10 Of The Largest Hedge Fund Implosions of All Time

Bayou Group

Bayou Group

The Beginning: Founded by Samuel Israel III in 1996

The Height: In 2003, the funds claimed to have made $43 million. Israel told investors that Bayou would grow to roughly $7.1 billion by 2006.

The End: Bayou was revealed as a Ponzi Scheme in 2005, when the SEC requested that the court freeze the defendants’ assets and accused them of claiming to have made $43 million in four hedge funds in 2003 when they actually lost $49 million.

When Bayou was unmasked as a fraud in 2005, many people lost a lot of money but the media was given the pleasure of meeting Sam Israel, a bizarre character who, after conning almost half a billion dollars from investors, faked his own suicide in 2008 before being eventually recaptured and sentenced to 22 years in prison.

Returns on investments at Bayou were neither made public nor genuine as it was discovered that Israel created a dummy corporation to audit his own fund.

Source: Forbes and CNN


Highland Capital Management “Crusader Fund”

Highland Capital Management "Crusader Fund"

The Beginning: Founded by James Dondero and Mark Okada in 1993.

The Height: The “Crusader Fund” had annualized average returns of 12.7% and held $1.5 billion in 2006.

The End: Wound down the “Crusader Fund” in October of 2008.

Dallas-based Highland Capital Management made a lot of money in The Nineties and “Early Aughts” by rolling out a number of funds under the Highland Capital banner, allowing them to trade on everything from commodities to distressed assets.

But the fiscal crisis of 2008 forced Dondero and Okada to shut down their flagship Crusader Fund in “an orderly fashion” after “unprecedented market volatility and disruption.”

Assets in the Crusader Fund were valued at approximately $360 million when the fund when the shuttering (which caused a lawsuit) occurred.

Source: Bloomberg


Peloton Capital

Peloton Capital

The Beginning: Founded by Ron Beller and Geoff Grant in 2005

The Height: Managed $3 billion in assets in 2006, the year it returned 87% to investors.

The End: Liquidated in 2008.

Beller, a former Head of the Fixed-Income Currency and Commodity Sales Group at Goldman Sachs returned roughly $2 billion of Peloton’s AUM to clients when he and former partner Geoff Grant Liquidated the fund in 2008.

Even though he had some unwanted excitement during his time with Goldman, Beller had a pretty great gig there when he left in 2005 to found Peloton with Geoff Grant. The subprime mortgage crisis caused the fall of Peloton and cut deeply into Beller’s net worth.

Source: WSJ and NY Times


Tiger Fund

Tiger Fund

The Beginning: Founded by Julian Robertson in 1980.

The Height: Tiger had almost $7 billion in assets by 1993, the year the fund returned 80%.

The End: Fund shuttered in 2000.

After being one of the earliest titans of the hedge fund boom, Robertson watched his multi-billion dollar investment business deteriorate rapidly before his eyes as a long bet on doomed US Airways and a run on the yen took a huge chunk out of his assets.

Tiger’s legacy are the numerous “Tiger Cub” hedge fund managers who are Tiger alums running funds all over the globe.

Source: Business Week and CNN Money


Satellite Capital

Satellite Capital

The Beginning: Founded by Lief Rosenblatt, Gabe Nechamkin and Mark Sonnino in 1999

The Height: After returning roughly 25% in 2004, the fund managed $7 billion by the end of 2007 but lost 35% in 2008.

The End: Shut down in 2008 with less than $3 billion in assets.

Satellite is a perfect example of just how bad 2008 was for hedge funds in particular and the global economy in general.

Rosenblatt, Nechamkin and Sonnino were proteges of George Soros and spent almost ten years building Satellite as a public equity and fixed income-driven fund. And fro seven years they did a great job of it.

But 2008 hit the three managers like a proverbial freight train as equity seemed to disappear around the globe and growing demands for redemptions caused the men to shutter the fund and pay investors back at a rate of 21% in November.

Source: Bloomberg and Reuters and Wilmott


Amaranth Advisors

Amaranth Advisors

The Beginning: Founded by Nicholas Maounis in 2000.

The Height: Managed $9 billion of assets in 2005 and had annualized returns of 86%.

The End: Folded in 2006 after losing billions in assets over a matter of weeks.

Amaranth had a meteoric five-year rise to reach a huge AUM number by utilizing a convertible arbitrage strategy to generate capital gains.

But the fund whose name translated to “unfading” in Greek did just the opposite when it made an unfortunate delta hedge transaction on natural gas future derivatives and lost roughly $6.5 billion on the gamble.

Maounis later sued JP Morgan for interfering with his attempt to resuscitate Amaranth by refusing to execute trades on the fund’s behalf and Amaranth’s failure is a major talking point in the debate over the efficacy of derivatives.

Source: Bloomberg


Long-Term Capital Management

Long-Term Capital Management

The Beginning: Founded by John Meriwether in 1994

The Height: Posted annualized returns of over 40% over the first four years of trading and once held $120 billion in trading liabilities.

The End: Closed in 2000 after borrowing to stave off bankruptcy.

Long-Term Capital Management was a seeming “can’t miss” when Meriwether, a former director of bond trading at Solomon Brothers founded it in 1994 and appointed Nobel Prize winning economists to its board.

And for a while LTCM lived up to its hype, making enormously healthy returns and growing its asset base very quickly until 1996 when it lost $4.6 billion in AUM and took a bailout payment form the government that is hearkened back to in this day of more extravagant bailouts and was dissected in brilliant detail throughout Roger Lowenstein’s book When Genius Failed.

LTCM shut down in 2000 after realizing its inability to pay off its growing debt.

Source: Investopedia


 Atticus Global

Atticus Global

The Beginning: Founded by Timothy Barakett and Nathan Rotschild in 1995.

The Height: Managed $13 billion in September of 2008 and had annualized average returns of 19.3%.

The End: Failed in August of 2009.

Barakett’s 2009 letter to Atticusinvestors was met more with anticipation and acceptance rather than surprise after the fund had weathered terrible returns including a year-to-year for September 2008 that saw the European arm of the fund drop by 42.5%.

But Amaranth had a great run, with strong returns over the fund’s first ten years and a nearly constant presence in Institutional Investor’s Top 100 Hedge Funds list and frequent adoration from Jim Cramer,

Source: Tracking Hedge Funds


Pequot Capital Management

Pequot Capital Management

The Beginning: Founded by Arthur J. Samberg in 1998

The Height: Managed $15 billion in 2001 and had annualized average returns of 16.8%.

The End: Shuttered in 2010 after being fined by the SEC for insider trading.

Pequot returned healthy profits every year and built an enormous AUM of $15 billion by 2001 when Samberg’s #2 man, Daniel Benton, rolled out his portions (nearly half) of Pequot’s assets into his own fund.

After John Mack made a one-month pit stop to work with Samberg at Pequot between a senior post at Credit Suisse and taking over as CEO at Morgan Stanley, the SEC launched a probe of Pequot’s trading practices and the commission found enough to levy a fine of $28 million against Samberg in 2010. He closed the fund moths later.

Source: Bloomberg

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Disclosure

 

Top Prime Brokers of Hedge Funds

 

Rank Firm Fund Clients
1 Goldman Sachs 2,004
2 Morgan Stanley 1,729
3 J.P. Morgan 1,439
4 Credit Suisse 878
5 Deutsche Bank 728
6 UBS 691
7 Bank of America 665
8 Citigroup 553
9 Barclays 407
10 Fidelity Investments 310
11 Wells Fargo 298
12 BNP Paribas 295
13 BNY Mellon 273
14 Jefferies 248
15 Interactive Brokers 207
16 BTIG 145
17 Societe Generale 109
18 HSBC 76
19 ConvergEx 62
20 Charles Schwab 53
21 Cantor Fitzgerald 48
21 Scotiabank 48
23 TD Bank 42
24 Nomura 39
25 Cowen Group 35
OTHERS 462
TOTAL 10,495

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Disclosure

 

 

Top Administrators of Hedge Funds

Client Funds’ Assets Under Management
Rank Administrator ($Mil.) Total
1 State Street 1,076,676.60 20.9
2 SS&C GlobeOp 1,030,766.90 20
3 Citco 967,122.60 18.8
4 BNY Mellon 442,241.00 8.6
5 Morgan Stanley 338,432.10 6.6
6 Northern Trust 305,080.10 5.9
7 SEI 169,581.50 3.3
8 Hedgeserv 146,150.00 2.8
9 MUFG 121,384.40 2.4
10 J.P. Morgan 102,913.70 2
11 U.S. Bank 81,476.10 1.6
12 Harmonic Fund Services 63,847.40 1.2
13 HSBC 62,036.70 1.2
14 BNP Paribas 50,330.50 1
15 Stone Coast Fund Services 41,332.10 0.8
16 Brown Brothers Harriman 38,311.10 0.7
17 Quintillion 17,538.80 0.3
18 Conifer Financial Services 14,110.50 0.3
19 DST Systems 13,729.50 0.3
20 Opus Fund Services 11,782.30 0.2
OTHERS 190,075.90 3.7
Total: Administered Funds 5,156,898.20 100
Total: All Funds 5,479,588.00

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Top 20 Auditors of Hedge Funds

 

Number of Fund Clients
Ranking   1Q-17 Total
1 Ernst & Young 2,855 24.9
2 PricewaterhouseCoopers 2,588 22.5
3 KPMG 1,998 17.4
4 Deloitte 1,417 12.3
5 RSM 441 3.8
6 EisnerAmper 379 3.3
7 Grant Thornton 234 2
8 BDO 226 2
9 Spicer Jeffries 142 1.2
10 Baker Tilly 83 0.7
11 Arthur Bell 76 0.7
12 CohnReznick 58 0.5
13 Elliott Davis Decosimo 56 0.5
14 Anchin, Block & Anchin 52 0.5
15 Marcum 49 0.4
16 Weaver 44 0.4
17 Citrin Cooperman 40 0.3
18 Richey, May & Co. 38 0.3
19 Withum Smith & Brown 36 0.3
20 Berkower 35 0.3
20 Cohen & Co. 35 0.3
OTHERS 601 5.2
TOTAL 11,483 100

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Disclosure

 

 

Morning Report

Overnight Markets and News

Sep E-mini S&Ps (ESU17 -0.55%) this morning are down -0.62% at a 1-week low and European stocks are down -1.32% at a 5-3/4 month low as global stocks plunge after North Korea fired a ballistic missile over Japan. The VIX volatility index jumped to a 1-week high and Dec COMEX gold (GCZ17 +0.90%) soared +0.81% to a 9-1/2 month high on increased safe-haven demand. Japan called North Korea’s latest provocation an “unprecedented, grave and serious threat” and asked the United Nations Security Council to hold an emergency meeting, while Japanese Prime Minister Abe told reporters he spoke with President Trump for 40 minutes and they agreed to increase pressure on North Korea. Asian stocks settled mostly lower: Japan -0.45%, Hong Kong -0.35%, China +0.08%, Taiwan -0.28%, Australia -0.72%, Singapore -0.56%, South Korea -0.29%, India -1.14%. A -0.62% slide in USD/JPY to a 4-1/4 month low also undercut Japanese stocks as the Nikkei Stock Index tumbled to a 3-3/4 month low. Japanese exporters slumped due to the surging yen, which rallied on increased safe-haven demand from North Korea’s missile firing over Japan.

The dollar index (DXY00 -0.50%) is down -0.41% at a 2-1/2 year low. EUR/USD (^EURUSD) is up +0.48% at a 2-1/2 year high. USD/JPY (^USDJPY) is down -0.62% at a 4-1/4 month low.

Sep 10-year T-note prices (ZNU17 +0.36%) are up +12 ticks at a 9-1/2 month nearest-futures high as the slump in global stocks over the North Korean crisis boosts safe-haven demand for government debt.

Japan Jul overall household spending unexpectedly fell -0.2% y/y, weaker than expectations of +0.7% y/y.

The Japan Jul jobless rate was unch at 2.8%, right on expectations and the lowest in 23-years. The Jul job-to-applicant ratio rose +0.01 to 1.52, right on expectations and the highest since Feb 1974.

German Sep GfK consumer confidence rose +0.1 to 10.9, stronger than expectations of no change at 10.8 and the highest since the data series began in 2005.

U.S. Stock Preview

Key U.S. news today includes: (1) Jun S&P CoreLogic composite-20 house prices (expected +0.1% m/m and +5.60% y/y, May +0.1% m/m and +5.69% y/y), (2) Conference Board Aug U.S. consumer confidence index (expected -0.2 to 120.9, Jul +3.8 to 121.1), (3) Treasury auctions $28 billion 7-year T-notes.

Notable Russell 1000 earnings reports today include: Hain Celestial (consensus $0.403), Best Buy (0.63), H&R Block (-0.62).

U.S. IPO’s scheduled to price today: none.

Equity conferences this week: Jefferies Investor Summit on Tue, The European Society of Cardiology Meeting on Tue, Jefferies Semiconductor Hardware Summit on Tue-Wed, The Simmons European Energy Conference on Tue-Wed, Simmons European Energy Conference on Wed.

Market Comments

Sep S&P 500 E-mini stock futures (ESU17 -0.55%) this morning are down -15.25 points (-0.62%) at a 1-week low. Monday’s closes: S&P 500 +0.05%, Dow Jones -0.02%, Nasdaq +0.27%. The S&P 500 on Monday closed slightly higher on a rally in pharmaceutical stocks on speculation of increased M&A activity after Gilead Science acquired Kite Pharma for $11.9 billion. There was also strength in mining stocks after gold prices rose +1.34% to a 9-1/2 month high and copper prices rose +0.97% to a 2-3/4 year high. Stocks were undercut by weakness in homebuilder stocks on concern that Tropical Storm Harvey will push back building projects in southern Texas that account for 10% of all new U.S. construction in 2017, according to Trulia. There were also losses in insurance stocks as disaster modeler Enki Research estimates that losses from Tropical Storm Harvey could climb to as high as $30 billion.

Sep 10-year T-note prices (ZNU17 +0.36%) this morning are up +12 ticks to a 9-1/2 month nearest-futures high. Monday’s closes: TYU7 +6.00, FVU7 +2.50. Sep 10-year T-notes on Monday closed higher on carry-over support from a rally in German bunds to a 2-month high and on strong demand for the Treasury’s $34 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.58, above the 12-auction average of 2.46.

The dollar index (DXY00 -0.50%) this morning is down -0.377 (-0.41%) to a 2-1/2 year low. EUR/USD (^EURUSD) is up +0.0057 (+0.48%) to a 2-1/2 year high and USD/JPY (^USDJPY) is down -0.68 (-0.62%) toa 4-1/4 month low. Monday’s closes: Dollar Index -0.533 (-0.57%), EUR/USD +0.0055 (+0.46%), USD/JPY -0.11 (-0.10%). The dollar index on Monday dropped to a fresh 1-1/4 year low and closed lower on carry-over weakness from Friday when Fed Chair Yellen refrained from providing clues as to when the Fed would raise interest rates again or begin to unwind its balance sheet. EUR/USD saw strength and climbed to a new 3-1/2 year high after ECB President Draghi refrained from talking down the euro at the Fed symposium at Jackson Hole, WY over the weekend.

Oct crude oil (CLV17 +0.02%) this morning is down -12 cents (-0.26%) and Oct gasoline (RBV17 -0.92%) is -0.0176 (-1.12%). Monday’s closes: Oct WTI crude -1.30 (-2.72%), Oct gasoline +0.0305 (+1.98%). Energy prices on Monday settled mixed with Oct crude at a 2-week low and Oct gasoline at a 6-1/2 month high. Crude oil and gasoline prices were supported by the slump in the dollar index to a 1-1/4 year low. Gasoline prices were boosted by the fact that Tropical Storm Harvey forced the closure of refineries on the Texas Gulf coast, home to 10% of U.S. refining capacity. Crude oil prices fell on concern that the shutdown of pipelines and refineries in Texas due to Tropical Storm Harvey may boost crude supplies at Cushing, OK, delivery point for WTI futures.

Metals prices this morning are higher with Dec gold (GCZ17 +0.90%) +10.6 (+0.81%) at a 9-1/2 month high, Sep silver (SIU17 +0.77%) +0.069 (+0.40%) to a 2-1/4 month high and Sep copper (HGU17 +0.78%) +0.018 (+0.59%). Monday’s closes: Dec gold +17.4 (+1.34%), Sep silver +0.392 (+2.30%), Sep copper +0.0295 (+0.97%). Metals prices on Monday closed higher with Dec gold at a 9-1/2 month high, Sep silver at a 2-1/2 month high and Sep copper at a 2-3/4 year nearest-futures high. Metals prices were boosted by the fall in the dollar index to a 1-1/4 year low and by fund buying of gold as long gold positions in ETFs rose to a 5-week high Friday.

Overnight U.S. Stock Movers

Intellia Therapeutics (NTLA +19.24%) was downgraded to ‘Neutral’ from ‘Buy’ at Chardan Capital Markets.

JA Solar Holdings Co Ltd (JASO unch) was downgraded to ‘Sell’ from ‘Hold’ at Axion Capital with a price target of $5.

Mellanox Technologies (MLNX +1.80%) was initiated a new ‘Buy’ at Benchmark Company LLC with a 12-month target price of $60.

Juno Therapeutics (JUNO +18.71%) was upgraded to ‘Outperform’ from ‘Neutral’ at Wedbush.

Best Buy (BBY +0.97%) jumped 5% in pre-market trading after it reported Q2 revenue of $8.94 billion, better than consensus of $8.66 billion, and said it sees Q3 revenue of $9.3 billion-$9.4 billion, above consensus of $8.99 billion.

Jack Henry & Associates (JKHY +0.40%) was initiated at an ‘Overweight’ at Cantor Fitzgerald with a 12-month target price of $112.

Avexis (AVXS -0.28%) slipped 3% in after-hours trading after it was initiated as a new ‘Reduce’ at Nomura Instinet.

Catalent (CTLT +0.45%) jumped over 10% in after-hours trading after it reported Q4 net revenue of $616.9 million, higher than consensus of $574.4 million, and then raised its full-year revenue estimate to $2.16 billion-$2.24 billion, above consensus of $2.13 billion.

Finish Line (FINL -2.34%) sank over 20% in after-hours trading after it cut its full-year adjusted EPS forecast to 50 cents-60 cents from a prior view of $1.12-$1.13, well below consensus of $1.12. Other athletic shoe makers fell in after-hours trading as well with Foot Locker (FL -0.50%) down -3% and Nike (NKE -0.32%) down over 1%.

Prospect Capital (PSEC -1.26%) fell nearly 4% in after-hours trading after it reported Q4 net investment income of 19 cents per share, weaker than consensus of 21 cents.

Hedge Funds & Commodity Futures Trading Advisors

Send us a message or  schedule an online review  to speak with a broker who’ll  answer your questions and provide supporting links for additional information and/or verification.

1) Identification and Preliminary Qualification 

2) Hedge Funds – 46 categories – 5,614 Reporting

Convertible Arbitrage
Distressed Securities
Emerging Markets – Asia
Emerging Markets – Eastern Europe
Emerging Markets – Global
Emerging Markets – Latin America
Emerging Markets Equity – Asia
Emerging Markets Equity – Eastern Europe
Emerging Markets Equity – Global
Emerging Markets Equity – Latin America
Emerging Markets Fixed Income – Global
Equity – Long Bias
Equity – Long Only
Equity – Long/Short
Equity – Long/Short – Europe
Equity – Long/Short – Pacific Rim
Equity – Market Neutral
Event Driven
Fixed Income – Arbitrage
Fixed Income – Asset Backed Loans
Fixed Income – Asset-Backed/Insurance Linked Securities
Fixed Income – Convertible Bonds
Fixed Income – Diversified
Fixed Income – High Yield
Fixed Income – Long Only Credit
Fixed Income – Long Short Credit
Fixed Income – Mortgage Backed
Fund of Funds – Arbitrage
Fund of Funds – Distressed Securities/Event Driven
Fund of Funds – Diversified
Fund of Funds – Emerging Markets
Fund of Funds – Equities
Fund of Funds – Fixed Income
Fund of Funds – Less than $250M
Fund of Funds – Greater than $250M
Macro
Merger Arbitrage
Option Strategies
Multi-Strategy / Relative Value
Sector Specific – Metals & Mining
Sector Specific – Energy
Sector Specific – Farming
Sector Specific – Financial
Sector Specific – Health/Biotech
Sector Specific – Natural Resources
Sector Specific – Real Estate
Sector Specific – Technology

3) Futures Trading Advisors – 16 categories – 1,191 Reporting

FTA Programs Managing More Than $10 Million
FTA Programs Managing At least $1 Million But Under $10 Million
Agricultural Traders Managing more than $1 Million
Currency Traders Managing More Than $10 Million
Currency Traders Managing At least $1 Million But Under $10 Million
Discretionary Traders Managing More Than $10 Million
Discretionary Traders Managing At least $1 Million But Under $10 Million
Diversified Traders Managing More Than $10 Million
Diversified Traders Managing At least $1 Million But Under $10 Million
Financial/Metal Traders Managing More Than $10 Million
Financial/Metal Traders Managing At least $1 Million But Under $10 Million
Multi-Advisor Funds Managing more than $1 Million
Option Strategies Managing more than $1 Million
Short-Term Traders Managing more than $1 Million
Stock Index Traders Managing more than $1 Million
Systematic Traders Managing more than $1 Million

4) Hedge Funds & Commodity Pools (transparency disclosure can be an issue)

5) Managed Futures ( fully transparent and disclosed)

  • All Accounts are required to be segregated
  • Member firms 
  • Financial Safeguard System
  • Disclosure of trading Methodology
  • Positions and balance are available online at any time
  • Statements are emailed daily recapping positions, liquidating value and any trading activity
  • Monthly statements summarize all activity and end of month balance
  • Liquidity in portion or all is 2 to 48 hours in any major currency

6) Multi Manager Asset Allocation

7) Stay on top of industry developments

8) Information Request Forms

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Disclosure

Qualified Eligible Participant (QEP)

A Qualified Eligible Participant (QEP) is a person who is allowed to trade in an Investment Program as defined by 4.7 of the Commodity Exchange Act.

How it works (Example):

In order to be a QEP, a person must own at least $2,000,000 of securities and other investments, have an open account with a futures commission merchant for at least six months, have at least $200,000 of initial margin and option premiums for commodity interest transactions and have a portfolio of those investments.

QEPs are similar to, but not the same as, accredited investors. That is, they are considered sophisticated investors who understand the nature and risks of commodities trading and hedge funds. Accordingly, when funds allow only QEPs to be investors, they are involving only people who more fully understand the nature and risks of the investment. This provides an exemption from certain regulations for the hedge fund.

Why it Matters:

The Commodity Exchange Act of 1936 requires hedge fund managers to register as commodity pool operators (CPO) if their funds trade any commodity futures, contracts, or options. CPOs must comply with the Act’s disclosure requirements as well as those of the Commodity Futures Trading Commission (CFTC). If a hedge fund limits its investors only to qualified eligible participants (QEPs), the hedge fund may be able to obtain an exemption from several regulations the Commodity Exchange Act would impose.

Q.E.P. Rule 4.7 of the Commodity Exchange Act

Exemption from certain part 4 requirements for commodity pool operators with respect to offerings to qualified eligible persons and for commodity trading advisors with respect to advising qualified eligible persons.

This section is organized as follows: Paragraph
(a) contains definitions for the purposes of § 4.7; paragraph
(b) contains the relief available to commodity pool operators under § 4.7; paragraph
(c) contains the relief available to commodity trading advisors under § 4.7; paragraph
(d) concerns the Notice of Claim for Exemption under § 4.7; and paragraph
(e) addresses the effect of an insignificant deviation from a term, condition or requirement of § 4.7.

(a) Definitions. Paragraph
(a)(1) of this section contains general definitions, paragraph
(a)(2) of this section contains the definition of the term qualified eligible person with respect to those persons who do not need to satisfy the Portfolio Requirement and paragraph
(a)(3) of this section contains the definition of the term qualified eligible person with respect to those persons who must satisfy the Portfolio Requirement. For the purposes of this section:

(1) In general—
(i) Affiliate of, or a person affiliated with, a specified person means a person that directly or indirectly through one or more persons, controls, is controlled by, or is under common control with the specified person.
(ii) Exempt account means the account of a qualified eligible person that is directed or guided by a commodity trading advisor pursuant to an effective claim for exemption under § 4.7.
(iii) Exempt pool means a pool that is operated pursuant to an effective claim for exemption under § 4.7.

(iv) Non-United States person means:
(A) A natural person who is not a resident of the United States;
(B) A partnership, corporation or other entity, other than an entity organized principally for passive investment, organized under the laws of a foreign jurisdiction and which has its principal place of business in a foreign jurisdiction;
(C) An estate or trust, the income of which is not subject to United States income tax regardless of source;

(D) An entity organized principally for passive investment such as a pool, investment company or other similar entity; Provided, That units of participation in the entity held by persons who do not qualify as Non-United States persons or otherwise as qualified eligible persons represent in the aggregate less than 10% of the beneficial interest in the entity, and that such entity was not formed principally for the purpose of facilitating investment by persons who do not qualify as Non-United States persons in a pool with respect to which the operator is exempt from certain requirements of Part 4 of the Commission’s regulations by virtue of its participants being Non-United States persons; and

(E) A pension plan for the employees, officers or principals of an entity organized and with its principal place of business outside the United States.

(v) Portfolio Requirement means that a person:
(A) Owns securities (including pool participations) of issuers not affiliated with such person and other investments with an aggregate market value of at least $2,000,000;
(B) Has had on deposit with a futures commission merchant, for its own account at any time during the six-month period preceding either the date of sale to that person of a pool participation in the exempt pool or the date that the person opens an exempt account with the commodity trading advisor, at least $200,000 in exchange-specified initial margin and option premiums for commodity interest transactions; or
(C) Owns a portfolio comprised of a combination of the funds or property specified in paragraphs (a)(1)(v)(A) and (B) of this section in which the sum of the funds or property includable under paragraph (a)(1)(v)(A), expressed as a percentage of the minimum amount required thereunder, and the amount of futures margin and option premiums includable under paragraph (a)(1)(v)(B), expressed as a percentage of the minimum amount required thereunder, equals at least one hundred percent. An example of a composite portfolio acceptable under this paragraph (a)(1)(v)(C) would consist of $1,000,000 in securities and other property (50% of paragraph (a)(1)(v)(A)) and $100,000 in exchange-specified initial margin and option premiums (50% of paragraph (a)(1)(v) (B)).(vi) United States means the United States, its states, territories or possessions, or an enclave of the United States government, its agencies or instrumentalities.

(2) Persons who do not need to satisfy the Portfolio Requirement to be qualified eligible persons. Qualified eligible person means any person, acting for its own account or for the account of a qualified eligible person, who the commodity pool operator reasonably believes, at the time of the sale to that person of a pool participation in the exempt pool, or who the commodity trading advisor reasonably believes, at the time that person opens an exempt account, is:
(i) A futures commission merchant registered pursuant to section 4d of the Act, or a principal thereof;
(ii) A broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934, or a principal thereof;

(iii) A commodity pool operator registered pursuant to section 4m of the Act, or a principal thereof; Provided, That the pool operator:

(A) Has been registered and active as such for two years; or

(B) Operates pools which, in the aggregate, have total assets in excess of $5,000,000;

(iv) A commodity trading advisor registered pursuant to section 4m of the Act, or a principal thereof; Provided, That the trading advisor:
(A) Has been registered and active as such for two years; or
(B) Provides commodity interest trading advice to commodity accounts which, in the aggregate, have total assets in excess of $5,000,000 deposited at one or more futures commission merchants;

(v) An investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 (“Investment Advisers Act”) or pursuant to the laws of any state, or a principal thereof; Provided, That the investment adviser:
(A) Has been registered and active as such for two years; or
(B) Provides securities investment advice to securities accounts which, in the aggregate, have total assets in excess of $5,000,000 deposited at one or more registered securities brokers;
(vi) A “qualified purchaser” as defined in section 2(51)(A) of the Investment Company Act of 1940 (the “Investment Company Act”);
(vii) A “knowledgeable employee” as defined in § 270.3c-5 of this title;
(viii)(A) With respect to an exempt pool:
(1) The commodity pool operator, commodity trading advisor or investment adviser of the exempt pool offered or sold, or an affiliate of any of the foregoing;
(2) A principal of the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing;
(3) An employee of the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing (other than an employee performing solely clerical, secretarial or administrative functions with regard to such person or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of the exempt pool, other commodity pools operated by the pool operator of the exempt pool or other accounts advised by the trading advisor or the investment adviser of the exempt pool, or by the affiliate; Provided, That such employee has been performing such functions and duties for or on behalf of the exempt pool, pool operator, trading advisor, investment adviser or affiliate, or substantially similar functions or duties for or on behalf of another person engaged in providing commodity interest, securities or other financial services, for at least 12 months;
(4) Any other employee of, or an agent engaged to perform legal, accounting, auditing or other financial services for, the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or any other employee of, or agent so engaged by, an affiliate of any of the foregoing (other than an employee or agent performing solely clerical, secretarial or administrative functions with regard to such person or its investments); Provided, That such employee or agent:
(i) Is an accredited investor as defined in § 230.501(a)(5) or (6) of this title; and
(ii) Has been employed or engaged by the exempt pool, commodity pool operator, commodity trading advisor, investment adviser or affiliate, or by another person engaged in providing commodity interest, securities or other financial services, for at least 24 months;
(5) The spouse, child, sibling or parent of a person who satisfies the criteria of paragraph (a)(2)(viii)(A)(1), (2), (3) or (4) of this section; Provided, That:
(i) An investment in the exempt pool by any such family member is made with the knowledge and at the direction of the person; and
(ii) The family member is not a qualified eligible person for the purposes of paragraph (a)(3)(xi) of this section;
(6)(i) Any person who acquires a participation in the exempt pool by gift, bequest or pursuant to an agreement relating to a legal separation or divorce from a person listed in paragraph (a)(2)(viii)(A)(1), (2), (3), (4) or (5) of this section;
(ii) The estate of any person listed in paragraph (a)(2)(viii)(A)(1), (2), (3), (4) or (5) of this section; or

(iii) A company established by any person listed in paragraph (a)(2)(viii)(A)(1), (2), (3), (4) or (5) of this section exclusively for the benefit of (or owned exclusively by) that person and any person listed in paragraph (a)(2)(viii)(A)(6)(i) or (ii) of this section;
(B) With respect to an exempt account:
(1) An affiliate of the commodity trading advisor of the exempt account;
(2) A principal of the commodity trading advisor of the exempt account or of an affiliate of the trading advisor;
(3) An employee of the commodity trading advisor of the exempt account or of an affiliate of the trading advisor (other than an employee performing solely clerical, secretarial or administrative functions with regard to such person or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of the trading advisor or the affiliate; Provided, That such employee has been performing such functions and duties for or on behalf of the trading advisor or the affiliate, or substantially similar functions or duties for or on behalf of another person engaged in providing commodity interest, securities or other financial services, for at least 12 months;
(4) Any other employee of, or an agent engaged to perform legal, accounting, auditing or other financial services for, the commodity trading advisor of the exempt account or any other employee of, or agent so engaged by, an affiliate of the trading advisor (other than an employee or agent performing solely clerical, secretarial or administrative functions with regard to such person or its investments); Provided, That such employee or agent:
(i) Is an accredited investor as defined in § 230.501(a)(5) or (a)(6) of this title; and
(ii) Has been employed or engaged by the commodity trading advisor or the affiliate, or by another person engaged in providing commodity interest, securities or other financial services, for at least 24 months; or
(5) The spouse, child, sibling or parent of the commodity trading advisor of the exempt account or of a person who satisfies the criteria of paragraph (a)(2)(viii)(B)(1), (2), (3) or (4) of this section; Provided, That:
(i) The establishment of an exempt account by any such family member is made with the knowledge and at the direction of the person; and
(ii) The family member is not a qualified eligible person for the purposes of paragraph (a)(3)(xi) of this section;
(6)(i) Any person who acquires an interest in an exempt account by gift, bequest or pursuant to an agreement relating to a legal separation or divorce from a person listed in paragraph (a)(2)(viii)(B)(1), (2), (3), (4) or (5) of this section;
(ii) The estate of any person listed in paragraph (a)(2)(viii)(B)(1), (2), (3), (4) or (5) of this section; or
(iii) A company established by any person listed in paragraph (a)(2)(viii)(B)(1), (2), (3), (4) or (5) of this section exclusively for the benefit of (or owned exclusively by) that person and any person listed in paragraph (a)(2)(viii)(B)(6)(i) or (ii) of this section;
(ix) A trust; Provided, That:
(A) The trust was not formed for the specific purpose of either participating in the exempt pool or opening an exempt account; and
(B) The trustee or other person authorized to make investment decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a qualified eligible person;

(x) An organization described in section 501(c)(3) of the Internal Revenue Code (the “IRC”); Provided, That the trustee or other person authorized to make investment decisions with respect to the organization, and the person who has established the organization, is a qualified eligible person;
(xi) A Non-United States person;
(xii)(A) An entity in which all of the unit owners or participants, other than the commodity trading advisor claiming relief under this section, are qualified eligible persons;
(B) An exempt pool; or

(C) Notwithstanding paragraph (a)(3) of this section, an entity as to which a notice of eligibility has been filed pursuant to § 4.5 which is operated in accordance with such rule and in which all unit owners or participants, other than the commodity trading advisor claiming relief under this section, are qualified eligible persons.
(3) Persons who must satisfy the Portfolio Requirement to be qualified eligible persons. Qualified eligible person means any person who the commodity pool operator reasonably believes, at the time of the sale to that person of a pool participation in the exempt pool, or any person who the commodity trading advisor reasonably believes, at the time that person opens an exempt account, satisfies the Portfolio Requirement and is:
(i) An investment company registered under the Investment Company Act or a business development company as defined in section 2(a)(48) of such Act not formed for the specific purpose of either investing in the exempt pool or opening an exempt account;
(ii) A bank as defined in section 3(a)(2) of the Securities Act of 1933 (the “Securities Act”) or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act acting for its own account or for the account of a qualified eligible person;
(iii) An insurance company as defined in section 2(13) of the Securities Act acting for its own account or for the account of a qualified eligible person;
(iv) A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;

(v) An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974; Provided, That the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is a bank, savings and loan association, insurance company, or registered investment adviser; or that the employee benefit plan has total assets in excess of $5,000,000; or, if the plan is self-directed, that investment decisions are made solely by persons that are qualified eligible persons;
(vi) A private business development company as defined in section 202(a)(22) of the Investment Advisers Act;
(vii) An organization described in section 501(c)(3) of the IRC, with total assets in excess of $5,000,000;
(viii) A corporation, Massachusetts or similar business trust, or partnership, other than a pool, which has total assets in excess of $5,000,000, and is not formed for the specific purpose of either participating in the exempt pool or opening an exempt account;
(ix) A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of either his purchase in the exempt pool or his opening of an exempt account exceeds $1,000,000;
(x) A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
(xi) A pool, trust, insurance company separate account or bank collective trust, with total assets in excess of $5,000,000, not formed for the specific purpose of either participating in the exempt pool or opening an exempt account, and whose participation in the exempt pool or investment in the exempt account is directed by a qualified eligible person; or
(xii) Except as provided for the governmental entities referenced in paragraph (a)(3)(iv) of this section, if otherwise authorized by law to engage in such transactions, a governmental entity (including the United States, a state, or a foreign government) or political subdivision thereof, or a multinational or supranational entity or an instrumentality, agency, or department of any of the foregoing.
(b) Relief available to commodity pool operators. Upon filing the notice required by paragraph (d) of this section, and subject to compliance with the conditions specified in paragraph (d) of this section, any registered commodity pool operator who offers or sells participations in a pool solely to qualified eligible persons in an offering which qualifies for exemption from the registration requirements of the Securities Act pursuant to section 4(2) of that Act or pursuant to Regulation S, 17 CFR 230.901 et seq., and any bank registered as a commodity pool operator in connection with a pool that is a collective trust fund whose securities are exempt from registration under the Securities Act pursuant to section 3(a)(2) of that Act and are offered or sold, without marketing to the public, solely to qualified eligible persons, may claim any or all of the following relief with respect to such pool:
(1) Disclosure relief. (i) Exemption from the specific requirements of §§ 4.21, 4.24, 4.25 and 4.26 with respect to each exempt pool; Provided, That if an offering memorandum is distributed in connection with soliciting prospective participants in the exempt pool, such offering memorandum must include all disclosures necessary to make the information contained therein, in the context in which it is furnished, not misleading; and that the following statement is prominently disclosed on the cover page of the offering memorandum, or, if none is provided, immediately above the signature line on the subscription agreement or other document that the prospective participant must execute to become a participant in the pool:

“PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED TO QUALIFIED ELIGIBLE PERSONS, AN OFFERING MEMORANDUM FOR THIS POOL IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A POOL OR UPON THE ADEQUACY OR ACCURACY OF AN OFFERING MEMORANDUM. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS OFFERING OR ANY OFFERING MEMORANDUM FOR THIS POOL.”
(ii) Exemption from disclosing the past performance of exempt pools in the Disclosure Document of non-exempt pools except to the extent that such past performance is material to the non-exempt pool being offered; Provided, That a pool operator that has claimed exemption hereunder and elects not to disclose any such performance in the Disclosure Document of non-exempt pools shall state in a footnote to the performance disclosure therein that the operator is operating or has operated exempt pools whose performance is not disclosed in this Disclosure Document.
(2) Periodic reporting relief. Exemption from the specific requirements of §§ 4.22(a) and (b); Provided, That a statement signed and affirmed in accordance with § 4.22(h) is prepared and distributed to pool participants no less frequently than quarterly within 30 calendar days after the end of the reporting period. This statement must indicate:
(i) The net asset value of the exempt pool as of the end of the reporting period;
(ii) The change in net asset value from the end of the previous reporting period; and
(iii) The net asset value per outstanding unit of participation in the exempt pool as of the end of the reporting period.
(3) Annual report relief. (i) Exemption from the specific requirements of §§ 4.22(c) and (d); Provided, That within 90 calendar days after the end of the exempt pool’s fiscal year, the commodity pool operator files with the Commission and with the National Futures Association and distributes to each participant in lieu of the financial information and statements specified by those sections, an annual report for the exempt pool, signed and affirmed in accordance with § 4.22(h) which contains, at a minimum:
(A) A Statement of Financial Condition as of the close of the exempt pool’s fiscal year (elected in accordance with § 4.22(g));
(B) A Statement of Income (Loss) for that year; and
(C) Appropriate footnote disclosure and any other material information.
(ii) Such annual report must be presented and computed in accordance with generally accepted accounting principles consistently applied and, if certified by an independent public accountant, so certified in accordance with § 1.16 as applicable.

(iii) Legend. (A) If a claim for exemption has been made pursuant to this section, the commodity pool operator must make a statement to that effect on the cover page of each annual report.
(B) If the annual report is not certified in accordance with § 1.16, the pool operator must make a statement to that effect on the cover page of each annual report and state that a certified audit will be provided upon the request of the holders of a majority of the units of participation in the pool who are unaffiliated with the commodity pool operator.
(4) Recordkeeping relief. Exemption from the specific requirements of § 4.23; Provided, That the commodity pool operator must maintain the reports referred to in paragraphs (b)(2) and (b)(3) of this section and all books and records prepared in connection with his activities as the pool operator of the exempt pool (including, without limitation, records relating to the qualifications of qualified eligible persons and substantiating any performance representations) at his main business address and must make such books and records available to any representative of the Commission, the National Futures Association and the United States Department of Justice in accordance with the provisions of § 1.31.
(c) Relief available to commodity trading advisors. Upon filing the notice required by paragraph (d) of this section, and subject to compliance with the conditions specified in paragraph (d) of this section, any registered commodity trading advisor who anticipates directing or guiding the commodity interest accounts of qualified eligible persons may claim any or all of the following relief with respect to the accounts of qualified eligible persons who have given due consent to their account being an exempt account under § 4.7:
(1) Disclosure relief. (i) Exemption from the specific requirements of §§ 4.31, 4.34, 4.35 and 4.36; Provided, That if the commodity trading advisor delivers a brochure or other disclosure statement to such qualified eligible persons, such brochure or statement shall include all additional disclosures necessary to make the information contained therein, in the context in which it is furnished, not misleading; and that the following statement is prominently displayed on the cover page of the brochure or statement or, if none is provided, immediately above the signature line of the agreement that the client must execute before it opens an account with the commodity trading advisor:

“PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.”
(ii) Exemption from disclosing the past performance of exempt accounts in the Disclosure Document for non-exempt accounts except to the extent that such past performance is material to the non-exempt account being offered; Provided, That a commodity trading advisor that has claimed exemption hereunder and elects not to disclose any such performance in the Disclosure Document for non-exempt accounts shall state in a footnote to the performance disclosure therein that the advisor is advising or has advised exempt accounts for qualified eligible persons whose performance is not disclosed in this Disclosure Document.
(2) Recordkeeping relief. Exemption from the specific requirements of § 4.33; Provided, That the commodity trading advisor must maintain, at its main business office, all books and records prepared in connection with his activities as the commodity trading advisor of qualified eligible persons (including, without limitation, records relating to the qualifications of such qualified eligible persons and substantiating any performance representations) and must make such books and records available to any representative of the Commission, the National Futures Association and the United States Department of Justice in accordance with the provisions of § 1.31.

(d) Notice of claim for exemption. (1) A notice of a claim for exemption under this section must:
(i) Be in writing;
(ii) Provide the name, main business address, main business telephone number and the National Futures Association commodity pool operator or commodity trading advisor identification number of the person claiming the exemption;

(iii)(A) Where the claimant is a commodity pool operator, provide the name(s) of the pool(s) for which the request is made; Provided, That a single notice representing that the pool operator anticipates operating single-investor pools may be filed to claim exemption for single-investor pools and such notice need not name each such pool;
(B) Where the claimant is a commodity trading advisor, contain a representation that the trading advisor anticipates providing commodity interest trading advice to qualified eligible persons;
(iv) Contain representations that:
(A) Neither the commodity pool operator or commodity trading advisor nor any of its principals is subject to any statutory disqualification under section 8a(2) or 8a(3) of the Act unless such disqualification arises from a matter which was previously disclosed in connection with a previous application for registration if such registration was granted or which was disclosed more than thirty days prior to the filing of the notice under this paragraph (d);
(B) The commodity pool operator or commodity trading advisor will comply with the applicable requirements of § 4.7; and
(C) Where the claimant is a commodity pool operator, that the exempt pool will be offered and operated in compliance with the applicable requirements of § 4.7;
(v) Specify the relief claimed under § 4.7;
(vi) Where the claimant is a commodity pool operator, state the closing date of the offering or that the offering will be continuous;
(vii) Be signed by the commodity pool operator or commodity trading advisor as follows: If it is a sole proprietorship, by the sole proprietor; if a partnership, by a general partner; and if a corporation, by the chief executive officer or chief financial officer;
(viii) Be filed in duplicate with the Commission at the address specified in § 4.2 and with the National Futures Association at its headquarters office (Attn: Director of Compliance, Compliance Department); and
(ix)(A)(1) Where the claimant is a commodity pool operator, except as provided in paragraph (d)(1)(iii)(A) of this section with respect to single-investor pools and in paragraph (d)(1)(ix)(A)(2) of this section, be received by the Commission:
(i) Before the date the pool first enters into a commodity interest transaction, if the relief claimed is limited to that provided under paragraphs (b)(2), (3) and (4) of this section; or
(ii) Prior to any offer or sale of any participation in the exempt pool if the claimed relief includes that provided under paragraph (b)(1) of this section.
(2) Where participations in a pool have been offered or sold in full compliance with Part 4, the notice of a claim for exemption may be filed with the Commission at any time; Provided, That the claim for exemption is otherwise consistent with the duties of the commodity pool operator and the rights of pool participants and that the commodity pool operator notifies the pool participants of his intention, absent objection by the holders of a majority of the units of participation in the pool who are unaffiliated with the commodity pool operator within twenty-one days after the date of the notification, to file a notice of claim for exemption under § 4.7 and such holders have not objected within such period. A commodity pool operator filing a notice under this paragraph (d)(1)(ix)(A)(2) shall either provide disclosure and reporting in accordance with the requirements of Part 4 to those participants objecting to the filing of such notice or allow such participants to redeem their units of participation in the pool within three months of the filing of such notice.

(B) Where the claimant is a commodity trading advisor, be received by the Commission before the date the trading advisor first enters into an agreement to direct or guide the commodity interest account of a qualified eligible person pursuant to § 4.7.

(2) The notice will be effective upon receipt by the Commission with respect to each pool for which it was made where the claimant is a commodity pool operator and otherwise generally where the claimant is a commodity trading advisor; Provided, That any notice which does not include all the required information shall not be effective, and that if at the time the Commission receives the notice, an enforcement proceeding brought by the Commission under the Act or the regulations is pending against the pool operator or trading advisor or any of its principals, the exemption will not be effective until twenty-one calendar days after receipt of the notice by the Commission and that in such case an exemption may be denied by the Commission or made subject to such conditions as the Commission may impose.
(3) Any exemption claimed hereunder shall cease to be effective upon any change which would cause the commodity pool operator of an exempt pool to be ineligible for the relief claimed with respect to such pool or which would cause a commodity trading advisor to be ineligible for the relief claimed. The pool operator or trading advisor must promptly file a notice advising the Commission of such change.
(4)(i) Any exemption from the requirements of § 4.21, 4.22, 4.23, 4.24, 4.25 or 4.26 claimed hereunder with respect to a pool shall not affect the obligation of the commodity pool operator to comply with all other applicable provisions of Part 4, the Act and the Commission’s rules and regulations, with respect to the pool and any other pool the pool operator operates or intends to operate.
(ii) Any exemption from the requirements of § 4.31, 4.33, 4.34, 4.35 or 4.36 claimed hereunder shall not affect the obligation of the commodity trading advisor to comply with all other applicable provisions of Part 4, the Act and the Commission’s rules and regulations, with respect to any qualified eligible person and any other client to which the commodity trading advisor provides or intends to provide commodity interest trading advice.
(e) Insignificant deviations from a term, condition or requirement of § 4.7. (1) A failure to comply with a term or condition of § 4.7 will not result in the loss of the exemption with respect to a particular pool or client if the commodity pool operator or the commodity trading advisor relying on the exemption shows that:
(i) The failure to comply did not pertain to a term, condition or requirement directly intended to protect that particular qualified eligible person;
(ii) The failure to comply was insignificant with respect to the exempt pool as a whole or to the particular exempt account; and
(iii) A good faith and reasonable attempt was made to comply with all applicable terms, conditions and requirements of § 4.7.
(2) A transaction made in reliance on § 4.7 must comply with all applicable terms, conditions and requirements of § 4.7. Where an exemption is established only through reliance upon paragraph (e)(1) of this section, the failure to comply shall nonetheless be actionable by the Commission.
[65 FR 47854, Aug. 4, 2000]