Make sure that you stay in compliance, especially if you're trading others' money. That's is on the short list in your threat document; The Powers At Be will put you out of the business--permanently--if you don't play by the rules.
Friends and Family questions
- Thread starter Joebone
- Start date
I have read to keep track of everything cause IB can mess up charges sometimes.
"undersells" as in its a great value to customers?
or undersells all the regulations and fees they kinda gloss over? lol
I think the benefits to traders, *and* to IB, are undersold. But I think their "softsell" is also a way to winnow applications to more-serious prospects (who will not be tapping IB resources for outsized chunks of staff time, while generating skinny bits of trading revenue).....
agree that it's a very underutilized piece of legislation to get your foot in the door of an industry with very big moats. Your idea that they want to weed out the people who can't manage themselves sounds reasonable.
GrenwichCompliance.com is also a way for them to stem the flow of service and bottleneck it at a certain place.
Check with your state securities department. In Ohio you are exempt from a Series 65 unless you are under 15 people, however it is suggested you register with the state regardless.
Make sure you inform your customers of the risks involved, it is suggested they only trade with risk capital. Give them a disclaimer and do not make statements that could be regarded as misleading. These are the issues that get people into trouble. Check with the securities people about proper reporting to the friends and family, for instance it might be necessary to provide monthly reports or audits.
Read the CFTC enforcement press releases and you will find which issues get people into trouble.
http://www.cftc.gov/PressRoom/PressReleases/EnforcementPressReleases/index.htm
Keep in mind that the CFTC controls commodity and Forex trading, whereas the SEC controls the other instruments.
Personally I think the people who show up in these enforcements are either criminals or delusional. What gets people into trouble is usually:
1/ outright fraud (despite the Madoff scam, people are still falling for this)
2/ these people are not registered
3/ make misleading and fraudlent statements but the issue of the misleading statements is due to the intent of fraud in my opinion.
From a trading perspective, be on the side of caution and try to use risk aversion meaning try to find the serious leaks. Every system has leaks but serious leaks are the ones that get people into trouble. Use proper risk management with the idea that being consistent and reasonable are the goals, these are necessary for survival. Use redundant systems (back up plans).
Make sure you inform your customers of the risks involved, it is suggested they only trade with risk capital. Give them a disclaimer and do not make statements that could be regarded as misleading. These are the issues that get people into trouble. Check with the securities people about proper reporting to the friends and family, for instance it might be necessary to provide monthly reports or audits.
Read the CFTC enforcement press releases and you will find which issues get people into trouble.
http://www.cftc.gov/PressRoom/PressReleases/EnforcementPressReleases/index.htm
Keep in mind that the CFTC controls commodity and Forex trading, whereas the SEC controls the other instruments.
Personally I think the people who show up in these enforcements are either criminals or delusional. What gets people into trouble is usually:
1/ outright fraud (despite the Madoff scam, people are still falling for this)
2/ these people are not registered
3/ make misleading and fraudlent statements but the issue of the misleading statements is due to the intent of fraud in my opinion.
From a trading perspective, be on the side of caution and try to use risk aversion meaning try to find the serious leaks. Every system has leaks but serious leaks are the ones that get people into trouble. Use proper risk management with the idea that being consistent and reasonable are the goals, these are necessary for survival. Use redundant systems (back up plans).
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Be very careful in any materials you produce that show historical or backtested returns. The regulators love to go after people who lied, made mistakes in their favor, or presented backtested results as actual historical returns.
What is your protection if your system blows up and many of your friends/family who suffer losses decide to become "enemies" and sue you for mismanagement/fraud?
well like I said the system has a decent correlation with SPY so I would only ask for a portion of their beta exposure. And their portfolio design would not be my business... Im not a financial advisor.
however, if the system "blows up" then the rest of their portfolio should also be in shambles. Im not selling it as the best thing since slice bread... its just a better mouse trap....
but you did bring something up that I was interested in... "what would be my protection?" I dont know.... thats why I'm asking on here to find a proper procedure.
General Partnership = Unlimited liability for all partners.
Investors should be limited partners. They can't be general partners if they don't participate actively in the business.
The actual managers / traders are the general partners, which is very dangerous for the managers. This is why the general partner is usually an LLC.
Investors should be limited partners. They can't be general partners if they don't participate actively in the business.
The actual managers / traders are the general partners, which is very dangerous for the managers. This is why the general partner is usually an LLC.
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