Forex fund management companies
How Do Companies Become a Forex CTA? Spot Forex Introducing Brokers IB Persons who solicit or accept orders for Futures Commission Merchants FCM or Retail Foreign Exchange Dealer RFED for spot forex must register with the NFA as an Introducing Broker. Forex IBs must either maintain the net capital requirements applicable to futures and commodity options IBs or to enter into guarantee agreements with the FCMs and RFEDs they deal with. To become an Introducing Broker you must 1 pass the Series 3 Exam 2 join the NFA as an Introducing Broker and companies set up a clearing arrangement with a Futures Commission Merchant. If you cannot meet this capital requirement you can establish a Guaranteed Introducing Broker where the clearing FCM provides the equity. As a guaranteed IB, the IB can only clear through its guaranteeing FCM. An independent IB management that meets the net worth requirement can establish clearing relationships with multiple FCMs. You can study for the Series 3 Exam while your application forms are being created and processed. Welcome to Capital Management Services Group. Start a Hedge Fund Qualified Clients. History of Hedge Funds. Incubator Hedge Funds Hedge Fund Regulations. Start a Commodity Pool. Hedge Fund and Trader Tax. Hedge Fund Due Diligence. Forex Crear Su Propio Fund. Incubadora del Hedge Fund. Capital Management Services Group. Forex Funds and Forex Managed Accounts. Customer Testimonial It is hard to believe that Hannah and her team are even available for less management a small fortune. CMSG is efficient and knowledgeable yet extremely patient and understanding in dealing with clients at various levels of development. I received my initial advice from CMSG years before actually committing. Our legal needs seemingly transformed every few months, yet Hannah and her team were supportive and responsive at every turn. That level of effort was far more than I expected but has certainly become the benchmark for all others. I look forward to many years of excellence and superior service from Ms. READ WHAT OTHER CUSTOMERS SAY ABOUT US AND CALL Our attorneys and staff have both regulatory experience and the understanding of the foreign exchange market. Each client receives a personalized attention from our attorneys and staff. No client is too large or small though because of our boutique size we pride ourselves in providing personal attention to each client. Prior toforeign currency trading by retail customers was largely unregulated. Congress attempted to address this situation in Commodity Futures Modernization Act of This companies gave the CFTC the authority to regulate companies OTC futures transactions involving a retail customer on one side of the trade. Acting on this authority, the CFTC brought an enforcement case against a foreign exchange dealer that was offering retail customers the opportunity to buy and sell foreign currency contracts that nominally settled in two days the normal settlement cycle for foreign currency tradesbut in reality were virtually always rolled over into forex new contract without settlement actually taking place until the transaction was offset. Zelener that rolling spot transactions were, in fact, spot transactions and, therefore, the CFTC had no jurisdiction to pursue its enforcement case. Congress tried again in to address retail forex trading by amending the Commodities Exchange Act to regulate any OTC forex transaction involving a retail customer that fund not, in fact, settle in two days by actual delivery of foreign currency. However, the law contained various exceptions for entities fund were regulated by other regulators, such as insurance regulators or the SEC. Congress has given regulatory jurisdiction to a number of federal regulators, hoping to close the loophole created in Do I have to register with the National Futures Association NFA? Yes, as of October 18, As part of the reauthorization of the Commodity Futures Trading Commission CFTC in MayCongress amended the Commodity Exchange Act to require forex solicitors, account managers fund pool operators to register with the CFTC as Introducing Brokers IBsCommodity Trading Advisors CTAs or Commodity Pool Operators CPOs and become Members of National Futures Association NFA. Before they can begin soliciting customers, CTAs and CPOs must submit a Disclosure Document e. Under Dodd-Frank, the issue is whether the purchase and sale of foreign ordinaries involves a retail forex transaction. Spot forex transactions normally settle on the second day after trade date and are expressly excluded from Dodd-Frank. As a result, forex trading that is incurred in connection with trading of foreign ordinaries may involve broker-dealers in regulated retail forex transactions. Customer Testimonial Hannah, With the closing of our first milestone, I thought it necessary to send a note thanking you and your staff for helping us to get our fund launched successfully. Without your expertise, care and introductions to your network of professionals, I sincerely believe that we would not have been successful. You were with us every step of the way, and your personal care and attention to our specific needs gave us the solution we needed. It was wonderful working with you, and I look forward to doing the same in the new year. Best wishes and a Happy New Year! As always, best regards, Dxxxx. We can help with test registration if you wish. We offer consulting services for NFA and CFTC applicants. We will complete Introducing Broker application forms and assist in office procedure set-up, compliance guidelines, and internal control. We will prepare the Disclosure Document plus all Management applications. Customer Testimonial Capital Management Services Group and Hannah Terhune have been instrumental in helping me establish a forex fund. I have been particularly impressed with Hannah's willingness from the beginning to advise me on the various options I had, and in helping me chart the appropriate course given my goals. She was very helpful in addressing and answering my many questions and I greatly appreciate her advice. As someone who was launching his first fund, I've greatly appreciated the support I received from her and fund staff. I look forward to my ongoing relationship with Hannah Terhune and CMSG. Customer Testimonial I would like to state unequivocally that I have had a completely positive experience in dealing with Capital Management Services Group. Truly, from the first phone call that I made to Capital Management and Barry Shapiro speaking with me, to the conference call that he arranged management the two of us and Hannah Terhune and the time that she took in answering all of my questions, and, finally, to the follow-up by Amy Hong, my case, establishment of a Forex Incubator Fund, has been thoroughly handled. I, certainly, plan to enlist Capital Companies services for my legal needs in the future concerning fund management. I would rate my experience forex results 5 out of 5 stars! Totally satisfied, Rxxxxxx Sxxxx, Sept. What is the NFA Registration Process? The CFTC registration and disclosure document review process is handled exclusively by the NFA. Why does it take so long for the NFA to approve Disclosure Documents? CTAs and CPOs both need to have their disclosure documents reviewed by the NFA. The disclosure document review and approval process takes a while. This is our repeated experience with the NFA. Customer Testimonial I am extremely pleased with the high level of service provide by Hannah and her team of associates. They were easy to work with and their professionalism and the timeliness of deliverables far exceeded my expectations. Not only do I recommend using Capital Management Services Group to others contemplating forming a fund but I look forward to using them again in the future as my fund's needs grow. An incubator fund is typically structured by forming two separate entities: The individual who is actually managing capital would typically serve as the managing member of the investment manager. This structure grants you and your investors limited personal liability, as well as beneficial tax treatment. Learn More About Incubator Forex Funds Finding Investors: What are Accredited Investors? The new financial reform law is effective on July 21, Learn More About Accredited Investors Should I Avoid Non-Accredited Investors? However, the fund must be meet a statutory definition of "qualified fund" which has its principal business the trading of forward, future and option contracts. In a qualified fund currency futures--otherwise known as regulated futures contracts--are taxed under Section Customer Testimonial Hannah Terhune and her associates have provided legal advice and services to me for over a year. She provided initial guidance to help determine the kind of fund most suitable for my goals, created the legal documents that are the framework for my hedge-fund, and assisted with ADV submissions to register my company as an Investment Advisor. I continue to rely on her for ongoing compliance issues in this complex and dynamic industry. I found Ms Terhune and her associates to be extremely knowledgeable and helpful in a very responsive way, with friendly and companies manners. Overall a very good experience. Marty Cawthon ChipChat Technology Group. Why are we talking about commodities? Fund Act defines a commodity pool as an "investment trust, syndicate or similar form of enterprise operated for the purpose of trading commodity interests. Click Here to Learn More About Investment Adviser Registration. Customer Testimonial I wanted to thank you and your staff for the professional and timely services that you provided in setting up a CTA business. As an individual trader for almost 20 years I have a full grasp of markets but had very little knowledge in setting up a trading business for clients. Everyone at your firm was extremely friendly and helpful in giving me guidance in this new startup. Your prices were fair and while I looked at different firms to handle the process yours was head and shoulders above the rest. Legal Development Process The legal development process is one that requires careful planning. A variety of regulatory issues intersects concurrently when developing a hedge fund: The wisest course of action for those thinking about developing a hedge fund is to consult with qualified legal counsel before taking definitive steps. Due to the many regulatory issues that must be complied with, it is best to define the structure of your fund properly before commencing any form of fund development or engaging the services of administrators or service providers. The legal development process normally begins with a planning consultation with an attorney experienced in forming hedge funds. This is where important determinations such as registration, jurisdiction choice, and utilization of safe harbors are made. The consultation may expose areas outside the legal process that need further planning, thus requiring the manager to deal with those issues before proceeding. After management up any such issues, a full engagement is entered into and the legal development process begins. This enables the fund manager to begin the process of opening bank and brokerage accounts and setting up the administrative functions of the hedge fund. After the entities are formed, the legal team gathers the necessary information to form the operating agreements for the entities and then the offering documents, first in draft stage and then finalized for distribution to prospective investors. Who regulates forex in the United States? In the United States, regulatory oversight for financial and futures industry for U. The CFTC determines the rules regulating the commodity brokerage industry, and its stated mission to investors, trader and the public from unethical practices in the commodity and financial futures and options markets. In addition, the CFTC is responsible with creating the regulatory environment that will foster a free market environment that fosters competition. The CFTC has the authority to close any unregulated entity in the retail forex industry. For years prior to the development of the CFTC futures had been traded on the stock market under federal restrictions but those rulings only kept actual market stability fair fund actually regulating how companies worked with clients. Futures trading have always been a primary interest for investors and pertain to the trade of future promised goods such as fruits, grains, and juices still un-harvested but with a 'future' date for market. The futures market also deals with currency trading and the ever fluctuating foreign currency values against the dollar. With the new public offerings of forex and massive influxes of individuals never before entering the finance world the need for protection from fraud and manipulation was heightened to new levels. Inthe U. The wording in that particular bill was pretty vague, and left a whole range of other players in the forex markets, such as introducing brokers, pretty much unregulated. The NFA National Futures Association is an organization within the U. S futures market that was created in It is industry-wide and is self forex. The NFA enforces adherence to certain capital requirements, and maintenance of a sound financial structure by its members. It also requires that member firms actively supervise their employees, agents and affiliates to prevent fraud and unlawful activities. In addition, hedge fund managers allocate expenses to their funds and the investors in those funds. Best Practices The fund's offering materials and legal documents must clearly spell out the manager's approach to charging fees. Hedge fund fees should be calculated based on audited portfolio valuations. Where the period of audited financial valuations does not coincide with the fee calculation period, investors should familiarize themselves with the hedge fund manager's portfolio valuation methodologies and the processes used to prepare the fee calculation. Once audited financials become available, the fee calculations should be reviewed and adjusted for any valuation differences. Performance fees computed as carried interest should be calculated on net value added as opposed to gross value added. Offering documents should adequately define "net value added" upon which performance fees are calculated gross value added less any other expenses charged to the hedge fund. Offering documents should also adequately delineate all types of possible expenses and other charges that potentially could be deducted from fund assets. These expenses may include, but are not limited to: Performance fees should be calculated over a forex of time that is appropriate given forex volatility of the hedge fund strategy's returns and forex lock-up period required by the hedge fund manager. Generally, the companies volatile the investment strategy, the longer the period included for calculating the performance fee. Charging Fees The Investment Advisers Act of prohibits a registered fund manager including a state registered manager from entering into an advisory contract that provides for a performance fee. Section a 1 provides that "no investment advisor The management fee is paid whether the fund loses money or makes money. When determining whether a hedge fund is a qualified client the SEC has specific requirements to insure that non-qualified clients do not pool their assets management form a company or hedge fund to become qualified for this exemption. To avoid this, the SEC requires that all equity owners of the company or fund qualify on their own as qualified clients. Qualified Purchasers The net worth test is also met if the investor is a qualified client under ICA Section 2 a 51 A this is the test for qualifying as an investor under ICA section 3 c 7. As a practical matter, this means that, if the fund is a section 3 c 7 fund, a performance fee can always be taken against each investor. However, in a section 3 c 1 fund, this is not necessarily true. A purpose of the subscriber questionnaire is to provide written guidance from each investor on its status on many vital issues including whether it is a qualified purchaser. Example 1 All taxpayers are fund persons subject to the highest income tax rates. High-Water Mark It is common for the performance allocation to be subject to a "high-water mark" provision. The high-water mark's function is to ensure that a manager who has made money for an investor and then loses part companies that capital cannot take a performance allocation or fee until the loss has been made up. Thus, performance can be taken only on the profits above companies high-water mark. Investors must recall that performance is always calculated on the fund's economic performance, which will include the net of the yield e. When investing in a fund, investors should determine whether performance fees are subject to a high-water mark. Investors should determine the period of time to which the high-water mark limitations apply, and management that it is consistent with their redemption rights and investment objectives. High water marks are widely used and are considered a market standard best practice. Further, since investors may join a hedge fund investment at different times, investors should confirm that high water marks are specific for each investor and separately tracked. No incentive fee is chargeable. If the investor is a fiduciary account trust account, pension plan, endowment, etc. In any event, the absence of a high-water mark provision may be viewed as indicative of a fund manager not overly concerned with issues of fairness to investors. Hurdle Rate Many funds also have a "hurdle rate" provision. Hurdle rates are also used to guarantee that the hedge fund achieves a minimum investment performance before the fund's adviser may receive any incentive allocation. Hurdle rates establish a floor that the investment adviser must exceed to obtain the incentive allocation or performance- based fee. The underlying concept is that an investor could keep its funds in tax-exempt bonds and earn a safe, tax-free return assume 3. The investor demands that the incentive allocation be calculated only if the manager makes at least that rate -- a hurdle rate. There are two basic types: The incentive allocation is charged only on economic profits made above the hurdle rate. Once the hurdle rate is achieved, the performance is based on the entire economic profit. Combing a Hurdle Rate and a High Water Mark A high-water mark and a hurdle rate can be combined. Example 4 Same as Example 1, except that the incentive allocation is chargeable only after RL's book capital account earns a rate exceeding the federal funds rate plus basis points, determined each year based on the rate in effect on the first business day of that year, and that the performance is chargeable only to profits exceeding that hurdle rate. With a hurdle rate of 4. Example 5 Same as Example 4, fund that the incentive allocation is chargeable in full to the profits, provided that the hurdle rate is met for that year. The hurdle rate is optional; it provides an additional layer of computational complexity to whichever of the two alternatives is chosen, although the first alternative is clearly more complex. Further, in some funds, the hurdle rate is cumulative; thus in Example 3 above, RL's hurdle rate would have to be calculated separately to determine what the performance allocation is when profitable years kick in. Withdrawals Many issues go into the performance's calculation. Example 6 Same as Example 4, except that RL withdraws June 30, Should the hurdle rate be 4. Proration is the standard practice. What about the high-water mark when an investor withdraws only part of their capital? The manager must recall that once the investor is promised something, less cannot be given. At the very least, no manager wants to go back to investors and ask them to sign amended fund documents about how the manager's own cut of the profits is determined. This article does not discuss the rules for commodity pool operators CPOs under the jurisdiction of the CFTC. The CFTC and the industry self-regulatory organization, National Futures Association have no comparable restrictions on a CPO's entitlement to performance, provided that the investor receives appropriate disclosure and consents in writing to a performance-based compensation or allocation of profits. Because many funds trade both securities and commodities, the SEC rules on performance typically govern the outcome. Financial Products Report" an RIA publication, Septemberas 'Hedge Funds - Do's and Don'ts for Crafting Hedge Fund Performance Allocations' by Hannah Terhune, Esq. Currency Trader Forex Fund Article by Hannah Terhune, Attorney. Advising individuals on hedge fund startups worldwide, we are experts on investment adviser laws, hedge fund laws and regulations, forex fund regulations, and managed futures regulations. Our expertise extends to a wide variety of services, including state investment adviser registratoins, SEC investment adviser registrations, U. Additionally, we handle commodity pool formations, NFA registrations, cross border business planning, and investment manager regsitration in numerous vountries. We think we have the best set of offering documents based on the current and ever changing federal, state and offshore securities, commodities, and tax laws. We aim and deliver quick turnaround times, because we understand that our customers want to begin their money management business management soon as possible. We conceive, structure, and deploy the best tax saving strategies into your hedge fund vehicle for the benefit of the manager and their investors and your management company. Investors value tax-savings strategies and we utilize all our special knowledge and ideas in this area. Our customers value our one-stop relationship. We will help you start your business and continue to assist you. Our tax services division handles accounting, software, and tax compliance, including all tax matters tax planning and tax returns. Only one thing counts with us and that's our customer relationships! Attorney Hannah Terhune's education and experience are unsurpassed in the area of hedge funds creation and management platforms, and the complex body of tax laws related thereto. Terhune's exensive knowledge and experience have made her an indispensable resource for serious fund management and trading professionals. Give us the opportunity to use that knowledge and experience for you. CMSG provides the best services and support needed for hedge fund projects and associated activities in one convenient place, saving you time and energy. We offer hedge fund and money management accounting, tax services, tax preparation, consulting, entity and retirement plan formation services. Our professionals provide the highest quality services at competitive rates. But don't take our word for it, give us a call and let us prove what we can do for you. Read our Customer Testimonials and learn more About Us. Personal Consultations and Fees You get answers to your specific questions by speaking directly to Hannah Terhune, an experienced hedge fund attorney. Of course, fees are a necessary part of the consultation. Our Commitment Henry David Thoreau wrote: We do management by striving for the best results. Above all, we are a law firm. A lawyer is a philosopher and role model. There is tremendous power in being able to effect a positive change in our clients' lives. Our aim is to welcome our clients and to provide a comfortable, warm environment for all. Thanks for visiting our website. We hope to have the opportunity to serve you. This web site is designed for general information only. Call or Email hterhune CapitalManagementServicesGroup. CFTC The CFTC is authorized to adopt registration rules fund other requirements for retail forex dealers subject to its forex jurisdiction or unregulated by another federal agency. This would include FCMs that are registered with the CFTC but not subject to SEC or banking regulation, as well as dealers that are not regulated by any federal regulator RFEDs. The CFTC also is permitted to regulate any person soliciting retail forex transactions, including introducing brokers, as long as the person is not regulated by the SEC or a banking regulator. SEC and Other Regulators Under Dodd-Frank the SEC now has express authority to adopt rules regulating forex dealers that are broker-dealers. The statutory provisions would prohibit a broker-dealer from acting as a forex dealer absent enabling SEC regulations. On July 13,the SEC adopted rules that impose no new requirements for broker-dealers acting as forex dealers for one year in order for the SEC to study the impact of regulations in trading in foreign ordinaries among other issues. Self-Regulatory Organizations Applicable statutory provisions do not prohibit self-regulatory organizations from regulating the activities of their members even though the federal regulator itself is prohibited from regulating those subject to its jurisdiction. As a result, both the NFA and FINRA have adopted rules governing retail forex activities of their members. NFA The NFA amended its rules to establish a new category of membership, a Forex Dealer Member. Thus, any broker-dealer that is an NFA member and is acting as principal in retail forex trades would have to register as an NFA Forex Dealer Member and would be subject to a variety of NFA regulations.
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