I spoke with a staff attorney at the CFTC and the conclusion is that the SEC does not require registration. The CFTC does not require registration either but requires the managers to file an exemption from registration thru this link (explained below):
http://www.nfa.futures.org/compliance/ExemptLoginSelection.asp
The LLC would qualify as an "exempt pool." It was also explained that you CAN accept compensation in a limited exempt pool or in one limited to qualified persons (definition at end of this post).
As long as all participants are "principals" [i.e. executives in a corporation or managers in an LLC] of the exempt pool, you can specify compensation beyond the proportional contribution of the participant.
There are still some record keeping and disclosure requirements to all participants of the pool.
Bottom line, you'd want an atty experienced in securities, CFTC, and LLC law. The whole point is to prevent crooks from taking advantage of unknowledgeable investors. God knows there are enough out there. The immense amount of legislation is just intended to protect decent people like you and me. This does not mean it is the intent of the law to prevent qualified investors and entrepreneurs from pooling their resources in a legitimate manner.
The following links originate from this page:
http://www.nfa.futures.org/registration/cpo.asp
Table of Exemptions:
http://www.nfa.futures.org/registration/easyReferenceGuidePart4.pdf
From this table, you can see there is a small pool exemption and an exemption for the type I have been discussing, which includes only Qualified Eligible Persons (QEPs).
4.13(a)(2) Small Pool, 15 members <$400k
4.13(a)(4) All QEPs
Note the restriction of "no compensation" does not apply to all exemptions.
The laws can be read here:
http://ecfr.gpoaccess.gov/cgi/t/tex...94&tpl=/ecfrbrowse/Title17/17cfr4_main_02.tpl
Adverstising Restrictions which apply regardless:
http://ecfr.gpoaccess.gov/cgi/t/tex...iv8&view=text&node=17:1.0.1.1.4.4.7.2&idno=17
QEP:
(2) Persons who do not need to satisfy the Portfolio Requirement to be qualified eligible persons. Qualified eligible person means any person, acting for its own account or for the account of a qualified eligible person, who the commodity pool operator reasonably believes, at the time of the sale to that person of a pool participation in the exempt pool, or who the commodity trading advisor reasonably believes, at the time that person opens an exempt account, is:
...
(viii)(A) With respect to an exempt pool:
( 1 ) The commodity pool operator, commodity trading advisor or investment adviser of the exempt pool offered or sold, or an affiliate of any of the foregoing;
( 2 ) A principal* of the exempt poolor the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing;
( 3 ) An employee of the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing (other than an employee performing solely clerical, secretarial or administrative functions with regard to such person or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of the exempt pool , other commodity pools operated by the pool operator of the exempt pool or other accounts advised by the trading advisor or the investment adviser of the exempt pool, or by the affiliate; Provided, That such employee has been performing such functions and duties for or on behalf of the exempt pool, pool operator, trading advisor, investment adviser or affiliate, or substantially similar functions or duties for or on behalf of another person engaged in providing commodity interest, securities or other financial services, for at least 12 months;
*Definition from:
http://ecfr.gpoaccess.gov/cgi/t/tex...:1.0.1.1.3;idno=17;cc=ecfr#17:1.0.1.1.3.1.7.1
(a) Principal. Principal means, with respect to an applicant for registration, a registrant or a person required to be registered under the Act or these regulations:
(1) If the entity is organized as a sole proprietorship, the proprietor; if a partnership, any general partner; if a corporation, any director, the president, chief executive officer, chief operating officer, chief financial officer, and any person in charge of a principal business unit, division or function subject to regulation by the Commission; if a limited liability company or limited liability partnership, any director, the president, chief executive officer, chief operating officer, chief financial officer, the manager, managing member or those members vested with the management authority for the entity, and any person in charge of a principal business unit, division or function subject to regulation by the Commission; and, in addition, any person occupying a similar status or performing similar functions, having the power, directly or indirectly, through agreement or otherwise, to exercise a controlling influence over the entity's activities that are subject to regulation by the Commission;
I'm not a lawyer and I don't play one on ET; see a qualified atty before you do anything.
Good luck!
http://www.nfa.futures.org/compliance/ExemptLoginSelection.asp
The LLC would qualify as an "exempt pool." It was also explained that you CAN accept compensation in a limited exempt pool or in one limited to qualified persons (definition at end of this post).
As long as all participants are "principals" [i.e. executives in a corporation or managers in an LLC] of the exempt pool, you can specify compensation beyond the proportional contribution of the participant.
There are still some record keeping and disclosure requirements to all participants of the pool.
Bottom line, you'd want an atty experienced in securities, CFTC, and LLC law. The whole point is to prevent crooks from taking advantage of unknowledgeable investors. God knows there are enough out there. The immense amount of legislation is just intended to protect decent people like you and me. This does not mean it is the intent of the law to prevent qualified investors and entrepreneurs from pooling their resources in a legitimate manner.
The following links originate from this page:
http://www.nfa.futures.org/registration/cpo.asp
Table of Exemptions:
http://www.nfa.futures.org/registration/easyReferenceGuidePart4.pdf
From this table, you can see there is a small pool exemption and an exemption for the type I have been discussing, which includes only Qualified Eligible Persons (QEPs).
4.13(a)(2) Small Pool, 15 members <$400k
4.13(a)(4) All QEPs
Note the restriction of "no compensation" does not apply to all exemptions.
The laws can be read here:
http://ecfr.gpoaccess.gov/cgi/t/tex...94&tpl=/ecfrbrowse/Title17/17cfr4_main_02.tpl
Adverstising Restrictions which apply regardless:
http://ecfr.gpoaccess.gov/cgi/t/tex...iv8&view=text&node=17:1.0.1.1.4.4.7.2&idno=17
QEP:
(2) Persons who do not need to satisfy the Portfolio Requirement to be qualified eligible persons. Qualified eligible person means any person, acting for its own account or for the account of a qualified eligible person, who the commodity pool operator reasonably believes, at the time of the sale to that person of a pool participation in the exempt pool, or who the commodity trading advisor reasonably believes, at the time that person opens an exempt account, is:
...
(viii)(A) With respect to an exempt pool:
( 1 ) The commodity pool operator, commodity trading advisor or investment adviser of the exempt pool offered or sold, or an affiliate of any of the foregoing;
( 2 ) A principal* of the exempt poolor the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing;
( 3 ) An employee of the exempt pool or the commodity pool operator, commodity trading advisor or investment adviser of the exempt pool, or of an affiliate of any of the foregoing (other than an employee performing solely clerical, secretarial or administrative functions with regard to such person or its investments) who, in connection with his or her regular functions or duties, participates in the investment activities of the exempt pool , other commodity pools operated by the pool operator of the exempt pool or other accounts advised by the trading advisor or the investment adviser of the exempt pool, or by the affiliate; Provided, That such employee has been performing such functions and duties for or on behalf of the exempt pool, pool operator, trading advisor, investment adviser or affiliate, or substantially similar functions or duties for or on behalf of another person engaged in providing commodity interest, securities or other financial services, for at least 12 months;
*Definition from:
http://ecfr.gpoaccess.gov/cgi/t/tex...:1.0.1.1.3;idno=17;cc=ecfr#17:1.0.1.1.3.1.7.1
(a) Principal. Principal means, with respect to an applicant for registration, a registrant or a person required to be registered under the Act or these regulations:
(1) If the entity is organized as a sole proprietorship, the proprietor; if a partnership, any general partner; if a corporation, any director, the president, chief executive officer, chief operating officer, chief financial officer, and any person in charge of a principal business unit, division or function subject to regulation by the Commission; if a limited liability company or limited liability partnership, any director, the president, chief executive officer, chief operating officer, chief financial officer, the manager, managing member or those members vested with the management authority for the entity, and any person in charge of a principal business unit, division or function subject to regulation by the Commission; and, in addition, any person occupying a similar status or performing similar functions, having the power, directly or indirectly, through agreement or otherwise, to exercise a controlling influence over the entity's activities that are subject to regulation by the Commission;
I'm not a lawyer and I don't play one on ET; see a qualified atty before you do anything.
Good luck!
