Registration and Compliance

Because the forex industry is not yet fully regulated there is a great deal of potential fraud that goes on. The United States Congress amended the commodity exchange act to require all forex solicitors, money managers and pool operators to be registered with the NFA and the CFTC. However as of the date of this writing, the rules are still being fine tuned to best protect the investors.

At this point most forex dealing firms require money mangers to be registered as CTA’s. However there are some exceptions out there. These firms typically run an indepth back ground check on potential money managers and still allow non-registered managers to trade funds in the forex market for their investors. In order to find the best trading arrangement for you as a money manager it makes sense to contact a well established introducing broker such as TradersChoiceFX.

In order to build a long term legitimate operation it is always a good idea to abide by a set code of ethics and rules. This way if and when regulations change it will be fairly easy to adapt because your business model will be already ran based on good intentions.

In order to stay intact with the compliance theme of this document it makes sense to go over key ethical principles that that should protect you and your investors.

1. Disclose all fees being charged to the investor. If you are receiving a rebate or some kind of kick back on trading volume without disclosing it to the investor you are hiding a key conflict of interest from your investor and potentially setting yourself up for a legal issue if you do not perform well on the account.
   
   
2. Charge reasonable fees. If you are charging a very high commission or performance fee on an already aggressive trading strategy, than you are very likely to eat away at the balance of your investors. Although this may cause you to earn quick short term money, it is very likely that your investors will eventually lose their money, or leave your managed program and potentially demand their money back. As mentioned earlier, reasonable fees are typically 2% annual management fee and 20% performance fee. If you do decide to charge a commission on the trades you should calculate the total commission being charged to the client based on the volume you trade and make sure that it is not overwhelmingly large relative to the profits of the master account.
   
   
3. Keep your investors interests first. If you truly believe that you have a good program and start to generate formidable returns you will attract a great deal of investors to your managed account. No matter how many people you start out with the word will spread. Therefore if you have the investors best interest in mind and focus on their performance first and your fees next, with a good trading strategy you will be able to grow your forex managed account very rapidly.
   

Because the regulations are being fine tuned by regulatory bodies we recommend that you always check the NFA website www.nfa.futures.org for all updates regarding CTA and CPO compliance requirements. The NFA also has a very friendly and valuable information desk so you can always call them with any questions or issues. You can also contact a large well established forex introducing broker such as TradersChoiceFX and look for guidance on setting up a forex managed account.