managing accounts

[Walther]

Pierson,
It depends on where do you live. Each state has dif. rules but generally Limited partnership is the best for your situation. You must decide how you want to be paid and then put it into partnership agreement together with liabilities and disclosures.
If you are any good ask for 20% or more from LP profit, paid monthly.
If you not sure about your prowess ask for salary or per hour fee .
Good luck,

 

[nkhoi]

Quote from Walther:

...
If you not sure about your prowess ask for salary or per hour fee .
Good luck,

in that case, the client should ask for refund

 

[ProfLogic]

Quote from pierson:

I have a few friends who have asked me to manage accounts for them. I do not have a brokers license so i was thinking about being the power of attorney over the accounts. If i decide to do this for them i want to make sure all my bases are covered.
Does anyone have experience doing this? Is there any way that i could get in trouble doing this? If so what other types of action would i need to do to make sure i could not be held liable for any loses etc.
I have of course told them they can lose everything and more and that i don't guarantee anything. Everything is their own personal risk.
Do i need to go to the trouble of getting a lawyer to draw up a contract stating that disclaimer or am i protected because they have to sign the broker agreement to give me the power to place trades.

Any help or constructive advise is appreciated,
Pierson

Personal Opinion - If you are profitable, stay the course and just use smart money management and increase your contracts traded if you need more money.

The easiest way to lose a friend is to trade an account for them. If you want to take a day off, your phone won't be ringing with the "friend" wondering why you didn't trade that day. If you have a bad day, your phone won't be ringing with the "friend" wondering why you lost some of their hard earned money. If you have a really good day, your phone won't be ringing with the "friend" wondering why you don't do that everyday. Friends stay friends if they let someone else manage their money.

 

[range]

I am not an attorney, nor do I manage money at the moment, but this is my understanding:

If you manage equities as a traditional equity manager, and if you receive compensation, you must register with your state if the state requires it. Some states, like Florida, seem to be more lenient than others. Many states require you to register simply because your office is in the state, regardless of whether or not you manage money for any citizens of the state.

To register, you usually need to pass exams, meet net worth standards, comply with record-keeping standards, etc.

Federal regulations forbid a state to force an out-of-state advisor to register if you manage less than five/six accounts in that state in a rolling 12 month period.

I do not know the nuances of hedge funds or commodity funds.

Here is a link to all state regulators. You can look up the laws on most of their websites. Check the definitions of "investment advisors" and the exclusions from the need to register.

http://www.nasaa.org/nasaa/abtnasaa/find_regulator.asp

 

[jam41510]

First of all, what and where are you trading?

Is there is anything stopping you from trading what you have always been trading? As in, would you be willing to trade something else?

If some friends came to me and wanted me trade their funds for them..............I would pool their funds together in one account and continue trading as if it were my funds like I have always been trading. If you are successful and I'm sure that is why they want you to trade for them, then there shouldn't be a problem. Just make sure they are aware of the risk involved in trading and basically disclose to them everything that a broker would disclose to you in a similar discrectionary situation.

 

[DVB]

Be careful with fees if you set up as IA. I am in Michigan, and % of profits is not allowed here. Make sure you call the state to discuss. See below from Michigan's Financial & Insurance Services web site...

c. INVESTMENT ADVISERY CONTRACT

Provide a copy of the Investment Advisory Contract the firm will use for Michigan clients. Section 102(b) of The Act provides in part that it is unlawful for an investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing that:

i. The investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of funds or any portion of the funds of the client.

http://www.michigan.gov/cis/0,1607,7-154-10555_22535_23038-70213--,00.html

It seems it is easy to set up in Michigan, but not easy to get paid

 

[ProfLogic]

Quote from DVB:

Be careful with fees if you set up as IA. I am in Michigan, and % of profits is not allowed here. Make sure you call the state to discuss. See below from Michigan's Financial & Insurance Services web site...

c. INVESTMENT ADVISERY CONTRACT

Provide a copy of the Investment Advisory Contract the firm will use for Michigan clients. Section 102(b) of The Act provides in part that it is unlawful for an investment adviser to enter into, extend, or renew any investment advisory contract unless it provides in writing that:

i. The investment adviser shall not be compensated on the basis of a share of capital gains upon or capital appreciation of funds or any portion of the funds of the client.

http://www.michigan.gov/cis/0,1607,7-154-10555_22535_23038-70213--,00.html

It seems it is easy to set up in Michigan, but not easy to get paid

That is absolutely hilarious . . . that had to put enacted and lobbied for by investment companies. Is it any wonder why investment advisors look at you cockeyed when you suggest they work on a performance basis . . . ROTFLMAO

 

[chinook]

I'm aware of IB's Advisor accounts but for paperwork, trade execution and monitoring purposes pooling the money in one account seems to be more efficient. Is the following legal in US ?

1)Pool money from friends and family in one account opened under my name.

2)Trade futures only and then pay taxes for capital gains. The taxes will be filed as an independent trader (sole proprietor trader) with no other business.

3)Take management fee from the profits after taxes

4) Send capital/profits to friends and family at certain periods if they request it.

In terms of taxation, the setup above seems to be fair. All of the profits will be taxed properly for IRS so there's no tax invasion . Friends and family does not have to report their income from this enterprise to IRS since it has already been taxed. Does this makes sense? I have a feeling that IRS won't like this setup....

Things get more tricky, if there's a loss since they won't be able to claim it in their tax returns. Any comments?

Thanks.

 

[trade24]

do yourself a favor that will save headaches and money down the road- spend some money on a securities lawyer and dont take others advise who don't do securities law for a living

 

[Aaron]

Quote from chinook:

1)Pool money from friends and family in one account opened under my name.

2)Trade futures only and then pay taxes for capital gains. The taxes will be filed as an independent trader (sole proprietor trader) with no other business.

3)Take management fee from the profits after taxes

4) Send capital/profits to friends and family at certain periods if they request it.

Clause 29 in the Interactive Brokers customer agreement for individual accounts reads:

29. Incoming Funds: Customer represents that all funds sent to IB for deposit into Customer’s account belong to Customer. Customer represents that no third-parties have beneficial ownership of funds in Customer's account and that Customer is not trading on behalf of third-parties unless Customer has notified IB in writing to the contrary, and provided that Customer is properly registered and authorized under applicable laws and regulations to conduct such trading.

I recommend creating a partnership and opening an account in the partnership's name rather than your own. The partnership will be the pool rather than you, personally. If your partnership is under $400k in assets you will likely be exempt from CFTC registration.