3038-0005-PRAC-proposed rule-Support Statmt (12-08)

SUPPORTING STATEMENT FOR NEW AND REVISED INFORMATION COLLECTIONS
OMB CONTROL NUMBER 3038-0005

Justification
1. Explain the circumstances that make the collection of information necessary. Identify

any legal or administrative requirements that necessitate the collection. Attach a copy of
the appropriate section of each statute and regulation mandating or authorizing the
collection of information.

the Commission's Regulations sets forth requirements regarding the disclosure
of risk, the filing of reports, and the keeping of books and records by commodity pool operators
(CPOs) and commodity trading advisors (CTAs). Regulation 4.21 requires that each CPO who is
registered or required to be registered and who solicits prospective participants in a commodity
pool must, absent an exemption, deliver to prospective participants a Disclosure Document
containing the information specified by Regulations 4.24 and 4.25 and must file the Document
with the National Futures Association (NF A) as provided by Regulation 4.26 before the CPO
may accept funds or other property in exchange for participation in the pooL. CTAs similarly
must comply with the disclosure requirements of Regulations 4.31, 4.34 and 4.35 and the fiing
requirement of
Regulation 4.36 before they may enter into an agreement to direct or to guide a
client's commodity interest trading account.
Part 4 of

2. Indicate how, by whom, and for what purpose the data would be used. Except for a new

collection, indicate the actual use the agency has made of the information received from
the curent collection.
The filing requirements of
Regulations 4.26 and 4.36 were established to assist customers
and to facilitate the Commission and NF A in monitoring compliance with the Par 4 rules.
Failure to require the information in this collection would severely hamper these efforts. These
records also provide the Commission with its source of independent aggregated financial
information concerning the commodity pool industry, which informs the Commission's policy

decision making.

information involves the use of
automated, electronic, mechanical, or other technological collection techniques or other
forms of information technology, e.g., permitting electronic submission of responses, and
the basis for the decision for adopting this means of collection. Also describe any
consideration of
using information technology to reduce burden.

3. Describe whether, and to what extent, the collection of

The proposed amendments to Regulations 4.26 and 4.36 being effected along with the
update of this collection of information will mandate electronic filing of Disclosure Documents
by CPOs and CT As, which is estimated to slightly increase the total hours required to submit
Disclosure Documents initially, but which should ultimately streamline the process of sending,
receiving and reviewing the Documents.

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4. Describe efforts to identify duplication. Show specifically why any similar information

already available cannot be used or modified for use for the puroses described in Item 2
above.
No other Division within the agency regulates the solicitation and other activities of
the respondents, and NF A is the sole registered futures association. Therefore, duplication inhouse and on the self-regulatory level is avoided. Some of the respondents,
however, are also registered with the Securities and Exchange Commission (SEC), which has
its own disclosure requirements. The regulations include provisions designed, in part, to

coordinate the Commission's regulations with those ofthe SEC applicable to public offerings
and exempt offerings set forth in SEC Regulation D.
5. If

the collection of
information involves small business or other small entities (Item 5 of
OMB Form 83-1), describe the methods used to minimize burden.

The Commission has established certain definitions of "small entities" to be used by the
Commission in evaluating the impact of its rules on such entities in accordance with the RF A.

The Commission determined that registered CPOs are not small entities for the purpose of the
RF A. With respect to CT As, the Commission has stated that it would evaluate within the context
of a particular rule whether all or some affected CT As would be considered to be small entities
and, if so, the economic impact on them of any rule. The proposed amendment to Regulation
4.36 does not change any substantive requirements for CTAs.
6. Describe the consequence to the Federal program or policy activities if

the collection

were conducted less frequently as well as any technical or legal obstacles to reducing
burden.
Failure to require this minimum level of disclosure could expose the investing public to
greater opportunities for fraud and mismanagement by CPOs and CT As and would make
monitoring the activities of these entities by the Commission and NF A less effective.
7. Explain any special circumstances that require the collection to be conducted in a

manner:

requiring respondents to report information to the agency more often than
quarterly;
The regulations in question do not require the respondents to report any information to
the Commission more often than quarerly.

requiring respondents to prepare a written response to a collection of
information in fewer than 30 days after receipt of it;
Respondents are not required to prepare any written responses.

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requiring respondents to submit more than an original and two copies of any
document;
Respondents are not required to submit more than an original and two copies of any
document.
requiring respondents to retain records other than health, medicaL, governent

contract, grant-in-aid, or tax records, for more than three years;
Respondents must maintain certain records in order to demonstrate compliance with the
Par 4 regulations. For enforcement purposes, Commission Regulation 1.31 requires that:

"All books and records required to be kept by the (Commodity Exchange) Act or
by these regulations shall be kept for a period of five years from the date thereof
and shall be readily accessible during the first two years of the five year period.
All such books and records shall be open to inspection by any representative of
the Commission or the U.S. Department of Justice."

in connection with a statistical survey, that is not designed to produce valid
and reliable results that can be generalized to the universe of study;
The Regulations do not involve a statistical survey.

requiring the use of a statistical data classification that has not been reviewed
and approved by OMB;
The Regulations do not involve use of statistical data.

that includes a pledge of confidentiality that is not supported by authority
established in statute or regulation, that is not supported by disclosure and data
security policies that are consistent with the pledge, or which unnecessarily
impedes sharing of data with other agencies for compatible confidential use; or
The Regulations do not involve a pledge of confidentiality.

requiring respondents to submit proprietary trade secrets, or other confidential
information unless the agency can demonstrate that it has instituted procedures to
protect the information's confidentiality to the extent permitted by law.

The Regulations do not involve submission of proprietary trade secrets or other
information to the Commission.
8. If applicable, provide a copy and identify the date and page number of publication in the

the agency's notice required by 5 CFR 1320.8(d) soliciting comments
on the information collection prior to submission to OMB. Summarize public comments

Federal Register of

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received in response to that notice and describe actions taken by the agency in response
to these comments. Specifically address comments received on cost and hour burden.

The Regulations, and subsequent revisions thereto, wil be published for comment in the
Federal Register.

Describe efforts to consult with persons outside the agency to obtain their views on the
availability of data, frequency of collection, the clarity of instructions and recOrdkeeping
disclosure, or reporting format (if any), and on the data elements to be recorded,
disclosed, or reported.
The Commission continues to consult with industry members to assure that the
requirements of this information collection are understood and to evaluate at the staff level
the usefulness of the data.

Consultation with representatives of those from whom information is to be obtained or
those who must compile records should occur at least once every 3 years - even if the
collection of information activity is the same as in prior periods. There may be
circumstances that may preclude consultation in a specific situation. These
circumstances should be explained.

No such circumstances occur.
9. Explain any decision to provide any payment or gift to respondents, other than

remuneration of contractors or grantees.
This question does not apply.
10. Describe any assurance of confidentiality provided to respondents and the basis for the

assurance in statute, regulation, or agency policy.

The Commission has provided no assurance of confidentiality above that provided by
the agency's Freedom ofInformation Act regulations, 17 C.F.R. Part 145. Outside of
the

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Freedom of Information Act, there is no basis for confidential treatment of any of the
information governed by these rules.

11. Provide additional justification for any questions of a sensitive nature, such as sexual
behavior and attitudes, religious beliefs, and other matters that are commonly considered
private. This justification should include the reasons why the agency considers the
question necessary, the specific uses to be made of the information, the explanation to be
given to persons from whom the information is requested, and any steps to be taken to
obtain their consent.
This question does not apply.
12. Provide estimates of the hour burden of the collection of information. The statement

should:

frequency of response, annual hour burden
and an explanation of how the burden was estimated. Unless directed to do so, agencies
should not conduct special surveys to obtain information on which to base hour burden
estimates. Consultation with a sample (fewer than ten) of potential respondents is
desirable. If
the hour burden on respondents is expected to vary widely because of
difference in activity, size or complexity, show the range of estimated hour burden, and
explain the reasons for the variance. Generally, estimates should not include burden
hours for customary and usual business practices.
Indicate the number of respondents,

If the request for approval covers more than one form, provide separate hour
burden estimates for each form and aggregate the hour burdens in item 13 ofOMB form
83-1.

Provide estimates of annualized cost to respondents for the hour burdens for
collections of information, identifying and using appropriate wage rate categories. The
cost of contracting out or paying outside parties for information collection activities
should not be included here. Instead, this cost should be included in Item 13.
the filer or recordkeeper,
the cost to the public of the hour burdens varies between $10 to $25 per hour.
See Attachment A. Depending on the technical expertise of

13. Provide an estimate of the total annual cost burden to respondents or recordkeepers

resulting from the collection of information. (Do not include the cost of any hour burden
shown in Items 12 and 14.
The cost estimate should be split into two components; (a) a total capital and startup cost component (annualized over its expected useful

life ) and (b) a total

operation and maintenance and purchase of services component. The estimates
should take into account costs associated with generating, maintaining, and
disclosing or providing the information. Include descriptions of methods used to
estimate major cost factors including system and technology acquisition, expected

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life of capital equipment, the discount rate(s), and the time period over
which costs will be incurred. Capital and start-up costs include, among other
items, preparations for collecting information such as purchasing computers and
software, monitoring, sampling, drilling and testing equipment, and record storage
facilities.
useful

If cost estimates are expected to vary widely, agencies should present ranges of
cost burdens and explain the reasons for the variance. The cost of purchasing or
contracting out information collection services should be a par of this cost burden
estimate, agencies may consult with a sample of
respondents (few than ten),
utilize the 60-day pre-OMB submission public comment process and use existing
economic or regulatory impact analysis associated with the rulemaking containing
the information collection, as appropriate.
Generally, estimates should not include purchases of equipment or services, or
portions thereof, made: (1) prior to October 1, 1995, (2) to achieve regulatory
compliance with requirements not associated with the information collection, (3)
for reasons other than to provide information or keep records for the government,
or (4) as par of customary and usual business or private practices.
See Attachment A.

the annualized costs to the Federal Government. Also provide a
description of the method used to estimate cost, which should include quantification of
hours, operational expenses (such as equipment, overhead, printing and support staff),
and any other expense that would not have been incured without this collection of
information. Agencies may also aggregate cost estimates from Items 12, 13, and 14 in a
single table.

14. Provide estimates of

The Commission previously has delegated to NF A the authority to receive and to review
Disclosure Documents. As such, there is no annualized cost to estimate. Moreover, while
Commission staff does engage in periodic oversight review of NF A's activities, the frequency
and the numbers and levels of staff are not specifically established or pre-determined - so no
definitive answer to Item 14 is available.
15. Explain the reasons for any program changes or adjustments report in Items 13 or 14 of

the OMB Form 83-1.

The proposed regulation amendments are estimated to result in a decrease of239.5 hours
in the number of hours for Disclosure Documents required to be prepared and fied in accordance
with Regulations 4.21, 4.24, 4.25, and 4.26 for CPOs and 4.31, 4.34, 4.35, and 4.36 for CTAs.
While the average number of hours required for each response will increase as a result of the
proposed amendments to Regulations 4.26 and 4.36 (to 3.25 from 2.80 for CPOs and to 1.85
from 1.40 for CT As), the number of CPOs and CT As subject to Disclosure Document
requirements has decreased since the last PRA filing. This decrease is due to the availability
and claiming by CPOs and CT As of additional registration and disclosure exemptions.

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information whose results are planned to be published for statistical
use, outline plans for tabulation, statistical analysis, and publication. Provide the time
schedule for the entire project, including beginning and ending dates of
the collection of
information, completion of report, publication dates, and other actions.

16. For collections of

This question does not apply.

17. If seeking approval to not display the expiration date for OMB approval of the

information collection, explain the reasons that display would be inappropriate.
This question does not apply.

18. Explain each exception to the certification statement identified in Item 19, "Certification
for Paperwork Reduction Act Submissions," ofOMB Form 83-1.

No exceptions exist.

3038-0005 - RULES RELATING TO THE OPERATIONS AND ACTIVITIES OF COMMODITY POOL OPERATORS AND
COMMODITY TRADING ADVISORS AND TO MONTHLY REPORTING BY FUTURES COMMISSION MERCHANTS

ESTIMATED # OF
RESPONDENTS
OR
RECORDKEEPERS
PER

POOLS BY EACH

REPORTS

RESPONDENT

ANNUALLY
EACH POOL

BY
OR

TOTAL
ANNUAL

RESPONSES

RESPONDENT,
AS
APPLICABLE

YEAR

ESTIMATED
AVERAGE
NUMBER

OF

HOURS PER
RESPONSE

ESTIMATED
TOTAL
NUMBER
HOURS

OF
OF

ANNUAL
BURDEN IN
FISCAL YEAR

REPORTING
4.12(b) (Exemption from Certain CPO

Requirements)

25.00

1.00

25.00

0.50

12.50

210.00

1.00

210.00

0.50

105.00

1,080.00

1.00

1,080.00

0.50

540.00

4.14(a)(8) (Notice of Exemption from CTA

Registration)
4.5 (Notice of Exclusion from CPO Definition
4.7 (Notice of Claim for Exemption for Pool

Offered to QEPs)
4.7(b)(2) (QEP Pool Periodic Reports)
4.7(b)(3) (QEP Pool Annual Reports)

4.13(b)(1) (Disclosures-Exempt CPOs)
4.13(b)(2) (Reporting-Exempt CPOs)

600.00
700.00
700.00

1.00
3.00
3.00

1.00
4.00
1.00

600.00
2,800.00
2,100.00

0.50
2.00
7.25

300.00
5,600.00
15,225.00

1,500.00
325.00

1.00
1.00

1.00
12.00

1,500.00
325.00

0.50
0.10

750.00
32.50

3.00

480.00

3.25

1,560.00

9.00
3.00
1.00

13,500.00
1,500.00
275.00

3.85
9.25
0.50

51,975.00
13,875.00
137.50

4.21,4.26 (CPO Disclosure Documents)

160.00

4.22(a) (Pool Account Statements)
4.22(c) (Pool Annual Reports)
4.22(f) (Extension for Pool Annual Report)

500.00
500.00
275.00

4.31,4.36 (CTA Disclosure Documents)

450.00

1.00

450.00

1.85

832.50

1.33(d) (FCM Reports)

10000

12.00

1,200.00

6.00

7,200.00

7,125.00

51.00

26,045.00

700.00
325.00
500.00
464.00

1.00
1.00
1.00

700.00
325.00
500.00
464.00

SUBTOTAL REPORTING

3.00

98,145.00

RECORDKEEPING

4.7(b)(4) (CPOs)
4.13(b)(2)(ii) (Exempt CPOs)
4.23 (CPOs)
4.33 (CTAs)

1.00

SUBTOTAL RECORDKEEPING

1,289.00

1,289.00

GRAND

8,414.00

27,334.00

TOTAL

42.00
13.00
52.00
18.00

29,400.00
4,225.00
26,000.00
8,352.00
67,977.00

6.08

166,122.00