Series 65 benefits vs. drawbacks

Discussion in 'Professional Trading' started by NeuralNet34, Jun 29, 2022.

  1. I do not yet hold any licences but am exploring starting a hedge fund in the next few years.

    I'm thinking to take the SIE and the Series 6, 7, 63, and 65 exams.

    If I understand correctly:
    (1) Series 65 will allow me to charge a management fee (instead of just a performance fee)
    (2) Series 65 will open my fund to annual audits

    Is this information correct? I've seen it only through second-hand sources, and want to understand if this is truly a double-edged sword. I plan on acting ethically, but I imagine annual audits will be time-consuming, stressful, and expensive unless the fund is large enough.
  2. Series 65 is typically used to qualify you to be an Investment Adviser Representative of a Registered Investment Adviser. Depending on your hedge fund, it might not be required. Some of the exams you're looking to take, you can't take unless you're affiliated with a broker/dealer.
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  3. Thanks for your answer. That echoes what I've learned in the meantime. I'm just taking the SIE and the Series 3 since I don't need to be affiliated with a BD.

    As for the others, I have no interest in registering as the only benefit seems to be added scrutiny and audits.
  4. Keep me posted on your progress. I took the Series 65 a while back when I had my own RIA firm and I was also an IAR of other RIA firms. Lately, I've also been considering a possible fund, etc. but really don't feel I have the mental bandwidth to deal with compliance issues so mainly exploring options which won't require any state/federal registrations. Feels like the next few years will be an opportunity for people that can make money in a variety of markets / market conditions. In an ideal world, I would probably rather be an advisor to a hedge fund but just continue to trade / speculate with my own funds.
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  5. Working as an advisor sounds like a good option.

    I don't speak from experience yet, but if registration/compliance is your main concern you might also check out the Regulation D exemptions for private placements. Typically you are limited to Accredited Investors or even Qualified Clients (i.e. if you want to charge a management fee and a performance fee, I believe clients must have $2.2M net worth), but the benefit is you don't need to register outside of filing Form D with the SEC and each state you operate in.

    Again this is just what I've found online, so verify it as I haven't yet had the necessary conversations with lawyers to double-check this is all accurate information.
  6. Agreed -- definitely not taking anyone other than accredited / qualified if I go that route but again, not sure I even want that burden. My analysis is pretty good for quarterly / monthly positions so I think that is where it might provide value to another fund -- would have kept a lot of folks out of crypto for the second quarter! :)

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