You don't see how the definition of security applies to futures or you don't see how the 3(b)(1) exemption applies to a commodity pool? The Commodity Futures Modernization Act of 2000 amended the Investment Company Act definition of "security" to include "security futures" which are defined as "contracts of sale for future delivery of a single security or of a narrow-based security index" (i.e. single stock futures), but the Investment Company Act definition of security does not yet encompass futures on broad-based indices like the e-minis Canadian_dude trades. So commodity pool operators who do not trade securities can, indeed, rely on the 3(b)(1) exemption from registration and are not bound by the 100 investor limit of the Act. And keep in mind, also, for hedge funds that do trade securities, the National Securities Market Improvement Act of 1996 added a new 3(c)(7) exemption that allows up to 500 investors if they are all "qualified purchasers" with $5m+ in net worth. So there are a few different ways around the 1940 Act. Thanks for the discussion, Wes. Not many people know this stuff as well as you do. And you are doing a great service by answering people's questions here at Elite Trader. Keep it up!
Foz, that's fascinating. Thank you! I read that definition of Security from the Investment Company Act to encompass all types of futures. But there are many nuances, and the law (and its interpretation) is always changing! Kudos to you, too, for your posts. Willingness to share knowledge is a wonderful thing.
I don't recall reading 3 times anywhere. As an investor in Neiderhoffer, what you should do is roll 100% of your money over in his fund year after year. Never take any out, and never invest with anyone else. Those poor, poor people lost all their money. That's solid money management.
If you trade futures, you're a commodity pool. It just sounds "kewl" and "upscale" to say you're a hedge fund. Although both groups can and do dabble in the other. One thing you might want to do is differentiate what you made being a buy and holder as opposed to intraday trading.
Take this statement seriously. Continue to trade for your own account and never have to answer to other investors or some commodity futures trading commission. You are in the cat bird seat where you sit....why take the risk of losing someone's assets and the probable law suits that could come with the event. I can assure you that if you make the leap to managing OPM it will not be long before you wish that they were not in the mix. You have enough capital $400k+ to put together a nice living if you continue to succeed. Stay the course and keep the freedom that you have created for yourself.
I think everyone is mixing the point, Canadian dude is not saying he wants to start a hedge fund. He just wants to set up his accounts so he has an audited record if he ever decided to set up a fund in the future. He's just hedging his bets for the future (excuse the pun) If he turns 400K into 20 Million, he'll be glad he's got an audited track record to prove it. Runningbear
We anyway might have a problem that nowadays no anybody would want to believe anything any longer any more. http://www.cftc.gov/files/enf/02orders/enftradewins-order.pdf Q Additionally, the promotional brochures falsely represented that the performance results had been independently audited and verified and invited potential customers to personally review the system developerâs personal account statements. In fact, the firm that conducted the auditing and testing was not at all âindependent.â Rather, the firm was compensated on the basis of a percentage of the profits earned from the sale of the LSS System â a material fact that was never disclosed to potential customers. UQ