CFTC Staff Letter 01-60: Requirements for Hypothetical and Proprietary Performance Presentations on a CTA Website

CFTC Letter No. 01-60
CFTC Letter No. 01-60
June 13, 2001
Other Written Communication
Division of Trading and Markets
Re: Rules 4.41(b)(1), 4.35(a)(6)(i) and 4.35(a)(7)(i)—Questions Concerning Certain Performance Presentations on an Internet Website that Provides Commodity Interest Trading Advice and Management of Commodity Interest Accounts. Dear:
This is in response to your electronic mail (“e-mail”) message dated March 19, 2001 (“March Letter”) to the Division of Trading and Markets (the “Division”) of the Commodity Futures Trading Commission (“CFTC” or “Commission”), as supplemented by an e-mail dated April 1, 2001. By your correspondence, you seek, on behalf of your company XXX (“XXX”), clarification of the requirements under the Commodity Exchange Act (the “Act”) [1] and Commission rules[2] applicable to certain promotional presentations on XXX’s proposed Internet website. Additionally, you note that the March Letter was sent in response to the Division’s reply to your letter of January 30, 2001 (the “January Letter”). Based on the representations made in your correspondence, we understand that in addition to matters described in the January Letter, the facts are as follows. XXX will offer, on a subscription basis, commodity interest trading advice via e-mail notifications and a company website. By so doing, XXX is acting as a commodity trading advisor (“CTA”) as defined in section 1a(6) of the Act.[3] XXX will offer this service without registering as a CTA, relying upon the CTA registration exemption provided in CFTC Rule 4.14(a)(9).[4] You acknowledge that prior to undertaking the management of client accounts, XXX must register with the CFTC, secure National Futures Association (“NFA”) membership, and file a disclosure document with the NFA and CFTC. In your March Letter, you pose two questions concerning the use of certain performance results for promotional purposes on XXX’s internet website. Both questions are copied below, and each is followed by the Division’s response. The Division’s response is based upon the information you provided. Hypothetical Performance Presentations Question 1: “First, the exact wording to be used in connection with hypothetical performance results as specified by the NFA (Disclosure Document Guide for CPOs and CTAs) is different than that specified in the regulations (CFTC 4.41(b)(1)(i). In a literal sense, it appears as if the wording specified by the file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/01letters/tm01-60.htm (1 of 4) [5/6/2010 6:14:30 PM]