Direct Participation Programs

The next level up in size and complexity is direct participation programs, or DPPs. You may think of them as tax shelters or limited partnerships (LPs). They are constructed to pass through all of their income, gains, losses, and tax benefits to their owners. The partnership itself pays no taxes because the partners accept liability. Gas-oil exploration and real estate development are common LPs.

Unlike those big sisters, the commodity trading limited partnership is not a tax shelter. It is structured to provide limited liability to investors. The syndicator is the CTA or a CPO, and usually the general partner as well. These can be public or private. Private LPs are usually formed by a small group of wealthy investors, while public LPs attract large numbers of small ($2,000 to $5,000 minimum) investors. The latter requires a full-fledged prospectus and is more stringently watched by federal regulators. Both must be registered with the SEC. Read more »

Posted: March 2nd, 2008 under Corn Futures, Crude Oil Futures, Future Fund, Future Management, Future Trading, Futures, Futures Contracts, Futures Market, Futures Prices, Interest Rate Futures, Managed Futures, S&P Futures, Stock Market Futures, market.
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Your choice of investment vehicles ranges from an individual account with unlimited risk to funds that guarantee the return of your principal. There is also a wide assortment of legal procedures you can take if you feel you have been treated unfairly.

On the most basic level, you can open a futures trading account and give your broker authority to trade your account. The first step is filling out what are known as account papers. The most important of these documents include:

1. Acknowledgment of Receipt of Risk Disclosure Statement—By signing this, you acknowledge you understand everything that could go wrong in your trading account and that you accept these risks. Key among the risks are that you could lose more than your original investment, at times market conditions may be such that you cannot liquidate a losing trade (limit up or down days), placing protective stop loss orders will not necessarily control losses, spreads may not be less risky than straight long or short positions, and the high degree of leverage in this investment can work against you, as well as for you.

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Posted: March 2nd, 2008 under Future Exchange, Future Investing, Future Management, Future Trading, Futures, Managed Futures.
Comments: 4

Knowing the type of investment you enter tells you who governs the regulatory process. For example, the simple managed futures trading program would be between yourself, a broker, and someone doing the trading, which could also be the broker. No security is issued. Therefore, the primarily regulators would be the NFA and the CFTC. As we progress, the offerings become a security, perhaps exempt from SEC registration, but a security nonetheless. In these cases, the SEC, the NASD, and the state commissioner of securities are the primary regulators during the selling period. Once trading begins, it is under the jurisdiction of the NFA and CFTC. This is the general rule and is not a legal opinion of any sort. Read more »

Posted: March 2nd, 2008 under Future Trading, Managed Futures.
Comments: 5