | the day on which the transaction took place and the name of the Commodity Futures Exchange, commodity futures market, commodity market or spot commodity market in which the transaction took place; | | (e) | an itemised list of the quantity or amount and the types of contracts that are the subject of the confirmation; | | (f) | the price per unit of the contract concerned; | | (g) | the amount of the consideration; and | | (h) | the rate and amount of commission (if any) charged. |
|
| (3) The requirement in paragraph (1) shall not apply if the customer is a commodity broker, commodity futures broker or spot commodity broker. |
|
| Monthly confirmation statements |
25.—(1) Every commodity broker, commodity futures broker and spot commodity broker shall furnish in writing to each customer, at the close of the last business day of each month, or at any regular monthly date selected by the broker, but not less frequently than once every 3 months, a statement which clearly shows for each customer —| (a) | the position and price at which each commodity contract, commodity futures contract or spot commodity contract is acquired; | | (b) | the net unrealised profits or losses in all positions marked to the market; | | (c) | the amount of funds belonging to the customer kept with the broker; and | | (d) | a detailed accounting of all financial charges and credits to the customer’s account during that month, including all funds received from or disbursed to the customer and realised profits and losses belonging to the customer, |
| but such statement need not include accounts in which there are neither positions at the end of the period or any changes to the account balance since the furnishing of the prior statement. |
| (2) The requirements in paragraph (1) shall not apply if the customer is a commodity broker, commodity futures broker or spot commodity broker. |
|
| Conduct of business of pool operator |
26.—(1) No commodity pool operator or commodity futures pool operator shall, directly or indirectly, solicit, accept or receive funds, securities or other property from a prospective participant for a pool that he operates or intends to operate unless the pool operator delivers or causes to be delivered to the prospective participant a disclosure document containing the following information:| (a) | particulars relating to —| (i) | the name and address of the pool operator, and the name and address, if any, of his main business office, his telephone number and the form of organisation of the pool operator; | | (ii) | the name of the person who will make the trading decisions for the pool including the name of any commodity trading adviser or commodity futures trading adviser; | | (iii) | if known, the name of the commodity broker or commodity futures broker through whom the pool will execute its trades; | | (iv) | the types of contracts the pool operator intends that the pool will trade in, with a description of any restriction or limitations on such trading established by the pool operator; and | | (v) | a risk disclosure statement in Form 2 in the Second Schedule; |
| | (b) | any actual or potential conflict of interest regarding any aspect of the pool on the part of —| (i) | the pool operator or any of his directors; | | (ii) | the pool’s commodity trading adviser or commodity futures trading adviser or any director of the trading adviser if the trading adviser is a corporation; or | | (iii) | any commodity broker or commodity futures broker through which the pool’s trades will be executed or any of the broker’s directors, |
| and including in the description of such conflict, any arrangement whereby the pool operator, his trading advisers, or the directors of such pool operator or trading adviser may benefit, directly or indirectly, from the maintenance of the pool’s account with any commodity broker or commodity futures broker; |
| | (c) | the actual performance record of the pool operator, in the following manner:| (i) | a table showing at least quarterly the following information, current as of a date not more than 3 months preceding the date of the record:| (A) | the initial net asset value of the pool for the period, which shall be 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 of the pool for the period, which shall be the change in the net asset value, net of additions, withdrawals and redemptions; | | (E) | the ending net asset value of the pool for the period, which shall be the initial net asset value plus or minus additions, withdrawals and redemptions and net performance; | | (F) | the rate of return for the period, which shall be calculated by dividing the net performance by the initial net asset value; and | | (G) | the number of participation units outstanding at the end of the period; and |
| | (ii) | a description of the material differences among the pools for which past performance is disclosed; |
| | (d) | the actual performance record of the pool’s commodity trading advisers or commodity futures trading advisers; | | (e) | a complete description of each kind of expense which the pool operator knows or ought reasonably to know has been incurred by the pool for its preceding financial year or is expected to be incurred by the pool in its current financial year, including, but not limited to, fees for management, trading advice, brokerage commissions, legal advice, accounting services and organisational services and, in particular —| (i) | the pool operator shall specify the actual dollar amount of each such expense for the pool’s preceding financial year and, wherever possible, the estimated amount of each such expense for the pool’s current financial year; | | (ii) | where any expense is determined by reference to a base amount term including, but not limited to, “net assets”, “gross profits”, “net profits” or “net gains”, the specific definition of each such term; and | | (iii) | where any fee is based on an increase in the value of the pool, the pool operator shall specify how the 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 pool at the point where payment of the increased fee commences; |
| | (f) | information relating to —| (i) | the minimum aggregate amount of funds that will be necessary for the pool to commence trading in commodity contracts or commodity futures contracts, or if there is no such minimum amount, a statement to that effect; | | (ii) | the maximum aggregate amount of funds that may be contributed to the pool, or if there is no such maximum amount, a statement to that effect; | | (iii) | the maximum period of time for which the pool will hold funds prior to the commencement of any trading, or if there is no such period of time, a statement to that effect; | | (iv) | the disposition of funds if the pool does not receive the necessary amount to commence trading, including the period of time within which the disposition will be made; and | | (v) | where the pool operator deposits or invests funds received prior to the commencement of trading by the pool and if the pool operator intends to place those funds in an income-generating account or obligation, the name of the person to whom that income will be paid; |
| | (g) | information relating to —| (i) | the manner in which the pool will fulfil its margin requirements, and where the pool will fulfil its margin requirements otherwise than by cash, a statement of disclosure as to —| (A) | the nature of such non-cash items; and | | (B) | if those items generate income, the name of the person to whom that income will be paid; and |
| | (ii) | the form in which pool funds not deposited as margin will be held after the commencement of trading by the pool, and where those funds will be held in assets other than cash, a statement to that effect; |
| | (h) | a complete description of any restrictions upon the transferability of a participant’s interest in the pool, and where there are no such restrictions, a statement to that effect; | | (i) | a complete description of the manner in which a participant may redeem his interest in the pool, and the description must specify —| (i) | the method of calculating the redemption value of a participant’s interest, including the cost associated therewith; | | (ii) | the conditions under which a participant may redeem his interest including the terms of any notification required; and | | (iii) | any restrictions on the redemption of a participant’s interest, or if there are no such restrictions, a statement to that effect; |
| | (j) | the extent to which a participant may be held liable for obligations of the pool in excess of the funds contributed by the participant for the purchase of an interest in the pool; | | (k) | the pool’s policies with respect to the payment of distributions from profits or capital and the pool’s policies with respect to the frequency of such payments; | | (l) | a statement as to —| (i) | whether trading in commodity contracts or commodity futures contracts will be done or is intended to be done for the proprietary account of —| (A) | the pool operator or any of his directors; or | | (B) | the commodity trading adviser or commodity futures trading adviser of the pool or any of their respective directors; and |
| | (ii) | if any of the persons mentioned in this paragraph does not trade or intend to trade for their own account, a statement to that effect with respect to each such person; and |
| | (m) | a statement that the pool operator shall provide all participants with a monthly or quarterly (whichever is applicable) statement of accounts and a certified annual report. |
| (2) For the purposes of paragraph (1), no pool operator shall use any disclosure document which is dated more than 6 months preceding the date of its use. |
| (3) The risk disclosure document required by section 32(2) of the Act to be provided by a commodity pool operator or commodity futures pool operator to a prospective client shall be in Form 2 in the Second Schedule. |
|
| Conduct of business of trading adviser |
27.—(1) No commodity trading adviser or commodity futures trading adviser shall solicit, accept or receive from an existing or prospective client any funds, securities or other property in the trading adviser’s name (or extend credit in lieu thereof) to purchase, margin, guarantee or secure any commodity contract or commodity futures contract of the client or prospective client unless he is licensed as a commodity broker or commodity futures broker, as the case may be, or a commodity pool operator or commodity futures pool operator under the Act.(2) No commodity trading adviser or commodity futures trading adviser shall solicit or enter into an agreement with a prospective client unless, he delivers or causes to be delivered to the prospective client, a disclosure document containing the following information:| (a) | particulars relating to —| (i) | the name and address of the trading adviser, and the name and address of his main business office, his business telephone number and the form of organisation of the trading adviser; | | (ii) | a description of the trading programme; | | (iii) | the name of the commodity broker or commodity futures broker, bank or merchant bank with which the trading adviser will require the client to maintain an account; and | | (iv) | the types of commodity contracts or commodity futures contracts the trading adviser intends to trade in, with a description of any restrictions or limitations on such trading established by the trading adviser; |
| | (b) | the actual performance record of the trading adviser over the past 3 years, including a description of the material differences among those accounts to which the performance record relates; | | (c) | a complete description of each fee which the trading adviser will charge the client and —| (i) | wherever possible, 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 specific definition of each such term; and | | (iii) | where any fee is based on an increase in the value of the client’s trading account, the 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 the point in time where the payment of the increased fee commences; |
| | (d) | any actual or potential conflict of interest on the part of the trading adviser or any of the directors thereof or on the part of any commodity broker or commodity futures broker with which the client will be required to maintain his account or any directors of the broker, and —| (i) | if there is any such conflict, a full description of the nature of the conflict; and | | (ii) | if there is no such conflict, a statement to that effect with respect to each such person; and |
| | (e) | a statement whether trading in commodity contracts or commodity futures contracts will be done or is intended to be done by the trading adviser or any of his directors for his own account, and if any of the abovementioned persons does not trade or intend to trade in such contracts for his own account, a statement to that effect with respect to each such person. |
|
| (3) For the purposes of paragraph (2), no commodity trading adviser or commodity futures trading adviser shall use a disclosure document dated more than 6 months preceding the date of its use. |
| (4) The risk disclosure document required by section 32(3) of the Act to be provided by a commodity trading adviser or commodity futures trading adviser to a prospective client shall be in Form 1 in the Second Schedule. |
|
| Trading standards for brokers |
28.—(1) A commodity broker, commodity futures broker or spot commodity broker shall not withhold or withdraw from the market any order or any part of an order from a client for his own benefit, the benefit of any connected person, or for the convenience of any other person.| (2) A commodity broker, commodity futures broker or spot commodity broker shall not buy for his own account, accounts belonging to connected persons, or an account in which he has an interest (including any account over which he has discretion), if he has in hand orders to buy for others at the prevailing market price or at the same price. |
| (3) A commodity broker, commodity futures broker or spot commodity broker shall not sell for his own account, being accounts to connected persons or an account in which he has an interest (including any account over which he has discretion), if he has in hand orders to sell for others at the prevailing market price or at the same price. |
| (4) A commodity broker, commodity futures broker or spot commodity broker shall not knowingly take, directly or indirectly, the other side of an order from his client for his own account or for the accounts of connected persons, except with the client’s prior consent and in accordance with the rules of a commodity market, commodity futures market, Commodity Futures Exchange as have been approved by the Board or any spot commodity market. |
(5) A commodity broker, commodity futures broker or spot commodity broker shall not divulge information relating to an order held by him, unless such disclosure —| (a) | is necessary for the effective execution of such order; | | (b) | is in compliance with the rules of the relevant commodity market, commodity futures market, Commodity Futures Exchange as have been approved by the Board or any spot commodity market; or | | (c) | is made at the request of the Board. |
|
(6) Every commodity broker, commodity futures broker, spot commodity broker and their representatives shall not accept or agree to accept any power or authority from any person or any third party acting on behalf of such person to deal in any commodity market, commodity futures market or spot commodity market for the account of such person, at the discretion of the broker or his representative, except in the following circumstances and upon the following terms and conditions:| (a) | at the request of a customer, a discretionary account accepted and operated only in circumstances when it is necessary to do so and at the request of the relevant customer; | | (b) | the agreement for the operation of a discretionary account is duly executed by the customer, the broker and his representative, if any; | | (c) | the agreement to operate a discretionary account contains the following statements which are printed in bold type and prominently displayed at the beginning of the agreement:| (i) | “This is a most important document, because it attaches personal liabilities to the customer. The customer is strongly advised to consult his accountant, bank manager, solicitor or other professional adviser prior to the customer’s execution of this document.”; and | | (ii) | “The Singapore Commodity Exchange (or the name of the relevant market or Exchange) has introduced certain guidelines for the operation of discretionary accounts, a copy of which will be made available to you upon request.”; |
| | (d) | the broker explains fully to the customer, (before the agreement is executed), the statements contained in the agreement and the customer’s risks and liabilities thereunder; | | (e) | the broker furnishes to the customer in writing at such times as are requested by the customer, full details of the transactions executed on the customer’s behalf and the positions and equity in the customer’s account; and | | (f) | the broker ensures that all discretionary account orders are transmitted to the dealing room or trading floor in writing with the account designation clearly indicated on such orders. |
|
| (7) The risk disclosure document required by section 32(1) of the Act to be provided by a commodity broker, commodity futures broker or spot commodity broker to a prospective client shall be in Form 3 in the Second Schedule. |
|
|