141 Capital Inc (fka ONCP)

[alliecorp]

NFA: Participate in a Commodity Pool

http://www.nfa.futures.org/investor/OppRisk/OppRisk.pdf

Another alternative
method of participating in
futures trading is through a
commodity pool, which is
similar in concept to a
common stock mutual
fund. It is the only method
of participation in which
you will not have your own
individual trading account.

Instead,your money will be
combined with that of
other pool participants
and, in effect, traded as a
single account.You share in
the profits or losses of the
pool in proportion to your
investment in the pool.

One potential advantage is
greater diversification of
risks than you might obtain
if you were to establish
your own trading account.
Another is that your risk of
loss is generally limited to
your investment in the
pool, because most pools
are formed as limited partnerships.

And you won’t be
subject to margin calls.
Bear in mind, however, that
the risks which a pool incurs in
any given futures transaction
are no different than the risks
risks incurred by
an individual
trader. The pool
still trades in
futures contracts
which are highly leveraged and
in markets which can be highly
volatile. And like an individual
trader, the pool can suffer substantial
losses.A major consideration,
therefore, is who will be
managing the pool in terms of
directing its trading.

While a pool must execute
all of its trades through a brokerage
firm which is registered
with the CFTC as an FCM, it may
or may not have any other affiliation
with the brokerage firm.
Some brokerage firms, to serve
those customers who prefer to
participate in commodity trading
through a pool, either operate
or have a relationship with
one or more commodity trading
pools. Other pools operate independently.

In most instances, a
Commodity Pool Operator
(CPO) cannot accept your
money until it has provided you
with a Disclosure Document
that contains information
about the pool operator, the
pool’s principals and any outside
persons who will be providing
trading advice or making
trading decisions. It must also
disclose the previous performance
records, if any, of all persons
who will be operating or advising
the pool (or, if none, a statement
to that effect). Disclosure
Documents contain important
information and should be carefully
read before you invest your
money. Another requirement
is that the Disclosure Document
advise you of the risks involved.

In the case of a new pool,
there is frequently a provision
that the pool will not begin trading
until (and unless) a certain
amount of money is raised.

Normally, a time deadline is set
and the CPO is required to state
in the Disclosure Document
what that deadline is (or, if there
is none, that the time period for
raising funds is indefinite). Be
sure you understand the terms,
including how your money will be invested in the meantime,
what interest you will earn (if
any), and how and when your
investment will be returned in
the event the pool does not
commence trading.

Determine whether you will
be responsible for any losses in
excess of your investment in the
pool. If so, this must be indicated
prominently at the beginning of
the pool’s Disclosure Document.


Ask about fees and other costs, including what, if any,
initial charges will be made against your investment for
organizational or administrative expenses. Such information
should be noted in the Disclosure Document. You
should also determine from the Disclosure Document how
the pool’s operator and advisor are compensated.

Understand, too, the procedure for redeeming your shares
in the pool, any restrictions that may exist, and provisions
for liquidating and dissolving the pool if more than a certain
percentage of the capital were to be lost.

Ask about the pool operator’s general trading philosophy,
what types of contracts will be traded, whether they will be
day-traded, etc.

How to Participate in Futures Trading Opportunity and Risk:

An Educational Guide
With a few exceptions,
CPOs must be registered
with the CFTC and be
Members of NFA. You can
verify that these requirements
have been met by
conducting a background
search on NFA’s BASIC
system at NFA’s Web site
(www.nfa.futures.org) or by
contacting NFA toll-free at
800-621-3570.