I have reprinted these two releases below. As a summary, the reports emphasize:. Members should consider incorporating the following fingerprinting practices in connection with filing registration applications in the futures industry. Firms must complete an annual update and questionnaire. Additionally, registered CTAs will need to develop a robust compliance program to avoid costly and unwanted regulatory entanglement. Many forex managers use a product called a managed forex fund, which is the equivalent to a mutual fund hedge fund.
The CTA performance information does not contain opinion or analysis of Equinox Cta Management or any of its affiliates, and the completeness and accuracy of performance information reported to Equinox Fund Management cannot in all forex be independently verified.
Other locations that may provide fingerprinting services and that would be appropriate include military bases, government agencies and self-regulatory organizations. I have reprinted these two releases below. As a summary, the reports emphasize:. Many of the above items can be done online. Please contact us if you would like more information on our annual NFA compliance packages which can be modified based on your needs.
We can also provide compliance support on an hourly basis. Many forex managers use a product called a managed forex fund, which is the equivalent to a mutual fund hedge fund. The a trader or traders for the forex dealer member will then manage the pool of assets.
Typically the forex dealer member will receive both a forex management fee as well as a performance allocation. Many managers will then charge a management fee and a performance allocation or only one or the other to the underlying clients.
Two new releases indicate that the NFA is serious about regulating the off-exchange foreign currency markets. On our sister website, www. The two notices, described in further detail below, apply to Forex Dealer Member and their interactions with their clients. While the CFTC has been slow to promulgate rules regarding the expected new Forex regulations, the NFA has acted swiftly and addressed many important issues.
However, forex managers should still get ready for coming forex regulations — a collegue of mine has recently discussed forex registration with a CFTC compliance person and that person expects that proposed rules will be promulgated within the first quarter of next year. As always, stay tuned as we will continue to stay on top of this issue. A summary of the two NFA actions is included below. As we announced earlier, the NFA promulgated rules which were approved by the CFTC which gave the NFA jurisdiction over retail off-exchange foreign exchange trading by its member firms.
What this essentially means is that if:. The disclosure documents will need to contain all of the information required for non-forex disclosure documents and the update must be completed by November As we have mentioned before the CFTC and the NFA have not released the information regarding the forex registration requirements, but in the interest of preparing forex managers for the coming registration, we are providing an overview of the likely requirements and the process to become a fully compliant Forex CPO or Forex CTA.
Pursuant to that objective we have previously outlined the likely requirements for Forex Disclosure Documents and now discuss the process of submitting those documents to the NFA. This is part one of a two part discussion. This article will provide an overview of the likely requirements for Forex Disclosure Documents. Please note that these are only likely requirements as proposed and final rules have not yet been released. For those managers which will be managing forex hedge funds, the disclosure document requirements are in addition to the requirements imposed by other securities laws please see hedge fund offering documents or a more detailed explanation of the forex hedge fund offering document requirements.
Additionally, if the Forex CPO or CTA also trades other instruments besides spot forex then the document will need to address those items as well — your hedge fund forex attorney will be able to help you draft these items. We do not yet know if there are any exceptions to Forex Disclosure Document delivery requirements. Inside the front cover the Forex disclosure document there will need to be a few paragraphs that serve as a general disclaimer of risk disclosure statement.
This disclaimer will be based on a uniform template for all Forex disclosure documents. A basic table of contents will be required. The beginning part of the document will need to include such basic information as name of the Forex CPO or CTA, addresses, phone numbers, etc. The information each of the people will need to provide includes: Principal Forex Risk Factors.
Such risks are expected to include: In addition, for Forex CPOs, there are other risks involved in the structure of the investment vehicle which will need to be disclosed. All aspects of the proposed trading program must be disclosed and discussed. A Forex trading program will usually include information on the investment object and the investment strategies as well as a discussion of the risk management procedures the Forex manager will utilize.
All aspects of the fee structure of the Forex hedge fund or Forex separately managed account must be discussed. This will include both management fees and performance fees if applicable as well as the methods for calculating the fees.
The rules require specificity here so this will be one area where precise information is required. This will be very important information and the Forex manager will want to discuss this section thoroughly with its attorney or compliance professional.
All actual or potential conflicts of interest must be disclosed. All fee and business arrangements must be disclosed. For example, if the forex manager will have any sort of pip sharing arrangement with the Forex Dealer Member, this will need to be disclosed.
Trading Forex for Own Account. Specifically, we will be providing information on the following topics: You can have the fingerprints done at any local police station. You will send the fingerprint cards to this address: Members that use their own personnel to take fingerprints should consider: Establishing and communicating internal fingerprinting procedures, and periodically reviewing and updating them; Limiting the number of employees who are responsible for the fingerprinting process; Training those employees to roll high-resolution fingerprints that will be accepted by the FBI; and Training those employees to require the person being fingerprinted to present two forms of identification, one of which is a valid picture ID issued by a government agency, in order to verify the identity of the person being fingerprinted.
As a summary, the reports emphasize: Firms must complete an annual update and questionnaire. Firms must pay of yearly dues to the NFA which can be done online. Firms should also make sure that all employees are appropriately registered as Associated Persons, as necessary.
Firms should review and test the Disaster Recovery Plan. If necessary, adjustments should be made. Firms should review Ethics Training Procedures. If necessary, appropriate ethics training should be provided.
Most futures and forex traders will need to register with the Commodity Futures Trading Commission and will be required to become members of the NFA prior to managing client accounts for compensation. Generally, the only exemption available to traders that exercise discretionary authority over client accounts requires that the firm have not more than 15 clients in any month period and not hold itself out to the public generally as a commodity trading advisor. The principals of a registered CTA who are involved in client solicitation activities will be required to take and pass the Series 3 examination.
The Series 34 examination will also be necessary if the CTA trades forex for client accounts. As with many asset management businesses, the biggest challenge is usually generating interest from prospective clients and aggregating enough assets to make the business viable. Although consistently delivering above-market returns and developing a track record with an attractive risk-reward profile is a significant hurdle, the competition for investor dollars is intense, and having success from a capital raising perspective requires a diligent effort.
Associated Persons must comply with the examination requirement in the same way as employees of the CTA that conduct solicitation activities. CTAs can offer multiple trading programs to prospective clients through the same CTA firm and generally under the same managed account agreement. While it is important that clients receive appropriate disclosure regarding the programs that they select. A CTA that trades any securities for client accounts may have to register as an investment advisor depending on where the CTA firm is based and other factors.
Exemptions from registration are available in certain states, but most states will require registration as an investment advisor prior to a CTA managing client assets in strategies that involve the trading of any securities. Guide to Starting a CTA — Commodity Trading Advisors Futures and forex traders that have developed trading strategies suitable for outside clients may be candidates to develop a successful commodity advisory business focused on trading futures, forex, or swaps.
Overview – Process to Start a CTA
The CTA cta information does not contain opinion or analysis of Forex Fund Management or any of its affiliates, and the completeness and accuracy of performance information reported to Equinox Fund Management cannot in forex cases be independently verified. Includes performance of Barclay CTA Index and Barclay BTOP50 Index; Convenient – Uses Excel format for easy sorting. Economical – Just $ per year for a single user license; $ per year for each additional license (same address, up to ten additional users). The CTA is a line item within forex accounting statement that handles forex gains or losses that have occurred because of exposure to foreign currency markets through normal business activities. Cta line item is clearly noted, separating the information from that of other gains or losses.