Setup of an exempt CPO - best low-cost service providers?

D

DerivativesTrader

Dear all,

I think of launching a CPO to manage others investors' money.

As the fund will be small at the beginning, I look forward to profiting from an exemption, either 4.13(a)(1) ("Operator does not advertise, receive compensation and is not otherwise required to be registered with the CFTC") or 4.13(a)(2) ("Total gross capital contributions in all Pools operated or intended to be operated do not in the aggregate exceed $400,000 and none of the Pools operated has more than 15 participants"), to build a track record. Then, to be able to grow, the CPO would of course be fully registered with the CFTC.

1. Do you guys know the best low-cost services providers that could launch the pool and the CPO? That would mean at least:
- Write (copy-and-paste?) organizational documents to form the Limited Partnershop (the fund/pool) and the CPO (management company, as a LLC).
- Write (copy-and-paste?) offering documents for the fund/pool (PPM, limited partnership agreement, subscription/withdrawal documents...)

I have seen very different prices, but most of them seem to be sky-high for the (mostly) copy-and-paste work. Paying several thousands $ seems normal to me, but $15k/20k for an exempt CPO and its pool of a few hundred thousands $ seems very expensive and will not help to build a good track record!

2. Also, if you think of a good low-cost CPA/auditor for the next step (after being registered as a CPO with the CFTC), and can give some insight of the fees, that would also be helpful.

Thanks a lot, and have a good week-end.
 
DerivativesTrader said:
I have seen very different prices, but most of them seem to be sky-high for the (mostly) copy-and-paste work. Paying several thousands $ seems normal to me, but $15k/20k for an exempt CPO and its pool of a few hundred thousands $ seems very expensive and will not help to build a good track record!
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The lowest I've seen from someone that is good is ~$12K to from a CPO. However, if you are except, you just need to stay exempt, have a proper agreement and file your exception with the NFA/CFTC. You don't need to spend a lot.
 
Deuteronomy_24_7 said:
Just start off with friends&family setup at IB or similar. Scale up if/when you're successful.
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Just because IB lets you set up a futures account with multiple partners does not relieve you of your regulatory responsibilities. And, he seems to want one account vs SMA. I'd rather be at a dedicated FCM for that business than a retail broker like IB. IB charges for overnight positions and offer higher than SPAN margin requirement.
 
@Deuteronomy_24_7: Thanks for your reply. That is exactly what I think of doing: managing own + friends and family money in a pool, building a track record for a gew months, before being fully registered as a CPO with the NFA/CFTC.

However, I still need to launch a LP (Limited Patnership) to form the pool (the fund) that is going to have an account at IB in its name, thus I would still need to get a draft of "offering documents" for the pool (PPM, limited partnership agreement, subscription documents...), and to fill the organizational documents to launch the pool/fund.

I would also need (maybe not at the beginning) to launch another very small company, a LLC, to act as CPO (management company) instead of me as an individual. That is at least what I was advised to do.

@1245 :
1. $12k as a minimum seems to be a bit high (even if it is much less than the $20k I was quoted once!), but maybe it was to launch a registered CPO, hence there is much more work involved, especially to register the fund as a Commodity Pool, register the management company as a CPO, and go back and forth discussing with the NFA/CFTC on the wording of each and every document, especially the PPM. Would it be possible (maybe by PM if not possible publicly) to know which firm proposed $12k?

2. You are correct about the regulatory responsibilities, and about the "one account" used at IB (it will be a CPO managing a pool of money, not individual accounts with fifferent holders as it would be in the case of a CTA). IB does charge for overnight positions if you ask to pay using the "Cost-Plus Tiered Commission per Contract" structure, but it is not the case for the Fixed pricing structure, which is still rather good fees for a small structure (especially because the margin fees are much below most of the competition, and so on).

3. As you wrote, I would "just need to stay exempt, have a proper agreement and file (my) exception with the NFA/CFTC", hence I think I should not have to spend $12k or more doing this, especially as I am ready to handle the work to be considered as "Exempt" with the CFTC/NFA (and also with the SEC).

Do you know someone that could still help me launching the 2 companies needed (the pool as a LP, the management company as a LLC), with a lower price tag than $12k? That would help me so much!
 
I think that what Deuteronomy thinks is that if a CPO is using the full margin capacity, the risks would probably be so high that using this of that broker, or spending $12k or $20k for the CPO/pool setups... are not that important compared to managing very precisely the risks in the fund, whose returns will probably be VERY volatile, even if the strategy followed is particularly hedged...
 
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