NFA/CFTC exemption question

[austinp]

Quote from Wallace:

thanks autinp

I should probably start a new thread to ask about signal providers instead of asking
on this thread, but couldn't resist posting to see if anyone had information about any
regulation that applies to signal providers

If an advisory service of any kind were promoting itself as a trade-along operation for others to follow with intent to profit, then that falls under the CTA ruling umbrella. Most signal advisory attempts try to fit within the educational = entertainment exemption with mandated CFTC disclaimers in place.

imo a signal service = trade-along advisory is realistically impossible to succeed with. No individuals can or will blindly follow someone else' trade signals and execute profitably over time.

It has never been done and will never be done purely from a human nature aspect. But for those who seriously attempt to make that work, they are advising others on specific trade recommendations, which in turn mandates CTA status and full compliance.

 

[Epic]

Quote from opt789:

Epic,
You sound rather inexperienced, not that there is anything wrong with that, but you are talking about entering into situations that you seem to significantly underestimate. You are convinced that if you fit into some exemptions by the bare minimum letter of the regulations then you will be fine. Theoretically that might be true, but realistically it won’t be. That is the difference between the knowledge that you get by doing your research and reading the regulations, and the wisdom earned by what happens in the real world.

You don’t seem to be interested in others hard earned experiences, so go ahead and pool people’s money together without any formal plans, agreements, disclosure documents, lawyers, or accountants, and eventually you will find out what happens. Off the top of my head I can think of 10 completely innocent mistakes you can make in the process of running a completely unregulated and informal hedge fund (which is what your commodity pool will be) that to you would seem minor and irrelevant to the overall scheme of things, but which will be considered fraud and will end in nothing but significant problems.

So there is no point to this thread anymore, you are correct in your basic reading of the regs, so go ahead and don’t worry about it. Although your unregistered fund has some more rules and requirements spelled out by the CFTC and SEC that you have not mentioned here. Pool the money and roll the dice, just don’t ever end up with one single investor who is unhappy - I suppose anything is possible. Being “exempt” is easier for you, there is no doubt, but doing the bare minimum (or skipping them altogether) for professional help, disclosures, and operating agreements exposes you to a level of liability that no successful trader would accept.

I think you are misinterpreting me. I'm not starting a fund. Not even sure that I would be interested in it. So it isn't like I'm not interested in others experiences. I most certainly am interested. But nobody here is sharing their actual experiences.

You are telling me that I am technically correct in my readings of the regs, but then implying that there are some unwritten rules that apply in real life. I doubt that is the case. A person cannot lose a lawsuit on the grounds that they didn't follow an unwritten law.

So if you are implying that you have personal experience with actual situations in which a manager was punished for following only the minimum requirements, then I would love to hear them. I'm not advocating a complete avoidance of professional help. Quite the contrary, this thread was started specifically because the information from several different professionals was incorrect.

So the point is, if the CFTC, NFA, and SEC specifically state that a certain document is not necessary, then you are not at all liable for not providing it. If you are going to claim the contrary then the burden of proof is on you. And I can't just trust that it is so because your lawyer said so.

 

[opt789]

Quote from Epic:


So the point is, if the CFTC, NFA, and SEC specifically state that a certain document is not necessary, then you are not at all liable for not providing it.

Find a qualified lawyer who says that your investors can’t sue you and win when those investors write their checks directly to you so you can do anything with the money, then pool it together, without you providing any disclosure documents, subscription or operating agreements, then you can make that silly statement.

Having worked with thousands of traders, and having been an executive at a hedge fund I am very familiar with how investors act in a variety of circumstances, and how no trader is perfect. At some point something will happen to not make the investor happy and if everything was not laid out in proper legal form then you will be in trouble. If your only investors are your family and friends who you know will never sue you, then you just risk them not liking or trusting you anymore.

But like I said, go ahead and do it, then you will see. The fact that you think following the basics of a CFTC exemption somehow creates a magic shield from your investors coming after you is ludicrously naïve.

So far you have said that people can live on the equivalent of $20k per year (what someone can make managing 400k), and that investors are magically barred from suing you because you fall under a certain exemption. This is me throwing up my hands and shaking my head in resignation; come back and start a thread on how it goes if you ever do it. By the way, any 6 year old can read the exemptions and know that the 400k limit is for contributions not for eventual AUM, so I would suggest you list the names of the people who told you that so we can all know to avoid them.

 

[Epic]

Quote from opt789:

Find a qualified lawyer who says that your investors can’t sue you and win when those investors write their checks directly to you so you can do anything with the money, then pool it together, without you providing any disclosure documents, subscription or operating agreements, then you can make that silly statement.

Having worked with thousands of traders, and having been an executive at a hedge fund I am very familiar with how investors act in a variety of circumstances, and how no trader is perfect. At some point something will happen to not make the investor happy and if everything was not laid out in proper legal form then you will be in trouble. If your only investors are your family and friends who you know will never sue you, then you just risk them not liking or trusting you anymore.

But like I said, go ahead and do it, then you will see. The fact that you think following the basics of a CFTC exemption somehow creates a magic shield from your investors coming after you is ludicrously naïve.

So far you have said that people can live on the equivalent of $20k per year (what someone can make managing 400k), and that investors are magically barred from suing you because you fall under a certain exemption. This is me throwing up my hands and shaking my head in resignation; come back and start a thread on how it goes if you ever do it. By the way, any 6 year old can read the exemptions and know that the 400k limit is for contributions not for eventual AUM, so I would suggest you list the names of the people who told you that so we can all know to avoid them.

Wow, can't figure out why you are getting all worked up.

First, I never said investors could write checks to me and I could do anything with the money. That is a straw man and you know it is. I claimed that if a person follows the requirements of the CFTC, NFA, and SEC then they are doing what is required. Are you claiming that managers are held accountable for additional requirements? If so, can you please provide reference?

Second, I clearly stated that I'm not advocating avoidance of proper professionals, but you seem to think that I am. Obviously a manager should still ensure that the entity is setup correctly and take seriously all the regulatory requirements.

I also never said that someone could live off 20K annual. Again that is just a straw man. I simply said that the statement,"nobody can live off 2/20 from 400K" is debatable. But instead said that most people cannot. Which I believe is a much more accurate statement.

As for your last statement, where should I start? The first three responses to the thread stated that I was wrong for thinking it was referring to contributions and not AUM. As Nazzdac referenced, the company Miramarresearch that specializes in setting up these structures also supports that view. So your assertion that a 6yo can understand it, might be an incorrect assumption.

But I'm still wondering why you are so worked up as to feel the need to throw out so much condescension?!?

 

[RDPoS]

Just when this was getting good, everyone took their ball and went home. How about an update?