Hello. I am UK based and apologies if this is a newbie question.
My friends and family have been giving me money to invest for them for the last few months as I am quite good at it - I have been charging 20% off their profits when they decide to pull out. I plan to legitimise everything I am doing over the next 6 months, it is just not financially feasible at the current moment as I continue to raise capital with the goal of opening an Investment Club or I might opt for PAMM system for CFD’s and Forex.
What I would like to know is if I was ever in a situation where I lost all their investments before I set myself up properly - what are the legal implications? There were no contracts, I have simply been investing money my family and friends transfer to me while sending weekly updates on their stocks. I am now quite worried about the whole thing after reading a few things online and close to stopping until I figure out how to start it all legally.
Any and all help will be appreciated.
Hi, you need license to use funds others people, something like CFA, but there is depending on country. Regards Greg
https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-raising-finance-friends-and-family
It may be useful to read the link above before doing anything else.
You say “I have been charging them 20% of their profits when they decide to pull out”.
Turn this around. Did you contemplate offering to pay 20% of their losses if they pulled out when you are making a loss with their money? And is that written down anywhere?
If not, you should act quickly to get an agreement (or at least a discussion) with each person in turn and ask them if they had thought through all eventualities. The reason they have lent you money “because you are quite good at it” is no consolation when you suffer a 100% loss on any particular investment.
Some examples of events you may not have considered:
You have bought public company stock. The company files for bankruptcy protection and the shares cannot be traded. What would you tell the friend when you can’t liquidate their investment?
A broker goes bankrupt, and all client funds have “mysteriously disappeared”
You have bought some physical gold, but not specifically insured it. Someone breaks into your home and steals the gold. Your insurance will not pay for it because it was not itemized on an insured list.
These are things that can, and will happen to you as you get older and older. You should have a list of these as risks and review what actions you will take to mitigate those risks. If they happen, they are called “issues”. That is an apt term when you need to tell a relative that there is an “issue” with their capital invested.
It is quite common what you have experienced, and it is a good move to ask for help on a forum like this.
Best of luck with the outcomes. It may be a good idea, if funds are currently invested, to turn them into cash as soon as possible whilst you contemplate the overall risk of managing someone else’s money.
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You’d be in deep shite, mate. Not only legal issues, but a ton of misery when word gets around you lost their life savings.
As an immediate precaution, set up a contract through a financial lawyer for every friend and family member that permits you to trade on their behalf. Include a disclaimer in the event of losses being incurred.
If any family member or friend doesn’t agree to sign the contract, sell their investment and return the proceeds to them ASAP…
This process would give you breathing space, but, IMO, you’ll likely lose their trust as you’re walking a tightrope above Mount Everest.
I agree with everyone here.
But I think sometimes family and money don’t mix.
I’ve met people who don’t give jobs to friends in their establishment because if firing a friend would cost that friendship.
I hope it goes well, in your case. Protect yourself and their money.
As @ProfesorPips mentioned - managing others portfolios is usually regulated and licenced by regulator. I am not an expert on UK regualtions, but it may be somewhere around FSA Markets Act 2000. UK regulator is quite conservative, so I would expect managing portfolios to be regulated activity as per UK law.
Second thing you should consider are taxes.
So to be sure, I would reach out to some legal/tax expert and walk through.
Do not jump into any agreements/contracts with your friends and family, because these will not be valid, if whole activity is illegal 
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Be very careful as the FCA are clamping down on unlicenced account management. You end up not only facing criminal charges but even if you don’t lose their money, they could find it locked up by the FCA pending their investigation into you.
Technically unless licenced in the UK, any account management is illegal.
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You need to pray that you STAY "Good at it "
Otherwise your future is one of ongoing pain and misery !
Simple way to become UK legal and continue with the trading is to set up an “investment club”.
Lots of info on the web.
Starting An Investment Club - The Motley Fool UK
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If you decide to do it seriously, then you definitely need to start making contracts and get to some new, more serious level.
It’s quite promising.
Only I don’t think business with relatives is a great idea?!
It is not recommended to trade with borrowed money. It can double the risk. If you decide to trade with the help of friends and family, have them in confidence and tell them about your plans beforehand.