CTAs are regulated money managers who are granted power of attorney to execute futures, option, forex transactions on behalf of investors, and be compensated with management fees and/or performance fees.

CTAs are required to comply with rules/regulations set forth by the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), the two regulatory agencies who safeguard the integrity of derivatives markets, and ensure that CTAs meet their regulatory responsibilities.

CFTC regulations require that, prior to offering themselves to the public as “Commodity Trading Advisor”, CTAs must prepare and share audited risk disclosure documents that fully acknowledge investors about the potential risks, past performance, fee structure, background of Principal, trading methodologies and more.

If investors agree to defer their trading decisions to a registered CTA, they sign risk disclosure documents and grant limited power of attorney to the CTAs so that futures commission merchants (FCMs) accept orders submitted by the CTAs on behalf of the investor. CTAs are required to update their risk disclosure documents every nine months, followed by NFA’s yearly audit intended for rigorous performance of due diligence.