I have been trading for myself for about a year and recently (this year) I had a lot of interest from friends who wanted in on some of the stocks I’ve been trading in particular, AMC & GME. My portfolio from other people’s money has grown to the middle part of 6 figures and I am now worried this may me illegal as I am unregulated and none of these people are HNW investors but rather family and friends who have invested based on trust.
What are my options to circumvent this and setup everything legally?
I’ve tried speaking to both the FSA & FCA and they’ve been no help. There is close to no information online so I’m stuck in a limbo of how to go about this as soon as possible. With the potential of a short squeeze with these stocks, I do not want my portfolio to exceed 7 figures before this is all figured out.
Any help will be greatly appreciated.
Hi Ben
Ideally if you provide advice or dealing services to ‘Retail Clients’ you want to operate under the license protection of a regulated service provider. You could approach a licensed trader and inquire whether (for a fee) you could operate under their licence provisions and service your private clients.
In Australia this is possible whereby a trader operates under the licence conditions of an existing AFS licence holder. The AFS holder would assess your risk as a service provider under their umbrella, and charge you a fee commensurate with that risk assessment plus a slice of the action.
There are already existing structures in place that make this possibility quite easy and convenient. For example Darwinex through their offering (applies to Forex and CFDs) allows you to operate under the protection of their licencing. You can then provide your private clients with your assigned trading name on the Darwinex Platform, and they can allocate funds to your signals under that arrangement. Not sure about the fees paid to Darwinex for this arrangement but believe it is quite attractive. I think it is probably a profit split arrangement but you would need to do your due diligence with them. Under Darwinex you also have the ability, if you meet their ‘performance thresholds’ to attract allocations of $AUM from Darwinex itself.
I believe there are also other structures (Futures) such as Jack Schwager’s FundSeeder, where you can achieve a similar outcome. There will also be others…
Hope this helps
Rich
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Im making an assumption you are from the UK - if you are trading shares you could set up an investment club partnership.
With CFDs or forex you could set up a limited liability partnership, and use a PAMM or LAMM management account.
You would have to get your ‘clients’ to sign an affidavit, often these forms are provided by the broker.
Word of warning though: and I am not meaning to degrade you in anyway here, but the likes of AMC and GME have been in a strong bull market and quite frankly anyone buying and holding for any period of time could have made money.
Again, not trying to offend, but do not confuse brains with a bull market many have come a cropper that way, me having been one of them from time to time.
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In general I think I need to create the mindset properly to trade with other people’s investments. And knowledge is definitely needed. Because you can’t make a profit without developing skills.
The easiest option is to use PAMM system (for example from Hotforex) or some copy trading platform where you indirectly manage money of other people (earning a fee of % from their profit). However competition is high in this sphere you have to show excellent performance, good track records so people online start to notice you.
If UK then via an “Investment Club” - recognized by HMRC.
It’s the legal way to go - don’t find yourself wrong end of the law with good intentions - google the term for info.
Edit: UK Gov site: Tax when you sell shares: Investment clubs - GOV.UK (www.gov.uk)
