CFTC Staff Letter 93-84: Relief from Rule 4.31(a)(3) Disclosure for Proprietary Trading Strategy Performance

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COMMODITY FUTURES TRADING COMMISSION
2033 K Street, NW, Washington, DC 20581
(202) 254 - 8955
(202) 254 - 8010 Facsimile
; DIVISION OF t nADINO AND MARKETS ;
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August 20, 1993
Re: Relief from R~le 4.31{a) {3)
Dear
This is in response to your letter dated June 21, 1993, as supplemented by talephone conversations with Division staff, wherein you request on behalf of "X", a registered commodity trading advisor ("CTA"}, relief from Rule 4.31(a) (3)!1 such that "X" may exclude certain past performance from its Disclosure Docwnent. From the representations made in your letter, as supplemen￾ted, we understand the facts to be as follows:
From time to time, [you] test new trading strategies prior to marketing them to the general public, The purpose of the testing is to determine whether or not the strategy is a viable product and to obtain a histori￾cal performance record should [you] decide to offer the strategy. Usually the funds used for the test strategies are proprietary mon￾ies, however, they may on occasion come from an outside source. Any outside sources would be sophisticated, high net worth investors. The past performance record of a trading strategy not offered to clients of a CTA is not required to be disclosed under Rule 4.31(a} (3}. This is because Rule 4.31(a} {3) requires disclosure of the actual past performance record of all accounts directed by the CTA. In this regard, the Commission has stated that, because Rule 4.31(a} (3) requires disclosure of the perfor￾mance of clients' accounts, as used in the context of the past p~rformance disclosure requirements, the term "clients" applies ! 1 Commission rules referred to herein are found at 17 c. F .R. Ch. I (1993}.