Forex CPO

A forex commodity pool operator (“CPO”) is a firm that provides forex advisory services to a forex commodity pool (sometimes referred to as a forex hedge fund). In general, all forex CPOs will need to be registered under the new forex registration rules. The following is an overview of the requirements for a forex CPO to register with the CFTC and become a member of the NFA.

NOTE: a manager to a forex commodity pool is selling securities (i.e. an interest in the commodity pool is a security). Therefore, it is imperative that the CPO retain counsel to draft the fund offering documents. While some groups will claim that forex disclosure documents and managed account agreements do not need to be drafted by a lawyer (which our group does not agree with), forex CPO documents cannot be drafted without involvement by counsel.

Exam Requirements

Each principal[] and associated person[] will need to have passed both the Series 3 exam and the Series 34 exam. Additionally, if there is a branch office [eventually to be linked to terms section], the manager of such branch office will need to have passed the Series 30 exam.

Fingerprint Requirements

The NFA will require each principal and associated person to provide fingerprint cards which will be run through the FBI databases prior to the registration of such person. While a felony or misdemeanor will not necessarily disqualify you from registering, it will likely delay the process. For more information, see [link to the FAQ about this subject].

Disclosure Documents & Managed Account Agreement

Each forex CPO will need to have appropriate disclosure documents and will also have a separate statement of information which will include the pool’s operating agreement (generally a limited partnership agreement) and the pool’s subscription documents. In general, the CPO disclosure document will include the following sections which describe the CPO’s investment program and structure:

· Forex risk disclosure statement

· Overview

· Discussion of trading program

· Performance disclosures

· Firm & principal background

· Risk factors

· Discussion of fees

· Break-Even Analysis

· Conflicts

· Discussion of service providers include Forex dealer information/ Forex IB information

· Litigation

· Discussion of fpool’s operating agreement

In addition to the disclosure document provisions listed above, the pool will also have a “Statement of Additional Information” which will include the pool’s operating agreement and the pool’s subscription documents.

Each disclosure document is specifically drafted to the needs of the client.

Costs

Firm Application - $200

Principal/ AP Application - $85

Yearly NFA Membership Fee - $750

Timing

Timing for a forex CPO is not quite as easy to predict as with a forex CTA. Generally the registration and disclosure document review times are similar (approximately 3 weeks for both), but there are more groups involved in the CPO process. Specifically forex CPOs will generally retain outside administration and audit firms and these firms typically will the review the offering documents prior to submission to the NFA for review. It will be up to the lawyer to “quarterback” this process and make sure the CPO process goes quickly and smoothly.

Questions?

If you have any questions on the above requirements, please contact us [] and we will get back to you as soon as possible.