Hedge Fund Sales

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Forex hedge funds. Registration with the Commodity Futures Trading Commission

In general, the Commodity Futures Trading Commission has jurisdiction over the foreign exchange futures and options contracts to retail customers and counterparties that can legally enter into contracts with these customers on a retail off-exchange are people who are: (i) registered by the Commission as a Futures Commission Merchant (FCM), (ii) certain affiliates of a registered FCM, or (iii) otherwise regulated, such as a stockbroker, broker, bank, financial institution or insurance company.

On May 22, 2008, Congress passed the Farm Bill which, in Title XIII, contains several amendments to the Act on the Commodity Exchange involving the retail exchange.

Under the CFTC Reauthorization Act, a person who operates the swimming pool only spot exchange is not required to register as a CPO at this time (but perhaps necessary in the future to the enactment of the regulation by the CFTC).

If I start a fund of funds and apportion the funds in equities and futures this kind of registration problems should I be concerned with?

As a fund of funds, you must be aware of each particular state investment adviser regulations. Many states have exemptions from registration. Also, if you intend to invest in futures or commodity funds, you must register with the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC) as products Pool Operator (CPO) . This person associated CPO must successfully complete the series 3 Review NASD.

Must be a researcher registered as a broker?

Generally, no Generally, a finder is not required to be registered as a broker, if its intermediation activities are limited. A broker "under the Securities Exchange Act of 1934 is" any person engaged in the business of trading in securities on behalf of others. "The SEC staff has found activities such as (a ) to participate in presentations or negotiations, (b) make recommendations concerning securities, (c) receive compensation based on transactions, (d) the structuring of a transaction or make recommendations as to the nature of titles, whether to issue securities or assess the value of securities sold and (e) the continuing involvement of the sale to result from the registration requirements for broker-dealer. However, a number of states, Texas and California for example, take the position that only a registered representative (broker) may receive some compensation.

Are there other types of detectors for issuers of private placement?

Yes. Rule 3A4-1 provides a non-exclusive port away from the definition of a broker for those associated with an issuer engaged in activities related to securities incident to their duties on behalf of the issuer. See Securities Exchange Act Rel. No. 22172 (June 27, 1985). Employees and possibly individual subsidiaries of an issuer that are not registered representatives of broker-dealers may be considered "associated persons" for purposes of Rule 3A4-1, in which case they may be exempt from the registration and will be allowed to participate in limited sales activities in accordance with the safe harbor rule.

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