How to trade someone else's money in the UK

Hi all.

Does anyone know what you need to do to be able to trade other peoples money in the UK? What exams do I need to take?

Been consistently profitable using 0.5% max risk for 4-5 years now and so I’m getting lots of offers. But I want to stay legal!

Please help?

Regards

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You need to start an unregulated investment scheme or hedgefund. As the name suggests you are not regulated but you must only have HNW clients (UK laws) that is clients who have 200k or more in assets.

these are considered eligible counter parties by the FSA and have very little protection in the event you screw them. I find this group is the dumbest and will jump at an opportunity like this.

You would need at least 1m yourself or a collective 1m to start the fund this will attract other investors seeing you are invested yourself. If you manage to raise 10m then you can get liquidity from any bank up to 50m or more in some cases which will be considered leveraged funds this is were the big bucks come in.

These funds are known in the finance world as 220 funds. If the above is not a license to print money then take this… Investors are normally obliged to sign a lock in of say 2 to 3 years in which they will not be able to withdraw their funds. After that they will be allowed partial redemption rights say once a year and if the market where to enter an overall recession they will be subject to an indefinite lock in till the market resumes. To top it all investors can loose all their investments with no fall out at all from authorities. All though the latter rarely happens.

In your case you will not be able to without observing the following these rules if you are in the UK. You can trade someones cash but they must be a HNW and sign a power of attorney, this at least protects you from prosecution. The key here is really the HNW status. The rest is flexible…

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Hi Emerald,

Many thanks for your time in answering my question.

I’ve spent hours on the phone to the FCA and I’m still no where. I thought I had to do some exams like the CF30 etc to become a certified money manager.

If I’m taking on funds from multiple people is this not the case?

Do you trade other peoples money?

Regards

P.S. If it’s easier, would happily buy you lunch to pick your brains…

I will be qualified financial adviser in a few months in addition to being an financial economist and an investor myself plus I have spent a lot of time working with funds so I am having to get to grips with funds very quickly.

You won’t get anywhere with the FCA as their role with regards to funds is observatory not regulatory. The issue you have is to be able to comply with the FSA rules regarding eligible counter parties this is key to bypassing all regulation it is the reason why the hedge funds operate with impunity. Below is your checklist

  1. Tax implications - This is important because to become a fund you must have a charging structure which determines taxation rules and some funds have tax benefits on behalf of your clients. I think you will have to tax investor returns 20% at source but as most will higher rate tax payers they will have a further 20% liability or 25% for additional rate tax payers but do get a tax specialist to advise you.

  2. High net worth only clients (eligible counter parties) - This will mean you will come under unregulated investment schemes. In the UK hedge funds are not subject to FSA regulation or FCA and have no restriction on the type of instruments you invest in. This is the most important rule because the above are not subject to FSA protection or compensation (essentially no jurisdiction).

  3. Make sure you are not running a ponzi scheme and you are qualified to handle the investments because there is a fine line between being called a fund and a ponzi scheme. So make sure the paperwork is sound and you have a good lawyer. Please do not take mr. joe blogs cash and trade it on his behalf because he will be considered a retail client and are considered by the FSA as requiring the most protection and must not be sold risky investments and would require a lot of information and disclaimers. It is the reason you won’t see ads from FX company ads on your local channel 5.

  4. You will need some cash of your own. Key to getting clients.

Note: Unit trust fund managers are different from 220 fund managers the latter require no qualifications. CISI and CEFA, DIPFA etc are all okay but not necessary for a 220 fund manager.

I am happy for us to chat on the phone so PM your number I can always call you and we can chat a bit more.

Hi Emerald

Many thanks for that great answer! It’s really the best I’ve come across so far. I’ve even been to 2 financial solicitors and they had zero idea!

Will PM you…

Regards

Trading in the stock market can be very profitable or painfully unprofitable. Many professional traders can make a few hundred to a few hundred thousand dollars a year - depending on the traders competence and the system used to trade.

Big thanks to Emerald…just had a chat on the phone…very knowledgeable in this area…

Hi Daytradingisbad,

I went through the discussion you had about “How to trade someone else’s money in the UK”.
I am hoping everything is going well with you and managed to do what you wanted to do.

I have same questions like you as I am planning to raise around £1m from private investors legally. I am certain that you are the right person to answer my questions. If you are happy to help me, could we chat on the phone? I can PM my contact should you wish to help me.
Many Thanks in advance.

Kind Regards
Kamal

Hi Kamal.

Have you a good contact with the UK FCA? You should have.

Not really. I have no contact with FCA whatsoever.
Will they assist me as to what I need to do?

They will advise if you need to register with them as part of anti-money laundering.

HI there,

My father has been scammed by Universal markets. He is not HNW and they are therefore breaking FSA rules are they
not? But will or can FSA or FCA do anything about it…?

Is an unregulated company such as Universal markets (trading Crypto which I would definately put in the high risk category) answerable to no one ?

Andy

Hi,

I just saw this question. Don’t look to regulators to help you. These are the same guys who approved CDO’s.

That said, yes they are a lot of wide eyed city boys collecting money because they can look the part or worked in a dusty basement at Goldman, so just remember all small investment funds are built on trust so no legitimate person should be asking you for money over the phone. Normally, you can start a family office, that’s private and once you can run that investors will find you.

Careful basically.

Hello Emerald could we please have a chat?

Hi, are the rules the same trading friend’s and family’s money for them in a PAMM style account? Does this have to be regulated in anyway, and what are the limitations if any? UK based.

Thanks in advance…

Most well run and well regulated brokers won’t accept third party funds. If you do manage to open an account using third party funds, they may not allow you to withdraw profits and they will almost certainly not return the full deposited amount back to you.

This was just a few friends and relatives giving me their money to trade on their behalf, the funds would be deposited by me in to the same trading account I already have set up, I would just work out the pro-rata profit for each person. Was just querying the legalities of doing this? Thanks

The legalities are just one aspect of the issue.

There can be major problems if you try to withdraw money from your account. There is every reason to think that firms are much more careful about who they give cash to rather than who they get cash from.

e.g. You deposit £50k with a firm and trade it up to £80k. You then wish to withdraw £20k. The firm may ask you to prove that you earned or were gifted the £50k so that they can be sure it was really your money. They may ask for details of the employers or donors who provided the money to you. Of course you can refuse to cooperate, but they will say they are just trying to comply with anti-money laundering legislation. In the meantime, you won’t see a penny.

I have several hundred thousand GBP of my own funds already trading and can easily prove where the money is from. My question was purely whether there is any legislation regarding trading friends and families money, I don’t see I will have any issue with the broker/s due to the amounts I already trade with them. Thanks.

So I have offers for ppl wanting me to trade for them and pay me but what do I have to do to make this happen