Tag Archives: Forex manager

NFA Forex Registration/Compliance Workshop | Las Vegas September 25, 2010


Overview of Forex Registration & Compliance Issues

By Bart Mallon, Esq.

In preparation for the implementation of the new retail forex regulations, the NFA recently conducted a retail forex registration and compliance workshop in Las Vegas at the Trader’s Expo.  The workshop covered a number of topics which the NFA views as especially important for forex managers.  I attended the workshop and the following discussion is based on my notes of the conference as well as collateral material provided by the NFA.

This overview will cover the various sessions throughout the day including:

  • Registration
  • General Compliance
  • Net Capital, Recordkeeping & Reporting Requirements
  • Discussion/ Individual Consultations

[Note: this article currently only has the summary of the registration session.  I will be adding the additional summaries directly to this page over the next few days.]


Registration Session

Firm Registration & Exemption Requirements

This first part discusses the various registration categories and the potential exemptions and other pertinent information.


  • These are entities which execute forex trades for managers.  We will not go into the registration and compliance requirements for these groups in this overview and will instead focus on forex managers and introducing brokers.

Commodity Trading Adviser (CTA)

  • Definition: a firm which is compensated for providing advice with respect to forex transactions, usually by having power of attorney (POA) to trade a client’s account held at an FCM or RFED.  Groups that provide individualized advice without a POA may also be considered to be a CTA.
  • Exemptions: a firm is exempt from CTA registration if the firm (i) provides advice to less than 15 people over the past 12 months and (ii) does not generally hold itself out to the public as a CTA. Managers should note that this exemption is narrowly construed by the CFTC and that very few forex managers will  fit within the exemption.  This exemption is self-executing and so the firm will not need to make a filing with the CFTC or NFA if they are claiming this exemption.  There are additional exemptions which are available but not often used by most forex managers.
  • Costs:
    • Firm – $200 non-refundable registration fee
    • APs/Principals – $85 registration fee (for each individual)
    • NFA Membership Fee – $750 (yearly)
    • Exam Fess – varies with respect to exam
  • Principal/AP Requirement: each firm must have at least one Principal listed and at least one Associated Person registered with the firm (see discussion below).  Each Principal and AP will need to have (i) fulfilled the proficiency (exam) requirements and (ii) provided the NFA with fingerprint cards for the FBI background check.
  • Disclosure Documents: CFTC regulations require each forex CTA disclosure document to include the following information:
    • Basic Background Information on the CTA
    • Information on the Trading Program
    • Discussion of the Risk Factors
    • Discussion of Conflicts of Interest
    • Litigation Information (see NFA Litigation Statement Requirement)
    • Certain Performance Reports
    • Supplemental information
  • Timing: with respect to the actual registration of the entity and the Principals/APs, this can usually be done quickly.  In most cases, after all fees have been paid and a Principal has submitted fingerprint cards and has completed all necessary exam requirements, the registration will be complete in about two days.  While the registration is done quickly, the disclosure document acceptance process can be lengthy.  For a normal CTA it will usually take about 5-10 weeks to get the document accepted, however this will depend on a number of items including the NFA examiner you are assigned and the work load of the NFA.

Commodity Pool Operator (CPO)

  • Definition: a firm which is compensated for providing advice to a pooled investment vehicle.  The investment vehicle (colloquially known as a “hedge fund”) is deemed to be a “commodity pool” and the firm providing advice is the operator or CPO.
  • Exemptions: there are a number of CPO exemptions which are potentially available for forex managers.  We have detailed these requirements before in our list of CPO exemptions.
  • Costs:
    • Firm – $200 non-refundable registration fee
    • APs/Principals – $85 registration fee
    • NFA Membership Fee – $750 (yearly)
    • Exam Fess – varies with respect to exam
  • Principal/AP Requirement: same as above.
  • Disclosure Documents: the requirement is generally the same as for CTAs.  However, CPO disclosure documents are usually much longer and deal with a number of other federal laws.  CPO disclosure documents must be drafted by an attorney.
  • Timing: generally timing will be similar to the above.

Guaranteed Introducing Broker

  • Definition: generally a firm which introduces client accounts to an FCM or RFED.  These brokers might include groups that license EA software and receive per trade compensation from a broker.  A guaranteed IB is a firm which only introduces to one FCM or RFED and who enters into a guarantee agreement with the FCM or RFED.
  • Exemptions: generally there are no exemptions.  Firms should note that the exact manner in which the firm is compensated (e.g. for use of the EA software) may make a difference in whether the firm will need to be registered wellbutrin buy as an introducing broker with the NFA.
  • Costs:
    • Firm – $200 non-refundable registration fee
    • APs/Principals – $85 registration fee
    • NFA Membership Fee – $750 (yearly)
    • Exam Fess – varies on exams (see below)
    • Other – written guarantee agreement with the FCM or RFED must be executed prior to registration
  • Principal/AP Requirement: same as above.

Independent Introducing Broker

  • Definition: definition is same as above, except an independant IB may introduce to any number of FCMs or RFEDs and does not need to enter into a guarantee agreement.  The independent IB will need to maintain a certain net capital.
  • Exemptions: generally there are no exemptions.  As above, the manner of compensation will determine whether the firm is an IB.
  • Costs:
    • Firm – $200 non-refundable registration fee
    • APs/Principals – $85 registration fee
    • NFA Membership Fee – $750 (yearly)
    • Exam Fess – varies on exams (see below)
  • Other: must maintain net capital of $45,000 subject to CFTC regulations.  NFA rules require an extra $5,000 buffer.
  • Principal/AP Requirement: same as above.

Discussion of Principals and Associated Persons


Principals generally mean persons who meet any of the following:

  • Certain title: Director, President, usually any “Chief” role
  • Ownership: generally owners with 10% or more interest, including owners which are entities and owners of those entities (there are also look-through rules for entities)
  • Other: Individuals with management and supervisory authority

Associated Person

Generally any partner, officer, employee, consultant, or agent (or any natural person occupying a similar status or performing similar functions), in any capacity which involves:

  • the solicitation of funds, securities, or property for participation in a commodity pool or
  • the supervision of any person or persons so engaged.

Firms should note that while the definition of AP does not include a person who acts solely as a trader, the NFA highly recommends that such persons become registered as APs.  If a firm decides that such person does not need to register with the NFA, the firm must be extra careful that the trader does not perform any functions of an AP.  This will likely be an issue which the NFA will examine closely during any audit.

Other Important Discussion Items

Soliciting Clients after October 18, 2010

Forex managers who currently are managing client accounts but are not registered with the NFA, will need to be registered by the October 18th deadline and continue to manage accounts for current clients.  However, these managers will not be able to accept new money from existing clients or new clients until the disclosure document is accepted by the NFA.

Managers with a Disciplinary History

Individuals who have certain criminal or regulatory issues in their background will need to make sure that they are able to produce records of the issue.  For persons with these issues, the NFA will require full records and will review those records prior to deciding whether to allow the person to register as an AP.  For more information, please see our discussion of registration issues for managers with disciplinary history.

Heightened Supervisory Procedures

Many forex managers and introducing brokers will need to implement heightened supervisory procedures because they will have Principals/APs which were either subject to prior NFA disciplinary actions or worked for firms subject to NFA disciplinary actions.  Almost every single forex broker has been subject to NFA disciplinary actions so persons who come from these firms will need to be aware of this fact and firms may need to augment their employee base to fit within certain guidelines.  This issue will most likely be identified by NFA staff during the registration process and may delay a registration.

Branch Office

Firms which have more than one office must designate a main office.  All of the other offices will be deemed to be banch offices and each of these branch offices will need to have a branch office manager (who has passed the Series 30 exam).

Firms often wonder whether a home office will count as a branch office.  Generally, it will depend on the exact facts of the situation, but if any person is acting as an AP at the home office, then it will be deemed to be a branch office.

While it does not cost extra to have a branch office, firms must make sure that they institute certain oversight procedures with respect to the branch office.  This means that compliance policies and procedures must be implemented.  This is likely to be another issue which the NFA will examine closely during an audit.

For more information, please see our article on the NFA Branch Office Designation.

Forex Exams

Overview – we have discussed the various exam requirements for forex managers a number of times.  For full information, please see our overview of the forex exams.  We also have specific information on the Series 3 exam, Series 30 exam, and how to pass the Series 34 exam.

Grandfather Provisions – For persons who were registered on May 22, 2008 as an AP (and have remained continuously registered as an AP with the CFTC), such persons will not be required to pass the Series 34 exam prior to providing advice to customers with respect to forex transactions.

Discretionary Waiver – some persons who would normally be required to complete the proficieny requirements may be able to apply for a waiver of the requirements from the NFA.  Such waiver is rarely granted.  For more information, please see NFA Rule 402.

Overview of Registration Process

At this point during the presentation the NFA staff took us completely through the registration process on the NFA’s online registration system.  In general the process is fairly straightforward and the NFA has provided a number of resources on their website which are designed to help managers navigate the process.  In general the process includes the following steps:

  • Obtain Security Manager Access
  • Pay Registration Fees
  • Complete Form 7-R for Firm Application
  • Complete Form 8-R for all Principals and APs

General Compliance Session

[To be forthcoming…]


Other related hedge fund law articles:

Bart Mallon, Esq. runs the hedge fund law blog and provides forex registration and compliance services to forex managers through Cole-Frieman & Mallon.  He can be reached directly at 415-868-5345.

NFA Takes Regulatory Aim at Spot Commodities Markets

Asks Congress to Increase Scope of Regulation for CFTC and NFA

Last week various employees of the CFTC and the NFA talked with members of Congress regarding certain aspects of the markets regulated by these groups.  Below is testimony from the Chief Operating Officer of the NFA, Daniel Discroll.  In the testimony, Mr. Discoll actually asks Congress to allow the CFTC and the NFA to regulate MORE markets – specifically the off exchange spot metals and energy markets.  While it is commendable that the NFA wants more power to help protect the investors, there are many reasons why this is not a good idea including:

  • The CFTC is underfunded already underfunded (see remarks by Commissioner Gary Gensley, “Specifically, the Commission [CFTC] needs more resources to hire and retain professional staff and develop and maintain technological capabilities as sophisticated as the markets we regulate.”)
  • In 2008 the CFTC was charged with promulgating proposed regulations to require forex managers to register with the CFTC.  This was supposed to be complete by late 2008 – we have yet to see any proposed regulations.  Are we likely to see any quick movements by the CFTC in the spot commodities markets?  Probably not.
  • The CFTC is likely to play a large role in reforming the regulatory framework for the OTC dervitives markets.  See our post on this issue.
  • The NFA, which must be commended for having staff who are generally cheerful and easy to deal with, is nonetheless a slow organization.  Managers who are registered with the CFTC and who have to interact with the NFA face long start-up times because of the overly onerous NFA review requirements.
  • Much of what the NFA does is ineffective – we probably see the most scams from CFTC/NFA regulated entities than we do from SEC/FINRA regulated entities.  Of note was another Ponzi scheme by a CFTC registered FCM, CPO and CTA (see press release).

I am not saying that the CFTC and the NFA should not have the power to regulate these markets.  I am saying that the CFTC and the NFA need to be pursuing the most egregious offenses and that Congress needs to ensure that the CFTC has the funding it needs in order to do its job propoerly.  If Congress does decide to grant jurisdiction over these markets to the CFTC then Congress should also make sure that a funding grant is included in any such rulemaking bill.




JUNE 4, 2009

My name is Daniel Driscoll, and I am Executive Vice President and Chief Operating Officer of National Futures Association. Thank you Chairman Harkin and members of the Committee for this opportunity to appear here today to present our views on closing a regulatory gap that allows fraudsters to sell unregulated OTC derivatives to retail customers.

Since 1982, NFA has been the industry-wide self-regulatory organization for the U.S. futures industry, and in 2002 it extended its regulatory programs to include retail over-the-counter forex contracts. NFA is first and foremost a customer protection organization, and we take our mission very seriously.

Congress is currently expending significant time and resources to deal with systemic risk and to create greater transparency in the OTC derivatives markets. Those are important economic issues, and we support Congress’ efforts to address them. Understandably, most of the debate centers around instruments offered to and traded by large, sophisticated institutions. However, there is a burgeoning OTC derivatives market aimed at unsophisticated retail customers, who are being victimized in a completely unregulated environment.

For years, retail customers that invested in futures had all of the regulatory protections of the Commodity Exchange Act. Their trades were executed on transparent exchanges and cleared by centralized clearing organizations, their brokers had to meet the fitness standards set forth in the Act, and their brokers were regulated by the CFTC and NFA. Today, for too many customers, none of those protections apply. A number of bad court decisions have created loopholes a mile wide, and retail customers are on their own in unregulated, non-transparent OTC futures-type markets.

The main problem stems from a Seventh Circuit Court of Appeals decision in a forex fraud case brought by the CFTC. In the Zelener case, the District court found that retail customers had, in fact, been defrauded but that the CFTC had no jurisdiction because the contracts at issue were not futures, and the Seventh Circuit affirmed that decision. The “rolling spot” contracts in Zelener were marketed to retail customers for purposes of speculation; they were sold on margin; they were routinely rolled over and over and held for long periods of time; and they were regularly offset so that delivery rarely, if ever, occurred. In Zelener, though, the Seventh Circuit ignored these characteristics and based its decision on the terms of the written contract between the dealer and its customers. Because the written contract in Zelener did not include a guaranteed right of offset, the Seventh Circuit ruled that the contracts at issue were not futures. As a result, the CFTC was unable to stop the fraud.

Zelener created the distinct possibility that, through clever draftsmanship, completely unregulated firms and individuals could sell retail customers forex contracts that looked like futures, acted like futures, and were sold like futures and could do so outside the CFTC’s jurisdiction. For a short period of time, Zelener was just a single case addressing this issue. Since 2004, however, various Courts have continued to follow the Seventh Circuit’s approach in Zelener, which caused the CFTC to lose enforcement cases relating to forex fraud.

A year ago, Congress closed the loophole for forex contracts. Unfortunately, the rationale of the Zelener decision is not limited to foreign currency products. Customers trading other commodities-such as gold and silver-are still stuck in an unregulated mine field. It’s time to restore regulatory protections to all retail customers.

Back in 2007, NFA predicted that if Congress plugged the Zelener loophole for forex but left it open for other products, the fraudsters would simply move to Zelener-type contracts in other commodities. That’s just what has happened. We cannot give you exact numbers, of course, because these firms are not registered. Nobody knows how widespread the fraud is, but we are aware of dozens of firms that offer Zelener contracts in metals or energy. Recently, we received a call from a man who had lost over $600,000, substantially all of his savings, investing with one of these firms. We have seen a sharp increase in customer complaints and mounting customer losses involving these products since Congress closed the loophole for forex.

NFA and the exchanges have previously proposed a fix that would close the Zelener loophole for these non-forex products. Our proposal codifies the approach the Ninth Circuit took in CFTC v. Co-Petro, which was the accepted and workable state of the law until Zelener. In particular, our approach would create a statutory presumption that leveraged or margined transactions offered to retail customers are futures contracts unless delivery is made within seven days or the retail customer has a commercial use for the commodity. This presumption is flexible and could be overcome by showing that delivery actually occurred or that the transactions were not primarily marketed to retail customers or were not marketed to those customers as a way to speculate on price movements in the underlying commodity.

This statutory presumption would not affect the interbank currency market dominated by institutional players, nor would it affect regulated instruments like securities and banking products. It would also not apply to those retail forex contracts that are already covered (or exempt) under Section 2(c). It would, however, effectively prohibit leveraged non-forex OTC contracts with retail customers when those contracts are used for price speculation and do not result in delivery.

I should note that NFA’s proposal does not invalidate the 1985 interpretive letter issued by the CFTC’s Office of General Counsel, which Monex International and similar entities rely on when selling gold and silver to their customers. That letter responded to a factual situation where the dealer purchased the physical metals from an unaffiliated bank for the full purchase price and left the metals in the bank’s vault. The dealer then turned around and sold the gold or silver to a customer, who financed the purchase by borrowing money from the bank. Within two to seven days the dealer received the full purchase price and the customer received title to the metals. In these circumstances the metals were actually delivered within seven days, so the transactions would not be futures contracts under NFA’s proposal.

In conclusion, while NFA supports Congress’ efforts to deal with systemic risk and create greater transparency in the OTC markets, Congress should not lose sight of the very real threat to retail customers participating in another segment of these markets. This Committee can play a leading role in protecting customers from the unregulated boiler rooms that are currently taking advantage of the Zelener loophole for metals and energy products. We look forward to further reviewing our proposal with Committee members and staff and working with you in this important endeavor.

Discussion with CFTC Regarding Forex Registration


No New Information on Forex Regulations

I have been getting more and more questions regarding forex registration and unfortunately I have not had much to say because there has been little information coming from the CFTC.  The NFA has done a good job of anticipating what those rules will generally look like, but the NFA (like us) must wait for the CFTC to propose (and then adopt) regulations requiring the registration of forex managers.  Accordingly any preliminary guidance from the NFA should be taken as that – preliminary guidance.  The fact that the regulations are coming obviously puts pressure on legal professionals and forex managers alike as we all try to figure out what will need to be done, when and how.

For this reason I have been calling the CFTC to try to figure out when we might hear something.  After calling the CFTC daily for over a week now, today I finally received a call back from a representative of the CFTC’s Division of Clearing and Intermediary Oversight.  Unfortunately, the representative was as tight-lipped about the future regulations as the CFTC has been up to this point.

During the conversation, I asked several questions and did not receive any responses other than what you would expect from a government agency.  The gist of the conversation was that the CFTC is working on the regulations and the reason that it is taking so long is that there are many aspects to the regulations which must be thoroughly reviewed be many different members and parts of the CFTC.   It sounded like the regulations could be quite detailed – the representative stated that it is not just simply these managers with this amount of assets must register, that the regulations will be comprehensive.  Another issue which remains unanswered is whether there will be exemptions from the registration provisions, similar to the current CPO exemptions and CTA exemptions from registration.

So with that being said, there is not much new to report.  Forex managers are still in a bit of a limbo until the CFTC promulgates the proposed regulations.  Until that happens it would be wise for forex managers to consider getting ready for registration by discussing the issue with a forex attorney.  Managers may also decide to move forward and begin taking the Series 3 exam and the Series 34 exam.  Managers (especially forex hedge fund managers) are especially encouraged to talk with their attorney about potential registration requirements under their state commodity codes – I will be posting more on this issue tomorrow.

I know this does not tell you very much, but please feel free to contact me if you have any specific questions or if you would like to find out more about forex CPO, CTA or Introducing Broker registration.

For more articles related to forex law and registration, please visit our forex hedge fund articles page.

Passing the Series 34 Exam

By Bart Mallon, Esq.

Discussion about How to Take and Pass the Series 34 Exam

On Thursday I took the Series 34 Exam and I passed.  I answered 30 out of 40 questions correctly for a 75% (it takes a 70% score to pass).  This score is not as good as I had hoped for, but it is good for a couple of reasons.  First, it proves that anyone can pass these exams without buying expensive study guides (I created a free Series 34 exam study guide).  Secondly, the exam gave me an opportunity to really see which areas the NFA is going to focus on therefore which areas of the study guide I needed to improve.

Score Breakdown

My scores broke down as follows:

  • Definitions and Terminology   7 of 10 (70%)
  • Forex Trading Calculations   6 of 8 (75%)
  • Risks Associated with Forex Trading   3 of 4 (75%)
  • Forex Market – Concepts, Theories, Economic Factors and Indicators, Participants   6 of 10 (60%)
  • Forex Regulatory Requirements   8 of 8 (100% – did you expect anything else from a forex attorney?)

Total Correct: 30 of 40

Time to complete the exam – approximately 42 minutes

What I exactly did to study for the exam

The way that I studied for the exam is likely to be different than the way that you study for the exam.  The time I spent creating definitions for each test topic can be spent memorizing the concepts and defintions.  As a brief overview, here is how I studied:

1.  Research to create free series 34 study guide.  Initially I researched all of the topics which were listed in the NFA study outline.  This took a good chunk of time as I had to read information from many different forex resources and then synthesize the information into a short description that I could understand and that would hopefully be helpful to forex managers.  Much of this research involved summarizing original NFA sources including NFA rules, interpretive releases and notices to members.  I also read through some of the good forex trading resources and provided links to these resources as appropriate.

2.  Created note cards.  After creating and posting the items on the checklist, I created note cards which were based on the study guide.  After creating the note cards I went through them a few times – I would imagine that it was about 8-10 times all the way through all together.  This is obviously not very much, but by creating the note cards I was able to ingrain the concepts faster.  There were a few concepts which I needed a little extra help with so I would focus on these note cards.

3.  Exam questions.  Two nights before the exam I reviewed the practice questions which I created.  I made a total of 16 fairly tough questions before the exam.  The night before the exam I re-read through all of the exam questions again.

4.  Final review.  On the night right before the exam I did a final real through of the important NFA resources and the forex trading guide.  I also did more drilling with my note cards and reviewed the exam questions a final time.  I also started an overview sheet which I will turn into another quick glance resource for this website.

Why I did not score as high as I would like

I have taken and passed a number of different proficiency exams which are administered by FINRA – the series 3, the series 7, the series 24, the series 63, the series 65, and now the series 34.   For each of these previous exams I prepared much better and accordingly received much higher scores.  Generally my scores were in the high 80% range (I don’t have the print outs anymore).  Here, my scores were not as high and I think it is for a couple of reasons:

1.  I did not do any practice calculations.  There were around five questions which really required the use of a calculator.  These questions included basic and more advanced calculations related to the actual profits and losses on positions.  There was also a question dealing with the price per pip calculation.  I feel that the reason I struggled with this part of the exam is that I did not really do any sort of practice problems on these types of calculations – I simply memorized the example I used in the definition.  I don’t believe that this is good enough if you want to make sure you will pass – because of this, I am going to create more practice questions related to the actual calculations.

Be prepared to use the calculator on the exam.  As an additional tip, do not spend too much time on one single problem – I must have spent a good 10 minutes on one calculation problem and after my calculations, I didn’t even come up with the right answer.  For this question I just had to guess.  There was another calculation problem which I made a more educated guess on as well.

2.  I did not focus really any of my study time on shorting currency pairs.  Because I spent no time even thinking about this, I was a bit unprepared for a couple of problems which discussed this as a possibility.  These questions were generally pretty basic questions and from previous study I was able to answer them correctly (I think).  For these questions I think that the series 3 exam and the series 7 exam helped in terms of general investment management knowledge.

3.  Ambiguously stated regulatory terms.  The exam included at least one question with ambiguously stated regulatory terms.  I believe the question made reference to a Member and Associated Member of some sort of regulated body.  These terms are not precise and do not make sense – there is no such thing as an associated member.  As I have discussed before the NFA is a self regulatory organization (SRO).  Firms must be Members of this SRO and the employees of the firm are termed “Associated Persons” or “Principals.”  I was not sure if this question was making reference to APs of a NFA Member firm.  I cannot remember how this worked out and I may have switched my answer at the very end (something you are not supposed to do).  This is one of the frustrating things about FINRA exams in general – it is not necessarily how much you know, but that you know how to take the exam.  This is more true with regard to the Series 7 and other exams, but it still holds true for this on

4.  Current Account, Capital Account, Balance of Trade and Balance of Payments.  I did not understand these concepts during my studies and still do not understand them.  The one phrase that I remembered is that the BOT is the largest part of BOP….and this was on the exam in some form.  I think there might have been another question on these issues which I likely answered incorrectly.

A note about pacing through the exam

One of the nice things about FINRA exams is that they always follow a very similar pattern.  At the beginning of the exam the questions will be easy and you will probably breeze through the first 5-8 questions.  From there the questions will begin to get tougher and somewhere around questions 20-28ish there are likely to questions which seem impossible.  It is at this point when the despair usually begins to kick in – REMEMBER THIS and keep it all in perspective.  You can miss a lot of questions and still pass.  After you make it though the tougher questions, the end is easy and you will likely breeze through the last 10 questions or so.  Like I said this is a common feature of FINRA exams and I have had the same exact feeling in each exam and really believed that I may not pass.

On the day of the exam

I scheduled my exam for 8:00am.  I always try to schedule these exams for the morning for a few reasons, the most important of which is that I just want to get the exam done with.  If I schedule the exam in the afternoon I am going to spend the day being distracted and trying to get extra studying in – this is just me, you should schedule your exam for the time you think you will be able to do your best.

I woke up at 5:40am, took out the dog, took a shower and was at the coffee shop by about 6:10.  I had a coffee and a bagel with cream cheese and then made my way to the bus stop.  I waited for the bus and went through my note cards on the bus ride down to the exam center.  After I got dropped off and walked to my exam center, it was 7:10am and I had a few minutes to kill before I was supposed to be at the center (FINRA recommends being at the testing center a half hour before the time which the exam starts).  I found a nearby bench and continued to go through my flash cards.  At 7:30am I made my way to the exam center and there were 7 people who were there before me.  I waited for the lady to check me in and I was finally seated by about 8:05am. After the exam I was given my print out and was on my way.  I would recommend eating more than I did; usually I am a bit more prepared but it seems to have turned out ok.

How would I study for the exam knowing what I know now.

The most important thing about this exercise of taking the exam is that I can share my experience with you before you take the exam.  Knowing what I know now, I would have modified my studying a little bit.  By far the easiest part of the exam were the regulatory questions – these were very basic and they could have been made harder.  The regulatory questions which I have included in my practice questions are harder (note: the structure of the regulatory questions may change in the future so I have deliberately made tougher questions with regard to the regulations).  As I said before there was a good mix of calculations which were necessary, so I would have focused on this more – during my study time I did not once touch a calculator.  I would have ingrained the American Terms and European Terms into my head from the beginning (this would have made it easier for me to focus on the concept tested instead of trying to first remember the definition).  These two terms user used to describe exchange rate quotes in many different contexts.  Besides these relatively minor modifications, I would have studied in a very similar matter – that is, making note cards, reading, making study guides, focusing on parts I was not quite as  confident about, etc.

For those persons who have not taken a FINRA exam before I highly recommend purchasing a study guide (or more than one study guide) which includes multiple exam prep questions.  Doing a large number of questions will help you when taking the actual exam.  The good thing is that you will generally take the series 3 exam before you take the series 34 exam and the series 3 is much more difficult than the series 34.  If you passed the 3 you will have an understanding of the pace of the exams, the types and styles of questions, and how to deal with more of the pedantic parts of the exam taking process (like showing up before, signing in, etc).

I would imagine that it would take someone 20 to 30 hours to properly prepare for the exam, spread out over a week or two weeks.  If someone is diligent about putting in this study time, there should be no problem passing the exam.  If you have specific questions, I have tried to answer these in other parts of the website.  Also, please feel free to contact me or leave a question below.

Reason for taking the exam – Forex Attorney and Develop Free Study Guide

As you may know I am an attorney with a practice focused on helping hedge fund managers start their hedge funds.   I also have a related compliance business which focuses on helping forex managers and forex introducing brokers register with the NFA (please see my other site devoted to forex registration information).  Through these ventures, I have clients who are involved in the forex area in many different respects and it is likely that these clients (including forex hedge fund managers) will need to take this test sometime in the future.  I believe that as a lawyer I am more effective if I can give my clients actual advice based on personal experience.

I also wanted to develop a free exam prep guide for the community – there is no reason why you should need to spend money on a study guide for this exam.  I am hoping that members of the community will be able to add to the guide over time and we can develop this into a very useful resource.


The Series 34 Exam is a passable exam and I believe I have provided forex managers with a lot of good information on the exam through these posts and through the free study guide.  Please help me to continue to make this resource and website useful for forex managers.

CFTC Uses New Enforcement Authority to Police Forex

Forex Firm Caught Operating a Ponzi Scheme

The CFTC just announced that it charged a group out of Atlanta with operating a Ponzi scheme.  This is the first action the CFTC has brought against a forex firm for fraud.  At the beginning of last year Congress passed the Farm Bill which provided the CFTC with more authority for regulating the off-exchange foreign currency markets (also known as the spot forex markets).  This action indicates that the CFTC is serious about cleaning up the forex markets.  As we’ve detailed before, forex registration will be coming shortly.  Continue reading

Forex Hedge Fund Launch

Henderson Global Announces Forex Hedge Fund

The British hedge fund manager will be launching a forex hedge fund in the first half of 2009.  The fund will be targeted towards institutional investors and will trade based on quantitative metrics.  The fund is expected to invest in G10 currencies and potentially emerging market currencies.  The traders are reportedly acquisitions from Fortis.  The full article can be found here. Continue reading

Forex Managers and Managed Forex Funds

Many forex managers use a product called a managed forex fund, which is the equivalent to a mutual fund hedge fund.  In a “managed forex fund,” the manager will invest the assets under the POA with the forex dealer member in the managed fund.  The a trader or traders for the forex dealer member will then manage the pool of assets.  Typically the forex dealer member will receive both a forex management fee as well as a performance allocation.  Many managers will then charge a management fee and a performance allocation (or only one or the other) to the underlying clients. Continue reading