Commodities are goods that are “fungible”, i.e., they are supplied without qualitative differentiation across a market and are the same no matter who produces them. The price of gold is universal, although it fluctuates daily based on global supply and demand.
Soft commodities are goods that are grown and are perishable such as sugar, coffee beans and rice. Hard commodities are those that are extracted through mining or drilling such as iron ore, crude oil and gold.
What are “Physical Commodities Contracts”?
Physical commodities contracts, so-called because they deal in physical products, are cash contracts that call for payment of the full contract price, in cash, on delivery. Such cash contracts can be either “spot” contracts or “forward” contracts. Spot contracts call for delivery by the seller and payment by the buyer within a short time. Forward cash contracts call for delivery and payment after a specified period, but on a fixed date.
What is a Commodities Wholesaler?
A commodities wholesaler acts as a merchant, buying commodities in bulk from producers and selling them to distributors/buyers, who in turn utilize them in the production of goods or resell them in smaller quantities into the distribution stream to the ultimate consumer. Prices for wholesale commodities are normally established by negotiation.
What is a Pre-Sold Commodity Contract?
A pre-sold commodity contract, sometimes referred to as a “buy/sell agreement”, is a two part contract whereby a wholesaler negotiates a sale price for a commodity to a buyer while negotiating the purchase price for that commodity with a producer. This is done to try to lock in a profit on the wholesaling transaction.
How Does Investing in Pre-Sold Commodities Contracts with Commodities Online Work?
Commodities Online offers a confidential subscription service. Qualified investors can fund an account and gain access to participate in various pre-sold commodities contracts that Commodities Online has negotiated. The type of commodity involved, the minimum investment required and the deadline to invest in the contract are specified in the Subscriber section of the web site. In addition, the anticipated length of the contract and its preferred return to the investor are also disclosed.
The purchase of participations in such contracts by investors is governed by a Master Subscription Agreement posted in the confidential subscription section of the Commodities Online website. When investors choose to participate in a contract, they allocate funds from their account to purchase at least the minimum amount required to participate in that specific contract. The funds of all of the investors in that particular contract are then used to purchase the commodity from the producer. When the commodity is delivered to the distributor/buyer and payment is received by Commodities Online, the invested capital from the investors, along with their share of the profits, is disbursed back into their accounts.
Who Would Be “Qualified” To Invest in Such Participations?
United States residents who are “accredited investors” within the meaning of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, and for whom the participations are otherwise a suitable investment under the terms of the Master Subscription Agreement, are qualified to invest. Non-residents do not necessarily need to be “accredited investors”, but they should have similar financial means and the participations must otherwise be a suitable investment for them under the terms of the Master Subscription Agreement.
What Is An “Accredited Investor?
- Any bank as defined in section 3(a)(2) of the Securities Act of 1933 (the “Act”), or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any 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; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
- Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
- Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
- Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;
- Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000;
- Any 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;
- Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D promulgated by the SEC under the Act; and
- Any entity in which all of the equity owners are accredited investors.
How do I Subscribe to this Confidential Service?
You may call me to receive more information about the subscription service provided by Commodities Online. Once the necessary information has been provided and you have reviewed the Terms & Conditions, you may pay by check or credit card for the subscription. Or you may also click the “Subscribe Now” button on our website and follow the instructions.
What Is The Cost Of A Subscription?
The cost of a subscription is $2000 per six months.
What Is The Renewal Cost Of A Subscription?
Subscriptions are renewed at the same cost as the original subscription.
What Is The Minimun Needed To Fund An Account?
To fund an account, a minimum of $5,000 is required. There is no maximum.
What Is The Minimun Investment of Each Contract?
Most contracts will require a minimum participation of $5000 or more. There may be some contracts that will require only a $2,500 investment, depending on availability.
Does Commodities Online Charge Commissions To Investors?
Commodities Online does not charge investors commission on their contract participations.
How Does Commodities Online Participate in the Contracts?
Commodities Online shares in the profits on the commodities contracts as described in the Master Subscription Agreement. In this way, the interests of the investors and Commodities Online are aligned: if the investors do not profit from a particular commodities contract, then neither does Commodities Online.
How Long Do Investors Have To Wait To Get A Return On Their Investment?
Contracts range in length from as little as approximately 21 days to as high as 140 days in some cases.
Is There a Guaranteed Return On Investment Funds?
Returns are not guaranteed. However, the Commodities Online is making every return a fixed “preferred return”. This means that, instead of sharing in profits with the Company on a 60/40 split as was previously the case, the fixed targeted rate of return to investors will be paid first out of available profits, with the Company receiving only whatever profits are left over, even if that means that the Company receives no share of the profits.
Once A Subscriber Participates In A Contract, Is My Money At Risk?
Once funds from a cash account are invested in a contract participation, such funds are subject to certain risks of loss as described more fully in the Master Subscription Agreement. Commodities Online believes that the potential returns from investing in its contract participations are attractive even on a “risk adjusted” basis.
How Does An Investor Withdraw Funds?
If an investor chooses to withdraw any capital or profits from their cash account, an “Account Withdrawal” form must be completed and sent it to Commodities Online. An original signature is required to withdraw funds. Withdrawal checks may take 7-14 days to process.
Can a Subscriber Get A Refund Of Their Subscription Fee?
- Activate your account within three (3) days of subscribing.
- Fund your account with the minimum of $5000.00 and allocate to your first commodity contract within ten (10) days of account activation.
- Notify us in writing within five (5) days of contract completion (payout) if you are not completely satisfied.
- You will receive a check for the full refund of your paid subscription, funds in your account and any profits earned within 7-14 days.
This policy is for new subscriptions only. Renewals do not qualify.
How Does Investing in a Pre-sold Contract Compare to Trading Commodity Future Contracts?
With Commodities Online, a subscriber is investing in an existing pre-sold contract. This is different from futures trading where someone is speculating on the future price of a commodity. Futures trading can have the risk of not only losing all invested capital, but also developing negative equity in an account. With the existing pre-sold contract, risks are limited to counter-party default, spoilage, grading issues, Acts of God, etc. due to the fact that price fluctuations in the commodity are not involved. The risk factors are described in more detail in the Master Subscription Agreement.
How is Commodities Online regulated?
Since Commodities Online is not buying or selling commodities futures or options, it is not a Commodity Pool Operator and it is not regulated by the CFTC or the NFA.
The participations in the pre-sold commodities contracts are “securities” due to the fact that the investors are dependent on the managerial efforts of Commodities Online in carrying out the contracts. Commodities Online is subject to the anti-fraud provisions of the federal and state securities laws. The offering of contract participations is done pursuant Rule 506 of Regulation D (for US residents) or Regulation S (for non-residents) promulgated by the SEC under the Securities Act of 1933, as amended, both of which provide exemptions from the registration requirements of the Securities Act. Commodities Online files Form D with the SEC with regard to each commodity contract in which participations are sold and also makes state notice filings where required.
Investments in the contract participations are “self-directed” by the investors. Commodities Online has no discretionary trading authority and does not make recommendations as to specific contracts. Thus, Commodities Online is not acting as an “investment advisor.” Moreover, Commodities Online does not pay commissions or finder’s fees for investments in the contract participations, so Commodities Online is generally exempt from the various state and federal laws governing the registration of securities brokers and dealers.
Are the Pre-Sold Physical Commodities Contracts Insured?
Yes. The commodities are insured against casualty losses during shipment from the producers to the distributors/buyers.
Where are Cash Accounts Kept?
Cash accounts are kept in FDIC insured bank accounts that are segregated from the operating accounts of Commodities Online.
Are There Taxes On Profits?
Yes, such profits are short term capital gains, generally taxed at ordinary income rates. Investors will be issued a Form 1099B at the end of each year.
Is there a Guaranteed Return on Investment Funds?
Returns are not guaranteed. However, Commodities Online has made every return a fixed “preferred return”. This means that, instead of sharing in profits with the Company on a 60/40 split as was previously the case, the preferred return to investors will be paid first out of available profits, with the Company receiving only whatever profits are left over, even if that means that the Company receives no share of the profits.
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