Do CTAs have to register as RIAs?

K

KTCM

Hi,

I trade ES futures and options on ES futures only. I plan to do that for a small set of clients (10 in CA, and 1 in NY). Looking on the NFA website, I see that I could be exempt from CTA registration since I don't have more than 15 clients and don't hold myself out as a CTA to the public.

Trading on these futures and options on futures for my clients, will I have to register in the California as an RIA?

Any insight would be very much appreciated!
 
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That is a good question. I believe the exemption for a CPO requires you to file a document yearly with the NFA, but the exemption for a CTA does not. I can ask my rep at one of the FCMs to confirm.

Without the CTA paperwork and signed documents, it is unlikely you can get paid your fee directly from the client's account, as it will be looked at as a third party transfer. You can still be an authorized trader and get paid directly from the client. The form at FC Stone is called,"THIRD PARTY LIMITED POWER OF ATTORNEY AUTHORIZATION." You would sign under

THIRD PARTY CONTROLLER STATEMENT,

B. Non-registered Third Party Controller:,

f. I have provided advice to 15 or fewer persons during the past 12 months, and do not hold myself out generally to the public as a CTA, including, but not limited to, the solicitation of customers.

I have other accounts like this that are not CTAs.
 
rmorse said:
That is a good question. I believe the exemption for a CPO requires you to file a document yearly with the NFA, but the exemption for a CTA does not. I can ask my rep at one of the FCMs to confirm.

Without the CTA paperwork and signed documents, it is unlikely you can get paid your fee directly from the client's account, as it will be looked at as a third party transfer. You can still be an authorized trader and get paid directly from the client. The form at FC Stone is called,"THIRD PARTY LIMITED POWER OF ATTORNEY AUTHORIZATION." You would sign under

THIRD PARTY CONTROLLER STATEMENT,

B. Non-registered Third Party Controller:,

f. I have provided advice to 15 or fewer persons during the past 12 months, and do not hold myself out generally to the public as a CTA, including, but not limited to, the solicitation of customers.

I have other accounts like this that are not CTAs.
More...


there are other qualifiers besides number of clients on has eg $ under management
 
If you have questions about anything related to the NFA, just call them. In my experience they are courteous, professional and helpful.
 
The CTA registration is required by the National Futures Association, the self-regulatory organization for the industry. A CTA acts much like a financial advisor, except that the CTA designation is specific to providing advice relating to commodities trading.
CTA registration requires the applicant to pass certain proficiency requirements, most commonly the Series 3 National Commodity Futures Exam. However, depending on one's role within a firm, alternative tests may be used as proof of proficiency. Generally, CTA registration is required for both principals of a firm, as well as all employees dealing with taking orders from, or giving advice to, the public.

thank you..
 
Thanks MrN. I contacted NFA via email and they were really responsively. The following response was what I was looking for. Thanks everyone.

"Dear XXXXX:


Unlike exempt CPOs who must file a formal notice of exemption, most CTA exemptions are self-executing, including the three that you have listed below. Therefore, there is no formal notice of exemption to file if you qualify for any or all of the exemptions listed below.


Sincerely,


NFA Information Center"


and the following was what I listed as exemptions in my question to them:

Registration is required unless:

§ You have provided advice to 15 or fewer persons during the past 12 months and do not generally hold yourself out to the public as a CTA or

§ You are in one of a number of businesses or professions listed in the Commodity Exchange Act or are registered in another capacity and your advice is solely incidental to your principal business or profession or

§ You are providing advice that is not based upon knowledge of or tailored to customer's particular commodity interest account, particular commodity interest trading activity, or other similar types of information, such as, for example

· You make recommendations, such as advice to buy or sell specific futures contracts should a particular price level be reached, through newsletters, books and periodicals. The advice includes specific recommendations and the recipients of publications all receive the same advice or

· You provide specific advice through e-mails, facsimiles, an Internet web site, telephone calls or face-to-face meetings with customers consisting of instructions to buy or sell a futures contract based on a computerized trading system, which also is available for purchase and use on a personal computer, and the customers all receive the same advice or

· You conduct seminars at which you teach attendees how to trade commodity futures contracts aided by a software program that you sell and you invite seminar attendees to participate in a question-and-answer session at which you provide commodity trading advice without asking or receiving information about the personal characteristics of the attendees.
 
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