CTAs: manage QEPs only?

Discussion in 'Professional Trading' started by jgfutures, Aug 25, 2005.

  1. Note: QEP = Qualified Eligible Person

    I recently read an article in FUTURES magazine noting the need for lower entry CTA managed funds. The article highlighted the lack of low minimum account requirements for managed futures.
    This got me to thinking (scary): Are there any exemptions for NFA registered CTAs to manage funds for non-QEPs? I've reviewed the CFTC/NFA regs and all it mentions is QEPs.

    My ultimate Q is this: Can a CTA manage average Joe's money?

    I know quite a few people who are financially healthy but do not meet the CFTC's definition of QEP (including myself). Why can't I put $25K with a CTA???
  2. ktm


    A CTA can manage small amounts of money. QEP provisions, as I understand it primarily apply to CPOs. The CTA is not taking custody, therefore there is substantially less risk to the investor. The CPO takes custody of funds. If certain disclosures and guidelines aren't followed, then the fund must claim an exemption and limit investors to "more qualified" investors - accredited or QEPs.

    Most of the higher minimums are because small accts are a headache once the manager gets millions under mgmt and under certain structures there are limits on the number of partners/clients.
  3. gnome


    Back in the old days when I was a CTA, you could manage up to $200K and 14 clients, before registration was required. However, you could not "hold yourself out " to the public as being a CTA. Meaning, you basically had to stick to friends, relatives, and those with whom you had some previous association.

    Once you are registered as CTA/CPO, your subsequent clients must meet the appropriate "qualifications".
  4. Thanks for the replies.
    ktm, you bring up a great point. The fact that funds with a CTA are in the client's name may negate some of the prequal necessary for CPOs.
    I'll follow up with the NFA help desk.

    Thanks again!
  5. calends


    Gnome - you're facts aren't quite right. The dollar limit for non-registration applies to CPOs, not CTAs. Non-registered CTAs cannot hold themselves out as CTAs and cannot exceed 15 clients. There is no cap on the amount of funds.

    Both registered and non-registered CTAs can have clients who are not QEPs. However, if a registered CTA has ALL clients who are QEPs then they don't have to have disclosure docs for clients.

    Note - I am not an attorney nor with the NFA, just a guy who's read a lot of regs, so don't take actions based on my post.
  6. Zemysto


    To my best knowledge, I confirm (and I am also "just a guy who's read a lot of regs" and want to become CTA/CPO in the near future).

    So either you qualify for an exemption (especially the 4.7 exemption) and you become CPO/CTA who can ONLY sell his fund/manage accounts for QEI -there are numerous advantages to do so for disclosure purposes, see the CFTC reg below.

    Either you do not ask an exemption and you can manage accounts (as CTA) for very small investors (non QEI), and/or manage your pool(s) (AS CPO) also for non-QEI.

    Please read the regulation in detail...


    NB : Of course, as I am not an attorney, please follow the rules, not only my understanding of these rules...