How to compensate referrals?

Quote from Joetrader:

I don't know whose ass everyone here is pulling all of this shit out of, but 20% of all fees (Management + incentive) forever is typical. Oh, if you are under 10 to 20M a good fund raiser won't even look at you. IT IS CRITICALLY IMPORTANT FOR YOU TO KNOW THAT THE FUNDRAISER MUST BE A REGISTERED BROKER DEALER. If you going paying your friend or acquaintance, etc even one dollar for raising assets you are violating all kinds of laws and will be totally fucked if your fund ever loses money. Basically, anyone who was introduced to your fund in an illegal manner (such as paying a non broker dealer for introductions) has the right to sue your ass of to be made whole. So if you suck and lose all of their money they can sue your criminal ass personally and take your house to pay them back 100% of their original investment (yes you are breaking laws so out the window with all the corporations and partnerships protecting your assets). If you are much too good a trader for that to ever happen to you then don't fuck around paying friends for introductions. It is time for you to step up to the plate, hire a good law firm and use their council for just such questions that no one on here has a clue about.
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Why all the hostility?
 
Quote from Joetrader:

IT IS CRITICALLY IMPORTANT FOR YOU TO KNOW THAT THE FUNDRAISER MUST BE A REGISTERED BROKER DEALER.
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i don't think this is accurate for private investment llc's aka "hedge funds".

surfer:confused:
 
In fact, it only applies to private investments like hedge funds. And I don't just think, I have been there and done that (Akin Gump is council). Hostile sounding to get your attention and shake some sense into the original poster. People think they can run money for a hobby, but this is extremely serious considering that you can lose everything for pulling some shit like this and no one here THINK's it applies to them, but it does.
 
Joetrader is spot on. You are not allowed to pay fees to anyone besides a B/D. You could, however, hire the marketer and pay them as an employee. I'm sure that there are some other ways to work it too, but I would definitely talk to your legal firm first.

Quote from marketsurfer:

i don't think this is accurate for private investment llc's aka "hedge funds".

surfer:confused:
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Quote from CPTrader:

On what basis do you derive these figures- your past experience, experience of others, or what you feel is right.

I'm asking because this seems reasonable....but I keep on hearing (mainly from the marketers themselves) that 20% of fees in perpetuuity is "industry standard"

Also for your suggested 10/5% is this in perpetuity or for a limited time?

Thanks!
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My grandfather.

He was consulate to China in the 80s - he also owned an import/export business. His rule of thumb for sales was 10% up to 1 million USD and 5% of anything over - I adjusted for inflation. The fee is for the booking of the business - not forward looking revenues.(obviously, the salesperson's job is done when you book the deal - they are no longer exposed.)


btw - he was extremely successfull in business.
 
Not to beat a dead horse, but if you are referring to my post...Based on my conversations with the NFA and my compliance firm (who have 10+ years as NFA auditors), it would be permissible to pay someone not registered as an associated person (i.e. passed the Series 3) so long as they didn't hand out the DDoc or make claims, etc. Just an introduction.

I just posted to see if anyone had any contrary experience.
 
Quote from krazykarl:

My grandfather.

He was consulate to China in the 80s - he also owned an import/export business. His rule of thumb for sales was 10% up to 1 million USD and 5% of anything over - I adjusted for inflation. The fee is for the booking of the business - not forward looking revenues.(obviously, the salesperson's job is done when you book the deal - they are no longer exposed.)


btw - he was extremely successfull in business.
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Thx krazykarl for the info
 
Arb Under - My council may be conservative, but they said even if I were to flat out hire a guy to work at my firm solely for his contacts that I would have to make it a marketing position and have him do more than just call up his contacts. They even went as far as saying i should consider changing the title to CFO, etc and have him participating actively in other aspects of the business. Guess the SEC is picky when it comes to TPM's huh?!

lgantt - my legal council (Akin) does not share your position in the least. But I am organized as a hedge fund and maybe the SEC's requirement are stiffer than the NFA's? At any rate, short of absconding with investor's funds, fund raising illegally is one of the worst messes you can get yourself into so I would suggest hiring a law firm that specializes in whatever type of investment fund you are running.
 
a hedge fund is not a broker dealer itself, yet charges fees. how is this rectified with having to be a broker-dealer to receive a fee for raising capital for same?

thanks,

surfer
 
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