Managing Futures $ w/o Series 3 Broker Lic. and NFA Registration.

Discussion in 'Index Futures' started by amtrak99, Sep 20, 2010.

  1. amtrak99


    Hello everyone,

    I'm pretty familiar with Forex managed account regulations but I do understand it is substantially more strict for the Futures market.
    I have a few questions for one of my trading partners.

    From my understanding, one can keep 14 accounts or a "commodity pool" and either/or has to be under $400,000.

    Besides that, you really have to be licensed with a Series 3?

    WHAT IF...

    a) You operated overseas with an offshore broker?

    b) You took in the funds as a "general investment" like an investment club or something and then invested the funds "at your own discretion. (I assume this would be an accounting problem?).

    If someone could let me know what they think as to loopholes thatd be great... Series 3 seems to be a pain!!

  2. LEAPup


    If the S3 is a "pain," you don't need to be managing opm.
  3. amtrak99


    Hmm, I don't recall asking for your personal opinion of investment management.

    Additionally, I clearly said I am not a Futures trader!!

    I look forward to some responses explaining legal aspects of what I asked.

    Thank you all in advance.

    Edit: Just read your profile.
    At least we agree politically ;)
  4. nLepwa


    S3 beats sitting in jail.

    Just a thought

  5. JamesL


    I think that amt was lowered to 200k, not sure. Either way, you can manage other people's money in segregated accounts, i.e. not in a commodity pool.
  6. where did you get those restrictions from?

    one guy said that he can't debit the accounts directly for managerial fees, so he got licensed and registered, to ensure getting paid from the accounts

    frankly I don' t understand any of this
  7. I believe that you can give generic trading advice and have your clients make the trades. You could then charge them for a signal/trading service Something like "I think company abc123 is going up and I think its a buy." Best bet would be to take the exam though.
  8. amtrak99


    Additionally-- what's the difference between having a Series 3 and being a CTA?
    It seems as you almost need both?

  9. the1


    It doesn't matter if you are trading offshore. If you are trading the US markets you need the Series 3. It's not a hard test at all.

    The regulation part was the hardest because you can't possible memorize all the different laws that apply to managing funds. I guessed on many of these questions but I knew the other material cold.

    If you take in funds from an investment pool that is not considered one investor -- it's considered however many investors are in the club. There are no loopholes I know of to get around the Series 3 requirement. I would suggest just studying for the exam and taking and passing the test. Once you pass you can register either as a CPO or a CTA. If you manage an de minimis fund (i.e. under 15 people, 400k) you have to register your exempt status with the NFA.

    Be aware that you can't charge a non-accredited investor a performance fee. You can accept up to 35 non-accredited investors in your fund but managers typically don't want to because they fly for free.

  10. amtrak99


    Thank you so much "the1".
    You answered a lot of my questions.

    Anyone have a preferred way of passing the exam? (studying resource.)

    #10     Sep 22, 2010