27.—(1) No commodity 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 of the client or prospective client unless he is licensed as a commodity broker or a commodity pool operator under the Act.
(2) No commodity 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, bank or merchant bank with which the trading adviser will require the client to maintain an account; and
(iv)
the types of commodity 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 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 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 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 to a prospective client shall be in Form 1 in the Second Schedule.