Tag Archives: commodities

FLOORED Film Peeks Inside Chicago Trading World

Audience Reacts Positively to James Allen Smith’s Documentary on Chicago Floor Trading

On Thursday evening at the Roxie Theatre in San Francisco, the professional women’s organization 100 Women in Hedge Funds sponsored the showing of Floored, a documentary by ex-floor trader James Allen Smith that offers a peek inside the lives, successes, and struggles of former traders of the Chicago trading floor (a.k.a. the “pit”).

Those who showed up to watch the film made for the perfect audience–traders, hedge fund managers, and other financial industry professionals schmoozed over wine and cheese before the showing, during which boos, laughter, applause, and verbal comments erupted each time the audience could relate to traders’ stories or make fun of their often idiosyncratic comments. Upon leaving trading, one notable former trader (and quite the character) Mike Walsh took up the hobby of hunting lions, giraffes, and other wild animals.

Through interviews and live footage of pit trading, the documentary tells the story of the Chicago Board of Trade’s (now the Chicago Mercantile Exchange, CME) humble beginnings–it opened in 1898 as the Chicago Butter and Egg Board because it only traded butter and egg contracts!–to the roller coaster ride experienced by floor traders during the peak of futures and options floor trading in the mid-1990s.

Starting in 1992 and still in use today in the pit is the combination of open outcry, the system of loudly shouting over competitors often associated with floor trading, and GLOBEX, an electronic trading system which works alongside open outcry to make trading more efficient. The idea behind trading revolves around buying a commodity at one price and then trying to sell it for a better price in order to make a profit.  In the film, the traders described this system as a game–one trader stated that when the bell goes off (to initiate the opening of trading hours), he experiences an adrenaline rush as if he were playing a sports game.  Another trader commented, “Trading is not a normal job. When you are in there [the pit] from 8:30 to 3:15, it’s all about money!”

The main issue traders discussed was the shift from floor trading to electronic trading. The majority opinion was that computers changed the dynamic of trading in an unfavorable way and that trading in person helps make the price of commodities more efficient. One trader commented that open outcry was more “honorable”. There is also a generational issue, as older traders who did not grow up using computers had trouble figuring out complicated electronic trading platforms. Essentially, those traders who still had enough money to continue trading and who were able to use the electronic systems continued trading, while those who lost too much money in the pit were forced to leave trading altogether.

According to the CME, the options and futures trading floor remains grounded in floor trading, which accounts for 90% of trades with the remaining 10% occurring electronically. The futures pit, however, has seen the biggest crossover to electronic trading, with approximately 85% of trades taking place on the computer and the remaining ones in the pit.

After the film, Smith, who watched the film alongside his audience, stood at the front of the theatre for a Q&A session. He was asked about his background–he went to art school then found himself doing web design for finance businesses in Chicago, where a friend suggested he make a movie about floor traders. He even dabbled in trading and reached out to his network when casting traders for the film. When asked why former traders were willing to open up about their personal lives on film, he commented that less successful traders are often more likely to talk, while more successful traders remain tighter-lipped. Finally, when asked what impression of traders he wanted to leave with audiences, Smith replied that traders are usually stereotyped as “greedy a**holes”, and he wanted to show that traders are more “dynamic than just that part of their personalities” by offering a “more rounded impression [of traders]” through his film.


For information about future Floored showings, click here.

Other related Floored and CME articles include:

Bart Mallon, Esq. of Cole-Frieman & Mallon LLP runs the Hedge Fund Law Blog.  He can be reached directly at 415-868-5345.

FLOORED Screening in San Francisco | 100 Women in Hedge Funds

Movie on Traders to be Screened in San Francisco

On January 28 the San Francisco investment management community will come together to watch the movie “FLOORED” which documents the issues facing floor traders as the industry continues its march away from traditional floor trading.  Please see the release below for more information.

Additionally, on an unrelated note, I would like to invite all futures/commodities professionals in the Bay Area to join the San Francisco Futures Professionals LinkIn Group.  The first meeting of this group will be sometime in February and will include traders/managers, service providers and (potentially) investors.



San Francisco Special Screenings of “FLOORED”
Followed by Director Q&A

January 28, 2010 at 5:00 and 7:30 PM
San Francisco, CA

Join us for sneak peek screenings of “Floored,” a feature-length documentary about the up and down lives of floor traders. Screenings will be followed by Q&A with Director James Allen Smith. (Run time: 80 minutes)

About the film: FLOORED is a gripping, honest look behind the curtain of the trading floor that few have ever seen. Like many aspects of our economy, computerized trading is changing the dynamics on the actual trading floors. FLOORED offers a unique window to this lesser-known world of finance.

To view the trailer and get more information on the film, please go to: www.FLOOREDmovie.com

Screening 1:
Time: 5:00pm wine reception/registration
Screening: 5:30- 6:45pm
Discussion: 6:45 – 7:15pm
Tickets cost $16 per person. Tickets can be purchased online at:

Screening 2:
Time: 7:30 – 8:00pm registration
Screening: 8:00 – 9:15pm
Discussion: 9:15 – 9:45pm
Tickets cost $12 per person. Tickets can be purchased online at:

We will begin promptly at screen times; please arrive early.

Location: The Roxie Theater
3117 16th Street, San Francisco, CA 94103

The Roxie Theater is located in the heart of San Francisco’s Mission District, at 3117 16th Street between Valencia and Guerrero. Local Muni are the 22 and 53 (both at 16th & Valencia), 33 (18th & Valencia), 14 (16th & Mission), 49 (16th & Mission). Bart stops one block east at 16th & Mission.

Public Parking is available on Hoff Street, off of 16th between Valencia and Mission. Very reasonable rates.
Click here for more directions

About 100 Women in Hedge Funds (www.100womeninhedgefunds.org)
100 Women in Hedge Funds is a global, practitioner-driven non-profit organization serving over 10,000 alternative investment management investors and professionals through educational, professional leverage and philanthropic initiatives. Formed in 2001, 100 Women in Hedge Funds has hosted more than 160 events globally, connected more than 150 senior women through Peer Advisory Groups and raised in excess of $17 million for philanthropic causes in the areas of women’s health, education and mentoring. For more information about 100 Women in Hedge Funds, please visit www.100womeninhedgefunds.org.

For questions, please email
Diane Schrader
Northern CA Chair, 100WHF
[email protected]


Bart Mallon, Esq. of runs the Hedge Fund Law Blog and provides hedge fund manager registration service through Cole-Frieman & Mallon LLP. He can be reached directly at 415-868-5345.

CFTC Head Addresses Futures Industry in Chicago

Futures Industry Association Annual Expo

CFTC Chairman Gary Gensler today spoke at the Futures Industry Association’s annual expo in Chicago. While most of the Chairman’s speech  focused on the proposed regulation of the OTC derivatives markets, Chairman Gensler also discussed the recent SEC and CFTC Harmonization report. As you can imagine, Gensler is for increasing regulation of the entire financial markets. Below I have included some of the more interested quotes which can be found in the text of the speech text of Chairman Gensler’s speech.

The CTA Expo was going on as well during this time and I will be writing more articles on the speakers at this conference over the next few days.


Both of the committees’ bills include three important elements of regulatory reform: First, they require swap dealers and major swap participants to register and come under comprehensive regulation. This includes capital standards, margin requirements, business conduct standards and recordkeeping and reporting requirements. Second, the bills require that dealers and major swap participants bring their clearable swaps into central clearinghouses. Third, they require dealers and major swap participants to use transparent trading venues for their clearable swaps.

The challenge remains, though, determining which transactions should be covered by these reforms. I believe that we must bring as many transactions under the regulatory umbrella as possible. This will best accomplish the two principal goals of reform: lowering risk to the American public and promoting transparency of the markets.


To promote market transparency, all standardized OTC products should be moved onto regulated exchanges or trade execution facilities. This is the best way to reduce information deficits for participants in these markets. Transparency greatly improves the functioning of the existing securities and futures markets. We should shine the same light on the swaps markets. Increasing transparency for standardized derivatives should enable both large and small end-users to obtain better pricing on standard and customized products.


Some have articulated a false choice between stronger regulation on the one hand and a free market on the other. Rules improve markets, however, by enhancing efficiency and integrity. Traffic lights require you to stop your car, but they also ensure that traffic is orderly and efficient. They reduce risks for every person on the highway. Similarly, this country’s markets work best with clear rules of the road.


Last year’s crisis also highlighted the need for regulators to change. In that regard, the CFTC last week released a joint report with the SEC to bring greater consistency, where appropriate, to our regulatory approaches. While the missions of the CFTC and the SEC may differ, our goal is the same: to protect the public, enhance market integrity and promote transparency. In preparing our report, we set turf aside and focused on those changes that would best benefit the markets and the American people.

We jointly made 20 recommendations where we can change our statutes and regulations to enhance both agencies’ enforcement powers, strengthen market and intermediary oversight and facilitate greater operational coordination.


Other related hedge fund law articles include:

Series 3 Exam | Commodities & Futures Exam Topics

Hedge Fund Managers and the Series 3 Exam

Those managers who engage in commodities and futures trading (and who don’t qualify for an exemptions) will need to register as commodity pool operators with the CFTC and become members of the NFA.  In order to do this all owners and “associated persons” of the manager/CPO will need to take and pass the Series 3 exam.  This article provides a brief overview of the Series 3 exam for hedge fund managers.

Commodities and Futures Contracts License

The NFA requires an individual to successfully complete the Series 3 in order to become qualified to sell commodities or futures contracts.  The exam is designed for anyone who is going to act as an Associated Person, Commodity Trading Advisor, Commodity Pool Operator, Introducing Broker, or Futures Commission Merchant.  [Note: under the forex registration rules, those managers who trade in the spot forex markets will soon also need to take the Series 3 and a new exam called the Series 34 exam.]  The Series 3 is also a prerequisite to the Series 30 Futures Branch Manager exam.

The Series 3 exam is required of individuals who conduct business with the public on the U.S. futures exchanges and:

  • offer or solicit business in futures or options on futures at a futures commission merchant (FCM) or introducing broker (IB) or who supervise any such person.
  • are associated with a commodity trading advisor (CTA) who solicits discretionary accounts or who supervises persons so engaged.
  • are associated with a commodity pool operator (CPO) who solicits funds for participation in a commodity pool or who supervises such persons.

Registration Process

The NFA Series 3 Exam is administered by FINRA. There is a two-step process that a candidate must complete to be able to take the Series 3 Exam.

Step 1 – The individual must apply with FINRA to take the exam by completing and submitting an application form and payment, or by submitting the application online. The testing application form can be downloaded from the FINRA’s web site. Effective January 2, 2009, the fee for an individual to take the Series 3 National Commodity Futures Examination will be $105.

Step 2 – Once the U10 registration has been approved and processed by FINRA, a Notice of Enrollment will be emailed to the candidate. FINRA will assign a 120-day window during which the exam can be scheduled and taken. The candidate may then contact their local test center to schedule an appointment to sit for the exam. Due to the many sessions administered at testing centers, the candidate should schedule test-taking as far in advance as possible to secure an appointment on the desired date.

Testing Locations

The exam is delivered via a computer system specifically designed for the administration and delivery of computer-based testing and training. Exams are given at conveniently located test centers worldwide and an appointment to take your exam can be scheduled online or by calling your local center. For a list of test centers in your area (U.S. and International) click here.

Series 3 Exam Overview

The Series 3 Exam for commodity futures brokers is divided into two parts – futures trading theory and market regulations. Each part must be passed with a score of at least 70 percent. There are 120 total multiple choice and true/false questions, and exam takers are provided 2 hours and 30 minutes to complete the exam. The Series 3 Exam also contains 5 additional experimental questions that do not count towards the exam taker’s score, and additional time is built into the exam to accommodate for these questions.

The Series 3 exam is divided into ten topics and is graded in two main parts: Market Knowledge and Rules/Regulations. The Market Knowledge part covers the first nine of the following topics, and  consists of 85 questions. The Rules/Regulations part covers category ten, and consists of 35 questions. You must achieve a 70% on each part in order to pass the exam.

Part 1: Market Knowledge – The first part of the Series 3 exam covers the basics of the futures markets. Exam takers will need to understand futures contracts, hedging, speculating, futures terminology, futures options, margin requirements, types of orders, basic fundamental analysis, basic technical analysis and spread trading.

Part 2: Rules/Regulations – The second part of the Series 3 exam consists of market regulations. Exam takers must familiarize themselves with relevant NASD rules and regulations for this part of the exam.

Exam Topics

  1. Futures Trading Theory
  2. Margins, Limits, Settlements
  3. Orders, Accounts, Analysis
  4. Basic Hedging
  5. Financial Hedging
  6. Spreads
  7. General Speculation
  8. Financial Speculation
  9. Options
  10. Regulations

Useful Terms to Know for the Series 3 Exam

Exam takers are expected to be familiar with the following terms and definitions prior to taking the Series 3 exam. The definitions presented below have been extracted from  Investopedia.

Bucketing: A situation where, in an attempt to make a short-term profit, a broker confirms an order to a client without actually executing it. A brokerage which engages in unscrupulous activities, such as bucketing, is often referred to as a bucket shop.

Delta: The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative. Sometimes referred to as the “hedge ratio”.

Double Top: A term used in technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop.

First Notice Day: The first day that a notice of intent to deliver a commodity can be made by a clearinghouse to a buyer in fulfillment of a given month’s futures contract.

Intrinsic Value: 1. The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors. This value may or may not be the same as the current market value. Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the investment exceeds its current market value. 2. For call options, this is the difference between the underlying stock’s price and the strike price. For put options, it is the difference between the strike price and the underlying stock’s price. In the case of both puts and calls, if the respective difference value is negative, the intrinsic value is given as zero.

Inverted Market: In the context of options and futures, this is when the current (or short-term) contract prices are higher than the long-term contracts.

Long Hedge: A transaction that commodities investors undertake to hedge against possible increases in the prices of the actuals underlying the futures contracts.

Offset: 1. To liquidate a futures position by entering an equivalent, but opposite, transaction which eliminates the delivery obligation.2. To reduce an investor’s net position in an investment to zero, so that no further gains or losses will be experienced from that position.

Scalpers: A person trading in the equities or options and futures market who holds a position for a very short period of time, attempting to make money off of the bid-ask spread.

Straddle: An options strategy with which the investor holds a position in both a call and put with the same strike price and expiration date.


Please contact us if you have any questions or would like information on how to start a hedge fund.  Other related hedge fund law articles include:

Four CFTC Actions against CPOs and CTAs

This past week and a half has proven to be a busy time for the CFTC’s enforcement divisions as a number of actions have been released to the public.  The four actions below showcase the unlawful and unsavory behavior of four groups.  Specifically, two of the actions below provide details of two more Ponzi schemes and the other two actions involve misrepresentations and lies.  As we’ve discussed before hedge fund investors have many tools to protect themselves from these sorts of actions.  Simple hedge fund due diligence will go a long way towards protecting an investment.


Release: 5612-09
For Release: February 11, 2009

CFTC Orders Former Bank Trader and New York City Resident to Pay $360,000 Penalty in Connection with False Trading Reports Submitted to His Former Employer, Bank of America

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today settled charges against Michael Moster for submitting false reports to the Bank of America in Chicago, where he once worked as a trader, and ordered Moster to pay a $360,000 civil penalty.

The CFTC issued an order on February 11, 2009, which finds that, during a three-day period in January 2004, Moster, a former proprietary trader for the Bank of America, falsely reported to the bank that he purchased 4,000 Treasury futures contracts to conceal the risk associated with large unauthorized positions in Treasury bonds that he established over the same time period, by making it appear as if the long futures position hedged the Treasury bond risk. By the following week, the fictitious trades inflated the value of his trading book by over $12 million, the order finds. The sale of Moster’s unauthorized Treasury bond position resulted in a loss of approximately $12.2 million to the Bank of America.

Based upon the same conduct, Moster pled guilty on September 18, 2008, to a one-count violation of making false entry into the books and records of a bank in the Southern District of New York. Under the criminal sentencing guidelines, Moster will be required to make full restitution of the over $12 million loss he caused to the Bank of America. The CFTC’s order recognizes the restitution made in the context of the criminal case and provides that Moster must pay and satisfy any criminal restitution obligation before his payment of the CFTC civil monetary penalty.

The following CFTC Division of Enforcement staff members are responsible for this case: Ken Koh, Todd Kelly, Peter Haas, Paul Hayeck, and Joan Manley.


Release: 5610-09
For Release: February 10, 2009

CFTC Seeks Freeze of Assets in Oklahoma Ponzi Scheme Involving Over $30 Million

Mark Trimble of Edmond, Oklahoma Posted Profits, While Losing Millions in Phidippides Capital Hedge Fund

Washington, DC – The Commodity Futures Trading Commission (CFTC) announced that today it filed an enforcement action against Mark S. Trimble, of Edmond, Oklahoma, and his company, Phidippides Capital Management LLC (PCM), with offices in Oklahoma City. Trimble, who controlled Phidippides, also managed a private hedge fund named Phidippides Capital LP, which the CFTC’s complaint alleges was a Ponzi scheme.

CFTC Seeks Court Order Freezing Defendants’ Assets

In conjunction with the filing of the complaint today in the U.S. District Court for the Western District of Oklahoma, the CFTC is seeking a statutory restraining order freezing defendants’ assets and preserving records. Trimble has consented to the entry of an asset freeze order.

The CFTC’s complaint alleges that, from at least 2005 to the present, Trimble and PCM operated a $34 million hedge fund with approximately 60 investors and traded partly in the name of Phidippides Capital, a Delaware company incorporated by Trimble. Since at least October 2007, Trimble and PCM allegedly issued false account statements, failed to disclose the fund’s actual multi-million trading losses, and operated the fund as a Ponzi scheme, paying participant redemptions based on the fund’s fabricated profitability. Additionally, defendants allegedly received over $1 million in management fees based on false reports of trading profits.

Trimble Used Email to Notify Investors that He Had Not Been “Honest” About the Fund’s Trading Results

According to the complaint, Trimble’s activities were exposed in late January 2009, after Trimble provided the Federal Bureau of Investigation a fictitious 2008 year-end trading account showing millions of dollars in trading profits that did not square with actual trading statements issued by Trimble’s brokerage firm that disclosed millions of dollars in trading losses. Trimble subsequently stated in an email sent to his brokerage firm, and addressed to “Family, Friends, and Clients,” that he had not been “honest” about the hedge fund’s trading results, explaining: “The reason our balances are off is because I could not look myself in the mirror and face all of you and notify you that in the last quarter of 2008 we lost all the profits for the year and then some.”

Stephen J. Obie, CFTC Acting Director of the Division of Enforcement commented: “Through the swift action of CFTC staff, millions of dollars have been frozen, which ultimately we will seek to return to the victims Trimble deceived by his scheme. The CFTC continues to zealously prosecute these lecherous schemes, so that as many assets can be preserved as possible as we fulfill our vital mission to protect customers from fraud and abuse.”

The CFTC’s complaint seeks civil monetary penalties, disgorgement of ill-gotten gains, restitution to defrauded customers, and injunctive relief, among other sanctions.

The CFTC appreciates the assistance of the Securities and Exchange Commission and the Financial Crimes Enforcement Network.

The following CFTC Division of Enforcement staff members are responsible for this case: Rosemary Hollinger, Scott Williamson, Richard Wagner, and Ken Hampton. CFTC Auditors Thomas J. Bloom, Shauna Wright-Regas, and Lauren Corn also are working on this matter.


Release: 5609-09
For Release: February 6, 2009

CFTC Obtains Judgment Against Albert E. Parish and Parish Economics LLC for Operating a Commodity Pool Scam in CFTC Anti-Fraud Action

Parish Currently Serving a Sentence of More than 24 years in Federal Prison for Related Criminal Violations

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that the Honorable David C. Norton of the U.S. District Court for the District of South Carolina entered an order settling charges alleging that Albert E. Parish and Parish Economics LLC, both of Charleston, South Carolina, lied to customers and misappropriated millions of dollars in customer funds (see CFTC Press Release 5320-07, April 19, 2007).

According to the order entered on February 2, 2009, between 1986 and March 2007, Parish and Parish Economics fraudulently solicited approximately $40 million in investments for their commodity futures pool. Parish and Parish Economics misrepresented to pool participants that funds would be invested in commodity futures when, in reality, Parish misappropriated the vast majority of funds for his personal use. Parish and Parish Economics also provided false futures account statements to pool participants and failed to provide required pool disclosure documents.

The order permanently bars Parish and Parish Economics from further violating certain provisions of the Commodity Exchange Act and the CFTC’s regulations and from engaging in any commodity-related activity. Parish is currently serving a sentence of more than 24 years in federal prison for related criminal violations. In lieu of an award of restitution and civil monetary penalties, the order recognizes that Parish will be subject to a criminal judgment restitution obligation in excess of $40 million.

The CFTC would like to thank James A. Rue of the Securities and Exchange Commission and John H. Douglas of the U.S. Attorney’s Office for the District of South Carolina for their assistance in this matter.

The following CFTC Division of Enforcement staff members are responsible for this case: Jo Mettenburg, Jeff Le Riche, Charles Marvine, Donald Nash, Rick Glaser, and Richard Wagner.


Release: 5608-09
For Release: February 5, 2009

CFTC Charges Minnesota Resident Charles “Chuck” E. Hays and His Company, Crossfire Trading, LLC, with Running a $5.5 Million Ponzi Scheme

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed an enforcement action today against Charles “Chuck” E. Hays and Crossfire Trading, LLC (Crossfire), both of Rosemount, Minnesota, charging them with fraud and misappropriation in connection with a commodity pool Ponzi scheme.

In conjunction with the filing of the complaint today in the U.S. District Court for the District of Minnesota, the CFTC is seeking a statutory restraining order freezing defendants’ assets and preserving records.

The CFTC’s complaint alleges that, from January 2006 to the present, Hays and his company, Crossfire, a purported commodity pool, fraudulently solicited and accepted more than $5.5 million from at least three individuals and a charitable foundation for the purpose of trading stock index and crude oil futures.

Hays, according to the complaint, convinced at least one person to invest in Crossfire by representing verbally and in fabricated account statements — issued on Crossfire’s letterhead — that Crossfire earned consistent profits trading commodity futures with no losing months. However, as charged in the complaint, Crossfire has never had an active commodity futures trading account. Additionally, in an attempt to alleviate at least two investors’ suspicions as to what Hays was actually doing with their money, Hays provided an account statement for the Crossfire pool fabricated to appear as if it were issued by a legitimate brokerage company by using that brokerage’s letterhead. This false account statement indicated that Crossfire maintained a trading account at the brokerage with over $37 million. As alleged, that account is nonexistent.

Furthermore, the complaint charges Hays with misappropriating investor funds to purchase a $4 million yacht, and for other purposes.

“Hays ran his Ponzi scheme from his yacht, but was grounded when the tide turned as Federal authorities exposed this egregious fraud,” said CFTC Acting Director of Enforcement Stephen J. Obie.

The CFTC complaint seeks orders requiring the defendants to provide the CFTC with continuing access to books and records and to make an accounting with information necessary to determine the actual amounts of net contributions and profits or losses. The CFTC also requests that the court issue orders of preliminary and permanent injunction against the defendants, a return of alleged ill-gotten gains, repayments to defrauded investors, monetary penalties, and other relief.

The CFTC appreciates the assistance of the United States Attorney’s Office for the District of Minnesota, the Department of Justice, the United States Postal Inspection Service, and the Federal Bureau of Investigation in this action. Hays was arrested this morning by Federal authorities.

The following CFTC Division of Enforcement staff is responsible for this case: Susan Gradman, Neville Hedley, Judith McCorkle, Venice Bickham, Scott Williamson, Rosemary Hollinger, and Richard Wagner.

Annual Reminder for CPOs and CTAs

Commodity Firms Need to Complete Annual Regulatory Information

The NFA recently released a regulatory reminder to firms which are registered as commodity pool operators and/or commodity trading advisors.  The reminder reminds CPOs and CTAs that there are certain annual regulatory items which a firm must complete in order to remain in good standing with the NFA.  I have reprinted these two releases below.  As a summary, the reports emphasize:

  1. Firms must complete an annual update and questionnaire.  Firms must pay of yearly dues to the NFA (which can be done online).  Firms should also make sure that all employees are appropriately registered as Associated Persons, as necessary.
  2. Firms should review the NFA Self Exam checklist to ensure compliance.
  3. Firms should send Privacy Policy to all investors/ clients.
  4. Firms should review and test the Disaster Recovery Plan.  If necessary, adjustments should be made.
  5. Firms should review Ethics Training Procedures.   If necessary, appropriate ethics training should be provided.
  6. Firms should file any new exemption notices with the NFA, if necessary.
  7. Firms should review their Disclosure Document.  As a reminder, the Disclosure Document must be no more than 9 months old and reviewed by the NFA.  If the CPO or CTA firm also trades in the off-exchange forex markets, the Disclosure Document must incorporate the new forex rules which were adopted on November 30, 2008 (see NFA Compliance Rule 2-41 on post regarding NFA to Begin Regulating Forex).
  8. (For CTAs) If the firm places bunched orders, the firm must conduct (and document) quarterly analysis of the of order allocation method.  The order allocation method must be fair and equitable.
  9. (For CPOs)  Firms must distribute the pool’s Annual Report to investors; Annual Report must also be submitted to the NFA.

Many of the above items can be done online.  Many of the above items should be overseen by a hedge fund/ securities attorney or an experienced NFA compliance consultant.  Please contact us if you would like more information on our annual NFA compliance packages which can be modified based on your needs.  We can also provide compliance support on an hourly basis. Continue reading