What is KYC in hedge funds?

As a fund manager, you must “know your clients” (KYC) before you allow them to invest in your fund. You should know the source of the funds to be invested in your fund and run a detailed background check on a prospective investor. By conducting due diligence checks, you can avoid these investors and their money.

What licenses do hedge funds need?

The only universal license requirement for a hedge fund manager is an ordinary business license. Because hedge fund managers are not regulated as brokers, they do not usually need the Series 7 license unless they engage in trading on behalf of customers.

What are KYC guidelines?

KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts and also periodically update the same.

Do you have to be accredited to invest in a hedge fund?

3 In exchange, the Securities and Exchange Commission (SEC) requires a majority of hedge fund investors to be accredited, which means possessing a net worth of more than $1 million and a sophisticated understanding of personal finance, investing, and trading.

Do hedge funds need to register with finra?

Generally, publicly offered funds — such as mutual funds, exchange-traded funds, closed-end funds and unit investment trusts — must be registered with the Securities and Exchange Commission (SEC) as investment companies. Private investment funds (often called hedge funds) are often exempt from registration.

What is the difference between Series 65 and 7?

A financial advisor with a series 7 license can receive third party payments like kickbacks, commissions etc in conjunction with the products they sell you. All of Morgan Stanley, Merrill Lynch and other Wall Street firms’ financial advisors are required to pass the series 7 license. Series 65 is an advisor license.

What should AML compliance look for when investing in hedge funds?

If the investor’s subscription is approved, the AML compliance officer should consider ongoing monitoring. A hedge fund manager should conduct enhanced due diligence in addition to standard investor identification procedures when the fund manager believes an investor presents high risk factors for money laundering or terrorist financing.

When does a hedge fund manager undertake reasonable due diligence?

If the investor is investing on behalf of other underlying investors, the hedge fund manager has undertaken reasonable due diligence efforts with respect to the identities of the investor and the underlying investors

What forms of identification should hedge fund managers obtain from investors?

When an investor’s bank is not located in a FATF jurisdiction, a hedge fund manager should obtain additional forms of identification from the investor that may be used to confirm the investor’s identity, for example, a passport or utility bill containing the investor’s name and address.