Forex Trading Agreements – the Forex Investment Management Agreement
Forex Investment Contacts
Like traditional investment advisors, commodity trading advisors and other money managers, forex managers need to have a solid trading agreement with the client. The following article outlines the major issues which should be addressed in a forex contract or the forex trading agreement. A forex lawyer will be able to help draft the forex IM agreement for the manager. [This article does not discuss the potential forex registration requirements for forex CTAs, forex CPOs or forex IBs.]
- Appointment of the Forex CTA - general background information on the forex CTA and the forex CTA’s registration qualification.
- Maintenance of the client’s assets – this provision discusses the manner in which the client’s assets will be maintained or custodialized. Generally this area will discuss the Futures Commission Merchant or the Forex Dealer Member which will hold the customers assets and act as the counterparty to the trades in the account.
- Obligations of the Forex CTA – these provisions will outline the specific duties which the Forex CTA will provide to the account. Such duties may include: general trading and management duties, providing information to written requests, providing access to books and records, etc.
- Obligations of the client – generally this will be provide all necessary authorizations for the Forex CTA if it is required.
- Compensation – this provision details the compensation arrangement between the Forex CTA and the client. Specific details can be provided in the actual contract or in an appendix to the contract.
- Forex CTA Representations and Warranties – the manager will make standard representations and warranties to the client.
- Client Representations and Warranties - the client will make standard representations and warranties to the manager, including net worth representations (if necessary) and payment of the fees.
- Liability and Indemnification provisions – these provisions provide protection to the Forex CTA and related parties if the manager is sued for anything other (generally) than gross negligence or willful misconduct.
- Term and Termination – these provisions provide the stated term of the arrangement between the parties and the manner in which contract can be terminated.
- Other Provisions – other provisions will generally include the following: notice, no assignment clause, governing law, dispute resolution (arbitration, mediation or litigation), counterparts, severability, etc.
This agreement is outside of any power of attorney (POA) agreements with the FCM or FDM which must generally be signed by the Forex CTA and the client. If you have questions or need a forex investment management agreement, please contact us.
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