How to get registered as a CTA in the UK

[DaxTrader]

Hi, I'm trying to find out information about managing money here in the UK.

Most of the futures/currencies/cfd brokerages offer "managed accounts" with a CTA, and advertise offering services to CTAs. The CTAs have a performance fee arrangement which is dealt with by the broker as I understand it.

Do you just need to be a registered representative to be a CTA or is there a lot more ? It seems like a less complicated way (from the outside !!) of managing money compared to the setting up of a fund structure.

thanks in advance

Peter

 

[Directional]

CTA (commodity trade advisor) is an NFA licensing category under US regulation.

This might be fine if you're only trading US markets for US clients, but if you're looking to do something in the UK for European markets and UK clients then you may need to look at FSA regulation.

To become a CTA, you usually have to have been licensed/sponsored as an AP (associated person) to an existing CTA for two years before you can self-sponsor and become a full CTA with the NFA.

The NFA exam you need to sit is called a series 3 exam, I think. you can sit this in london through various futures education bureau's, I cant remember who I did mine with.

You can get a lot more information about this stuff on the NFA website: http://www.nfa.futures.org

 

[DaxTrader]

thanks for the info, yes it would be for UK clients.

I'm trying to find out what the equivilant is looking at the FSA website...clear as mud.

The US laws look clear - less than 15 friends and family, no registration needed

 

[grantx]

Tentatively, I would suggest you would need seek FSA ”ISD Category C” Sole Trader status.

Basically, this means as an indivdual you advise, manage (?), execute and arrange trades/transactions for, and on behalf of, clients.

I assume you considering futures and options. Therefore, you will need a Clearing and Settlement Agreement with a Clearing member, who also hold clients’ funds, and a ”Locum” agreement with the same (in case you die and clients’ funds need to be sorted out).

You will need legal advice from someone suitably experienced, ie a law firm in the City (I doubt there are any outside – I’ve looked). Further, you will use the same for advising on Regulation and Compliance.

Via a FSA recognised accountant, you will need to prepare, inter alia, financial statements, cash flows. FSA recognition is not too difficult for an accountant; I think its just a matter of understanding and implementing FSA procedures and protocols. Note this is not the same as an accountant applying for authorisation as an adviser.

Cost will be around £10,000: £5000 legal fees, £5000 accontantancy fees (these figs may need updating).

You will also have to provide Euro 50,000 (£35,000) as a minimum Capital Requirement to be maintained at alll times, ie you can’t spend any of it.

Your status will be: Registered Representative (Futures and Options Representative exam needed), Regulation and Compliance Officer, Anti-Money Laundering Officer.

No (major) criminal records; previous professional experience, good character, good education level.

From start to finish, six to nine months.

Grant.

 

[Directional]

great post grant! good info

 

[grantx]

great post grant! good info

Thank you, Arbitrageur. Your compliment really lifted my spirits. I'm in the mood for a few drinks, now. I'll have one for you.

Cheers, mate.

Grant.

 

[grantx]

And a sponsoring broker, ie someone to support your application (not 100% about this - relying on memory).

Plus c £15,000 expenses, etc during the application process - up to 4 meetings in London with each of the other parties - legal advisers, clearers, accountants, FSA.

Plus £10-15,000 pa business expenses/overheads - quote system, telephones,etc. This is if you are working from home. More if you take office space. Marketing and advertising are not included in these figures.

Plus at least a year's living expenses (£20,000 minimum?) while you develop the business.

You'll also need to submit inter alia, monthly accounting/ reporting figures to the FSA. You do this yourself - not difficult.

The application form is about one inch thick.

Bottom line? I'd say £70,000 minimum at a squeeze. Shall we start?

Grant.

 

[grantx]

Sorry, forgot re managing a fund: advice and arrangement with fund administrator, £5000 (ongoing).

Legal advice re fund structure and compliance, £5000.

Grant.

 

[DaxTrader]

Thanks forthe very detailed information Grant

Was that for setting up as a fund manager as such , or managing money on a managed account basis ?(where investor has control of funds and statements etc and manager just has dealing authorisation )


Sounds like you went through it a while ago, and lived to tell the tale :-0

 

[grantx]

Dax,

That was for setting-up as a fund manager. Your description of managed accounts appears to be straightforward discretionary trading. There is no special requirement for this as far as I'm aware; you just need permission and confirmation from the client(s).

However, be aware of merging clients' accounts into a single account or effecting simultaneous trades on the same instrument for different clients. This may constitute a 'collective investment scheme' or managed fund. Unless you can prove otherwise.

As an aside, re FSA member firm authorisation (an individual can be a member firm), and contrary to preconceptions and unflattering press coverage, the FSA are incredibly helpful, here. I assumed their position would be, "Why should we authorise you?". The opposite is the case - "Why shouln't we authorise you?". And they will do all they can in assisting your application (you get two advisers).

Grant.

PS. The fund admin fees may be too high. However, there are FSA application fees c £1200 (?).

 

[grantx]

Dax,

That was for setting-up as a fund manager. Your description of managed accounts appears to be straightforward discretionary trading. There is no special requirement for this as far as I'm aware; you just need permission and confirmation from the client(s).

However, be aware of merging clients' accounts into a single account or effecting simultaneous trades on the same instrument for different clients. This may constitute a 'collective investment scheme' or managed fund. Unless you can prove otherwise.

As an aside, re FSA member firm authorisation (an individual can be a member firm), and contrary to preconceptions and unflattering press coverage, the FSA are incredibly helpful, here. I assumed their position would be, "Why should we authorise you?". The opposite is the case - "Why shouln't we authorise you?". And they will do all they can in assisting your application (you get two advisers).

I did go through it and received authorisation (futures and options broking, not stockbroking) conditional on confirmation of capital. Unfortunately, my wealthy backers pulled-out. Nine months' work for zilch. However, I will be re-applying now I'm in a better position.

Grant.

PS. The fund admin fees may be too high. However, there are FSA application fees c £1200 (?).

 

[DaxTrader]

thanks grant, have PM'd you

 

[grantx]

DAX Trader,

Re “merging clients' accounts into a single account or effecting simultaneous trades on the same instrument for different clients”.

Another revision. This can be effected, within the rules, via an “omnibus account” , ie a single transaction for multiple clients/accounts. The clearer will then allocate positions to individual accounts.

Grant.

 

[DaxTrader]

Hi Grant

was this what you applied for ?

http://www.fsa.gov.uk/pages/Library/Communication/Forms/packs/securities.shtml


The reason I ask is I spoke to the perimeter guidance section at the FSA and they pointed me in this direction (for trading as described above- managed accounts or discretionary).

It sounds like what you did - ie lengthy and expensive, and yet I do not want to handle client money or act as pooled fund manager. Having said that I haven't been through the forms in detail to see if there are significant exclusions.

 

[grantx]

DaxTrader,

This is new to me, and a big improvement on what I had to go through. It should save you a considerable amount re legal and accountancy fees/expenses, not to mention time.

That said, it may be worth while to consider an initial legal consultation over the telephone - there's no reason why it has to be face-to-face, unless that's how they like to play it. At a guess, it'll cost a few hundred. It's got to be worth it just to clarify your position re your intentions. At worse, they'll suggest a full-blown application but at least it will have saved you time in persuing the lesser, and ultimately, inappropriate course.

I would suggest submitting an outline of your intentions and ideas and asking for a quote re costs on that basis. Let me know if I can give you a name. I'll also help re possible questions, if you like.

I've book-marked the page and will certainly make a detailed examination.

PC broke down this weekend so away from my desk. Now fixed. Try Sat or Sun next.

Regards,

Grant

 

[OddTrader]

How about if someone says/ claims that (s)he was once a registered CTA in the past, however without giving a real name for people to check/ verify against the CTA registrar, what could CFTC/ NFA/ people do about it?

Nothing?

Is that legal?

 

[grantx]

OddTrader,

What would be the point of a false name that can't be verified? Won't get you far. If you did this, it would probably constitute deception, and you'd be prosecuted. Get this stupid idea out of your head before you become unstuck.

Grant.

 

[OddTrader]

OddTrader,

What would be the point of a false name that can't be verified? Won't get you far. If you did this, it would probably constitute deception, and you'd be prosecuted. Get this stupid idea out of your head before you become unstuck.

Grant.

Thanks Grant.

Say we know for sure that someone on a public trading forum claims many many times he was once a CTA, without disclosing his real name, are you saying that we should report to the the authorities for this case, because we are not able to check or verify the fact by ourselves?

Any precedences (links?)?

 

[grantx]

OddTrader,

I suppose it depends on whether he is using the claim to give credibility or legitimacy to an inducement or service, or obtaining an advantage through the claim. That would be illegal. If it’s just a question of gaining (false) credibility for his views, then he’s just a sad fcuk.

Precedence? Henry VIII’s use of Leviticus to support his claim to the Vatican that his marriage is void (just teasing). Sorry, can’t be specific. I suppose it boils to, (he should ) put up, or shut up (or buyer beware).

Grant (Doctor of Jurisprudence).

 

[OddTrader]

Thanks again Grant (Doctor of Jurisprudence).

That is helpful enough.

OddTrader (Once a winning trader)