Graham Capital Management, L.P. - ss. 38(1) of the CFA

Headnote

Subsection 38(1) of the Commodity Futures Act(Ontario)(CFA) -- relief from the requirements of subsection22(1)(b) of the CFA granted to non-resident advisers in respectof advising certain permitted clients and certain non-Canadianmutual funds regarding trades in commodity futures and optionscontracts traded on commodity futures exchanges outside of Canadaand cleared through clearing corporations outside Canada subjectto certain terms and conditions.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20,as am., ss. 22(1) & 38(1).

Securities Act, R.S.O. 1990, c. S.5, as am.- Rule 35-502 -- Non Resident Advisers.

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, CHAPTER C.20,AS AMENDED (the Act)

AND

REGULATION 90 UNDER

THE COMMODITY FUTURES ACT,

R.R.O. 1990, AS AMENDED (THEREGULATION)

AND

IN THE MATTER OF

GRAHAM CAPITAL MANAGEMENT,L.P.

ORDER

(Subsection 38(1) of the Act)

UPON the application of Graham CapitalManagement, L.P. (Graham) to the Ontario Securities Commission(the Commission) for an order pursuant to subsection38(1) of the Act that Graham and its directors and officersare exempt, for a period of three years, from the requirementsof paragraph 22(1)(b) of the Act in respect of advising a deminimus number of unsolicited clients and certain investmentfunds in respect of trades in commodity futures contracts tradedon commodity futures exchanges outside Canada and cleared throughclearing corporations outside Canada subject to certain termsand conditions;

AND UPON considering the applicationand the recommendation of staff of the Commission;

AND UPON Graham having represented tothe Commission that:

1. Graham is a limited partnership formedunder the laws of Delaware.

2. Graham is registered with the U.S. CommoditiesFutures Trading Commission (the CFTC) as a commoditytrading adviser and commodity pool operator and is a memberof the U.S. National Futures Association (the NFA).

3. Graham is not registered in any capacityunder the Act.

4. Graham is or may in the future be an investmentadviser for a number of commodity pools (the Funds).

5. The Funds invest in futures and optionscontracts traded on organized exchanges outside of Canadaand cleared through clearing corporations located outsideof Canada and other derivative instruments traded over thecounter and may, to a lesser extent, invest in securities.

6. Each of the Funds is not, and has no currentintention of becoming, a reporting issuer in Ontario or inany other Canadian jurisdiction.

7. Securities of the Funds (Securities)are being offered primarily outside of Canada to institutionalinvestors and high net worth individuals. It is anticipatedthat Securities will be offered to a small number of Ontarioresidents (expected to be institutional investors or highnet worth individuals) and that Securities distributed inOntario will be distributed through registrants (as definedunder the Securities Act (Ontario)) and in relianceupon an exemption from the requirements of Sections 53 and62 of the Securities Act (Ontario).

8. Prospective investors in Securities ofFunds who are Ontario residents will receive disclosure thatincludes (a) a statement that there may be difficulty in enforcinglegal rights against any of Graham, the directors, officers,trustees or managers of the Funds because they are residentoutside of Canada and all or substantially all of their assetsare situated outside of Canada; and (b) a statement that Grahamis not registered with or licensed by any securities regulatoryauthority in Canada and accordingly, the protections availableto clients of a registered adviser will not be available topurchasers of Securities of a Fund.

9. In addition, Graham may wish to provideadvice to clients through discretionary accounts in Ontario(Clients), provided that:

(a) it does not solicit Clients in Ontario;

(b) Graham and its affiliates or affiliatedpartnerships that are not ordinarily resident in Ontariodid not act as an adviser during the preceding 12 monthsfor more than five Clients in Canada;

(c) the advice provided to Clients is inrespect of futures and options contracts traded on organizedexchanges outside of Canada and cleared through clearingcorporations located outside of Canada and other derivativeinstruments traded over the counter and, to a lesser extent,securities;

(d) Clients resident in Ontario will bepermitted clients within the meaning of Ontario SecuritiesCommission Rule 35-502 -- Non-Resident Advisers, promulgatedunder the Securities Act (Ontario);

(e) Graham notifies the Clients, prior toproviding any advice, that it is not registered as an adviserin Ontario; and

(f) all assets of Clients are held withcustodians which are selected and appointed by the Client.

AND UPON being satisfied that it wouldnot be prejudicial to public interest for the Commission togrant the exemptions requested on the basis of the terms andconditions proposed,

IT IS ORDERED pursuant to subsection38(1) that Graham and its directors and officers are not subjectto the requirements of paragraph 22(1)(b) of the Act in respectof their advisory activities in connection with the Funds fora period of three years, provided that:

i. Graham is registered with CFTC as a commoditytrading adviser and is a member of the NFA;

ii. The Funds invest in futures and optionscontracts traded on organized exchanges outside of Canadaand cleared through clearing corporations located outsideof Canada and other derivative instruments traded over thecounter and may, to a lesser extent, invest in securities;

iii. Securities of the Funds are offered primarilyabroad and are only distributed in Ontario through registrants(as defined under the Securities Act (Ontario)) andin reliance upon an exemption from the requirements of Sections53 and 62 of the Securities Act (Ontario); and

iv. Prospective investors in Securities ofFunds who are Ontario residents will receive disclosure thatincludes (a) a statement that there may be difficulty in enforcinglegal rights against any of Graham, the directors, officers,trustees or managers of the Funds because they are residentoutside of Canada and all or substantially all of their assetsare situated outside of Canada; and (b) a statement that Grahamis not registered with or licensed by any securities regulatoryauthority in Canada and accordingly, the protections availableto clients of a registered adviser will not be available topurchasers of Securities of a Fund.

AND IT IS ORDERED pursuant to subsection38(1) that Graham and its directors and officers are not subjectto the requirements of paragraph 22(1)(b) of the Act in respectof their advisory activities in connection with Clients fora period of three years, provided that:

i. it does not solicit Clients in Ontario;

ii. Graham and its affiliates or affiliatedpartnerships that are not ordinarily resident in Ontario didnot act as an adviser during the preceding 12 months for morethan five Clients in Canada;

iii. the advice provided to Clients is inrespect of futures and options contracts traded on organizedexchanges outside of Canada and cleared through clearing corporationslocated outside of Canada and other derivative instrumentstraded over the counter and, to a lesser extent, securities;

iv. Clients resident in Ontario will be permittedclients within the meaning of Ontario Securities CommissionRule 35-502 -- Non-Resident Advisers, promulgated under theSecurities Act (Ontario);

v. Graham notifies the Clients, prior to providingany advice, that it is not registered as an adviser in Ontario;and

vi. all assets of Clients are held with custodianswhich are selected and appointed by the Client.

August 29, 2003.