Attention! Funded trading clients could violate regulatory requirements

Funded trading may expose traders to regulatory violations
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We have received initial feedback on our articles about funded trading accounts from our alert whistleblowers. One interesting opinion on funded traders’ legal and regulatory situation, i.e., the clients of funded trading providers like Topstep, XLtrade, SpeedUp, OneTrader, or LeeLoo, points out that they would have to register with the competent regulator. Therefore, the apparently legally competent whistleblower recommends that all such traders in the U.S. seek legal advice and conduct due diligence. He also believes that the U.S. Commodities and Futures Commission (CFTC), for example, will take action against Topstep et al. Below is the interesting opinion.

A valued opinion

One thing to note, almost all of the funded trader companies are operating in a way that has the traders violating CFTC/NFA regulations. I’ve spoken with the NFA and CFTC, and the way that they operate, where the traders are 1099 contractors, would require the trader to, at the minimum, be registered as an exempt CTA. When asked, TS tells you that you don’t need to register or be exempt. However, per NFA, this is NOT true, and traders who are funded are operating as unregistered CTA’s. In order for it to be legal, the traders would need to be actually part of the prop firm and not just contractors. This becomes even more clear when a trader is bouncing between prop firms.

In your reviews, just be clear with your USA readers. If they are going to join one of these funded trader firms that treat them as a contractor, make sure they do their own due diligence and check with the NFA about their registration requirements before being funded.

I’m sure the CFTC will crack down on the improper structures soon enough.

Preliminary conclusion

We tend to agree with this opinion based on our own analysis. The situation for funded trading providers and their clients is certainly different in the various regulatory regimes. In this respect, we are surprised that Topstep et al. seem to offer their services across the globe without considering the different legal and regulatory frameworks of their traders.

CategoriesFunded Trading

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