As an FYI, I'm located in Canada, so this question may have different implications in the US.
Two scenarios:
Person X is a plumber who discovered that the stock market behaves the same way as leaking pipes (just imagine it). Person X has no certifications/liscences to trade, but knows he can make some money in the stock market with his 'leaking pipe theory'.
1) Person X get a $25,000 loan from a bank. Person X uses that money to trade.
2) A buddy gives Person X $25,000 to trade, Person X aggrees give his buddy 60% of the profits.
From what I understand, case 1 is legal, case 2 is illegal.
The reasoning is that without liscencing/registration, Person X cannot take other people's money and trade securities on their behalf (which is pretty much was case 2 is).
But, if person X took a loan from his buddy, this would *seem* to be legal, (but shady), because the interest rate could be *wink wink* modified if there were such a clause in the contract, and the loan could be *wink wink* forgiven if the loan is lost.
Could anyone elighten me on this subject? I'm interested in these issues, I've started reading about it, but I'd like some feedback from people in the field.
I have a couple of friends want to give me some money to trade for them, but I don't think I can do this without the appropriate certification. Am I right?
Regards,
Brandon
Two scenarios:
Person X is a plumber who discovered that the stock market behaves the same way as leaking pipes (just imagine it). Person X has no certifications/liscences to trade, but knows he can make some money in the stock market with his 'leaking pipe theory'.
1) Person X get a $25,000 loan from a bank. Person X uses that money to trade.
2) A buddy gives Person X $25,000 to trade, Person X aggrees give his buddy 60% of the profits.
From what I understand, case 1 is legal, case 2 is illegal.
The reasoning is that without liscencing/registration, Person X cannot take other people's money and trade securities on their behalf (which is pretty much was case 2 is).
But, if person X took a loan from his buddy, this would *seem* to be legal, (but shady), because the interest rate could be *wink wink* modified if there were such a clause in the contract, and the loan could be *wink wink* forgiven if the loan is lost.
Could anyone elighten me on this subject? I'm interested in these issues, I've started reading about it, but I'd like some feedback from people in the field.
I have a couple of friends want to give me some money to trade for them, but I don't think I can do this without the appropriate certification. Am I right?
Regards,
Brandon