Discussion of New Forex Registration Requirements

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Forex hedge funds have escaped registration requirements so far, but that is expected to change very shortly. Yesterday the NFA released a report which provided some detail on the proposed new Forex registration requirements.  While the NFA notes that the CFTC has not yet published its proposed forex rules, the NFA is still getting prepared for the Forex registrations.  The NFA specifically stated that managers of forex account (including hedge fund managers) will need to register with the CFTC and be a member of the NFA.  From the report:

The legislation also requires firms that solicit retail forex customers, manage retail forex accounts or operate pools for retail customers to register with the CFTC and be Members of NFA. FCMs, IBs, CPOs and CTAs whose activities involve retail forex will be designated Forex FCMs, Forex IBs, Forex CPOs and Forex CTAs, while APs of those firms will be designated as Forex Associated Persons.

New Series 34 Exam

The NFA also announced that there will be a new exam which forex managers will need to pass in order to be a Forex CPO and a Forex AP.  According to the release, the NFA’s Vice President of Registration Greg Prusik said “We have developed a new proficiency examination specific to retail forex activity, called the Series 34 exam, and have recommended to the CFTC that its forex rules require any individual applying for registration as a Forex AP to take and pass both the Series 3 exam and the Series 34.”

For information on the likely Series 34 exam topics, please see Series 34 exam topics.

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** Please note that this release is different from the NFA release of last week (see NFA Begins Regulating Forex above).  The release from last week alerted managers who are already registered with the CFTC as CPOs or CTAs that, if they also provide advice to clients regarding off-exchange forex, they will need provide such clients with a disclosure document.   Previously the registered CPOs and CTAs did not need provide clients with a disclosure document if the trading program focused only on spot forex.