Forex Disclosure Documents

Overview of Forex Disclosure Documents

Although there are currently very few details concerning the upcoming Forex registration rules, many Forex managers are preparing for registration, including the preparation of the Forex disclosure documents. Whether the Forex manager is a "Forex CTA" and only provides advice to individual accounts, or if the manager is a "Forex cpo" and provides advice to a fund, the manager will need to have some sort of disclosure document to provide to the investor. This document will need to be prepared in accordance with the NFA regulations and will also need to be approved by the NFA prior to giving them to potential investors. The disclosure documents will generally need to be prepared by the Forex attorney.

Selecting the Forex Attorney

A good Forex attorney is well versed in all aspects of the Securities laws and has experience with Forex managers. It is also helpful when the attorney understands the business aspects of the Forex manager's trading program. For example, it is often helpful if the attorney has taken and passed the Series 3 exam (and, soon, the Series 34 exam). You will also want to talk to the attorney about the process and timeline of both the Forex registration process as well as the disclosure document creation process. After you have decided on a Forex attorney, you will likely sign an engagement letter and submit a retainer payment - they the attorney will begin drafting the offering documents.

Disclosure Documents

There are three main parts of a Forex fund's offering documents - the private placement memorandum (PPM, sometimes also called the offering memorandum), the limited partnership agreement and the subscription documents. Below, we have detailed the important parts of these items:

Forex PPM - like a regular hedge fund (especially a commodity hedge fund), the Forex fund PPM will include the following sections:

• Legal Disclosures



• Discussion of the Forex Investment Program



• Background of the Forex Manager



• Risks Factors of the Forex Trading Program



• Discussion of the Potential Conflicts of Interests



• Descriptions of the service providers - a discussion of the service providers will included in the offering documents. This includes the attorney, the administrator, the auditor and the Forex dealer member (FDM). Current pending litigation of the FDM will also need to be disclosed - your attorney will gather these details.



• Performance Results - the NFA is expected to require in depth information about the fund's past performance. These requirements are likely to be substantially similar to the current requirements for non-Forex CPOs.



• Any Other Relevant Information

Forex LPA - these are the official governing legal documents of the fund. Typical provisions will include:

• Preamble



• Discussion of Rights and Duties of Investors (contributions, redemptions, etc.)



• Discussion of Rights and Duties of Manager (compensation, duties to fund/investors, conflicts of interest)



• Winding Down Provisions



• Etc.

Forex Subscription Documents - the subscription documents are important because they help the manager to make sure the offering complies with all appropriate laws with regard to an investor's suitability. Common subscription document elements are: