- June 27, 2017
- Posted by: Vincent Sarullo
- Category: Hedge Funds
What licenses does a hedge fund manager need to have?
- A Universal License Requirement
In some states, hedge fund managers require only an ordinary business license as their universal license requirement. They do not usually need to have the Series 7 license. The Series 7 license is required for brokers to trade stock for customers, but hedge fund managers are not regulated as brokers. Check with your state to learn their specific requirements.
- A Series 65 License
Hedge fund managers may be required to take the Series 65 exam and obtain a Series 65 license because they are in the position of acting as an investment adviser. There are states that require possession of a Series 7 license to obtain a Series 65 license. Check with your state for their specific rules.
- Investment Advisers Act of 1940 Requirements
Depending on the AUM of the fund, the adviser may be required to register at the federal level. For example, under the Investment Advisers Act of 1940, if a hedge fund manager is managing more than $125 million worth of investment assets, he is required to register as an investment adviser at the federal level.
- Commodity Futures Requirements
There is also another set of requirements if the hedge fund manager is considering investing in commodity futures. If so, the fund manager may need to register as a Commodity Pool Operator or Commodity Trading Adviser with the National Futures Association (NFA). This requires the Series 3 license.
State laws determine the licensing requirements for investment advisers in each state, and state laws vary.
Most states require obtaining a Series 65 license, but some states only require official registration as an investment adviser plus payment of a licensing fee.
While a Series 7 license is usually not required, the catch 22 is that some states require possession of a Series 7 license to obtain a Series 65 license.
The AUM of your fund may require registering at the federal level.