Forex Law Question – Forex Managers and the Series 7 Exam
Question: If I trade spot forex in a fund structure, do I need a Series 7 exam license?
Answer: If a hedge fund manager trades in the spot off-exchange foreign currency (forex) markets and is not associated with a broker dealer, then the investment activities of the manager do not require a series 7 exam license.
However, please note that the management company, or certain employees of the management company, may be required to be registered as brokers if their business of selling interests in the forex hedge fund rise to the level of being “broker” of those securities (that is a broker of the hedge fund interests). Normally most forex hedge fund selling activity will not rise to this level, but please discuss this issue with your hedge fund attorney. Another good resource is the SEC’s Guide to Broker Dealer Registration.
Please note if the manager is trading exchange-traded forward foreign currency contracts then the manager will need to be licensed as a commodity pool operator with the CFTC.
Please also note that congress has passed new forex regulations which will require forex hedge fund managers to register with the CFTC as Forex CPOs. These regulations are expected to be finalized sometime around the beginning or middle of next year. These regulations will require the manager to have passed both the Series 3 exam as well as the Series 34 exam. Please contact us if you have any questions on the exams or the forex registration process.
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