A hedge fund manager does not necessarily need any specific license to operate the hedge fund. But depending on the type of investments the fund makes, he may find it necessary or at least helpful to obtain certain licenses. The legal requirements of the state in which the hedge fund is registered as a business may necessitate the fund manager obtaining a Series 65 license, administered by FINRA.

A hedge fund is an investment fund that is commonly only available to a limited group of investors who meet certain income and net worth requirements. Hedge funds invest in a wide range of assets. They may be primarily invested in stocks, bonds, futures, currencies, other funds such as exchange-traded funds (ETFs) or even hold direct investments in companies. (For more details, see "What Does a Hedge Fund Do?")

Licensing Requirements for Hedge Fund Managers

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 to have the Series 7 license required for brokers to engage in trading on behalf of customers.

However, since a hedge fund manager is in the position of acting as an investment advisor, he may be required to take the Series 65 exam and obtain a Series 65 license. It is state laws that determine the licensing requirements for local operating investment advisors, and they vary: Some states simply require official registration as an investment advisor and payment of a licensing fee, but most states require the Series 65 license. Also, some states set a Series 7 license as a prerequisite for obtaining a Series 65 license.

Additionally, if a hedge fund manager is managing more than $30 million worth of investment assets, he is required to register as an investment advisor at the federal level per the Investment Advisers Act of 1940. If the hedge fund manager is considering investing in commodity futures, the fund manager probably needs to register as a Commodity Pool Operator or Commodity Trading Advisor with the National Futures Association (NFA), which requires obtaining the Series 3 license.