Do do need RIA? What does it involve?

rubenhak

rubenhak

Hi Everybody,
I'm trying to make some money by sending trade alerts in a newsletter. I recently learned that if the content of newsletter includes a specific advise and/or financial information regarding the client, then it is required to be a RIA to provide such a service.

I am planning to send exact trade alerts weekly to buy/sell ETFs and specific stock options. Also, am planning to specify percentage of the capital to be used for such transactions. First of all, wanted to confirm that RIA would indeed be needed?

Next question is what does the process involve to become an RIA? Would very much appreciate some info on the process, some hints, and from where to start the research? Can I be completely independent, or I should be RIA with some broker?

Also, I am planning to start this business through a company. Can I legally hire or contract with some other person that is an RIA, and through him make this newsletter legal, even though I'm not an RIA?

Thanks for any help.

Ruben.
 
No RIA needed for newsletter or signal alert type service. Your advise is specific to the financial instrument not to the a specific client portfolio.

Google internet for RIA exemptions and tonnes of information is available.
 
toc said:
No RIA needed for newsletter or signal alert type service. Your advise is specific to the financial instrument not to the a specific client portfolio.

Google internet for RIA exemptions and tonnes of information is available.
More...

Hmmm, I'm getting contradicting information regarding this. I talked to financial lawyer. He said the newsletter cannot include specific financial information. Let me get as much information regarding this here, i might then contact another lawyer for details.

My newsletter looks somewhat like this :
-) Buy SPY. Allocate 35% of the portfolio capital.
-) If you have GLD positions, close them all.
-) If you don't have EFA, then write a April 2017 PUT at $55. Allocate portfolio capital / 1000 contracts.
-) If you have IWM short PUTs that are worth less then $0.15, close them.

So, can this kind of newsletter which includes specific signals be distributed through email without RIA? If not, which portion of the newsletter causes the RIA?
 
rubenhak said:
Hmmm, I'm getting contradicting information regarding this. I talked to financial lawyer. He said the newsletter cannot include specific financial information. Let me get as much information regarding this here, i might then contact another lawyer for details.

My newsletter looks somewhat like this :
-) Buy SPY. Allocate 35% of the portfolio capital.
-) If you have GLD positions, close them all.
-) If you don't have EFA, then write a April 2017 PUT at $55. Allocate portfolio capital / 1000 contracts.
-) If you have IWM short PUTs that are worth less then $0.15, close them.

So, can this kind of newsletter which includes specific signals be distributed through email without RIA? If not, which portion of the newsletter causes the RIA?
More...
Between advice from an attorney who specializes in this and a jackass on this board, who are you going to believe? Sounds like you don't like the answer you got from a professional and are looking for the flimsiest of excuses to disregard it. That's a dangerous train of thought, imho.
 
Sig said:
Between advice from an attorney who specializes in this and a jackass on this board, who are you going to believe? Sounds like you don't like the answer you got from a professional and are looking for the flimsiest of excuses to disregard it. That's a dangerous train of thought, imho.
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Well, if I were to think that way I wouldn't start this thread in the first place. If you noticed in the beginning I was just trying to get some more info on how to become RIA.

On the other hand, yes you noticed correctly that I indeed didn't like what I was told by the attorney. But it does not mean I'm going to just bypass what I was told. Instead I'd rather gather some more info on what to talk and discuss with another attorney. I don't want to say that my attorney is not good, actually I quite liked working with him. I think there is no hard in being critical and sometimes questioning pros, as there are always chances for professional to be wrong and miss a piece of information (especially in legal field), and maybe there is another way got get around this. I shouldn't be the first one to tell you how does the law work.
 
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rubenhak said:
Well, if I were to think that way I wouldn't start this thread in the first place. If you noticed in the beginning I was just trying to get some more info on how to become RIA.

On the other hand, yes you noticed correctly that I indeed didn't like what I was told by the attorney. But it does not mean I'm going to just bypass what I was told. Instead I'd rather gather some more info on what to talk and discuss with another attorney. I don't want to say that my attorney is not good, actually I quite liked working with him. I think there is no hard in being critical and sometimes questioning pros, as there are always chances for professional to be wrong and miss a piece of information (especially in legal field), and maybe there is another way got get around this. I shouldn't be the first one to tell you how does the law work.
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You can always call the SEC and state regulators. Until and unless laws have changed in last few years, I am pretty sure that newletters and signal services are exempt from RIA registration.

A good link below you might want to forward to the professional attorney also.

http://www.thinkadvisor.com/2008/02/01/avoid-market-events-in-your-investment-newsletters
The Supreme Court reached this conclusion, because the newsletters were completely disinterested and offered to the public on a regular schedule. They were not published in response to some type of market activity. These publications did not offer individualized advice attuned to a specific portfolio or to any client's particular needs.
 
toc said:
You can always call the SEC and state regulators. Until and unless laws have changed in last few years, I am pretty sure that newletters and signal services are exempt from RIA registration.

A good link below you might want to forward to the professional attorney also.

http://www.thinkadvisor.com/2008/02/01/avoid-market-events-in-your-investment-newsletters
The Supreme Court reached this conclusion, because the newsletters were completely disinterested and offered to the public on a regular schedule. They were not published in response to some type of market activity. These publications did not offer individualized advice attuned to a specific portfolio or to any client's particular needs.
More...

Thanks for the link. I will definitely try to call SEC.

From that article it does not mean that just a format of a "newsletter" is sufficient to qualify. See this:
Under the holding of Lowe v. Securities and Exchange Commission, a publication must satisfy three elements to qualify for the publisher's exemption:

1. The publication must offer only impersonal advice, which is advice that is not tailored to the individual needs of a specific client, group of clients, or portfolio.

2. The publication must be "bona fide" in that it contains objective analysis. A publication is not bona fide if it touts lists of stocks that are certain to go up or distributes information in conjunction with personalized investment services.

3. The publication must be published regularly, rather than in response to events affecting the securities industry.​

Let's go step by step.
1) It requires the advice to be impersonal. I advise to buy SPY and dedicate 35% of the capital. Also, I advise trade based on existing account positions. Is it considered personal? or as long as I tell the same thing to every subscriber it does not make the newsletter personal?
2) I can include objective reasoning for the action.
3) The newsletter is published every week. so I'm good with this.

Any thoughts?
 
There are guys who run a portfolio on their newsletter service where they buy certain stock at certain prices both at market and limit orders with well defined stops in place. They do not have to register as an RIA. Every subscriber gets these signals and they have the freedom to do as they please either buy equal amounts or more or less and at a different price.

An RIA has the custody of the funds via trading authorization and conducts actual trades for the client and thus has authority over their accounts. With newsletter running own portfolio and broadcasting signals, there is no authority and clients are at their own discretion.
 
toc said:
There are guys who run a portfolio on their newsletter service where they buy certain stock at certain prices both at market and limit orders with well defined stops in place. They do not have to register as an RIA. Every subscriber gets these signals and they have the freedom to do as they please either buy equal amounts or more or less and at a different price.

An RIA has the custody of the funds via trading authorization and conducts actual trades for the client and thus has authority over their accounts. With newsletter running own portfolio and broadcasting signals, there is no authority and clients are at their own discretion.
More...

ok, I understand what you're saying. Though, would like to get another confirmation with professional lawyer. What would be the skills for the lawyer I need to look for to get complete answers?
 
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