Other peoples money

the1 · Jul 22, 2009

Also not true. You can accept up to 35 non-accredited investors but you can't charge them a performance fee. However, if you are a non-registered operation you can charge them a performance fee. Google CFTC rule 4.7, and 4.13. There are others but I can't recall them off the top of my head. Just read all the rules that begin with a 4.

Disclaimer: I'm not a lawyer.

Quote from Angrycat:

One more thing....

You're going to want to make sure you only take money from "qualified investors" - people with at least $1MM net worth or incomes exceeding $200K annually.

If you don't take only qualified investors and you don't have a clearly spelled out trading partnership, you are a lawsuit (and a losing law suit, at the) waiting to happen.

the1 · Jul 22, 2009

One more thing. If you are a non-registered operation you have to register that exemption with the CFTC. Pretty funny huh?

Quote from the1:

You don't need the series 3. You can manage up to 400k per year for no more than 15 people without registering or getting a license.

Angrycat · Jul 22, 2009

Quote from the1:

Also not true. You can accept up to 35 non-accredited investors but you can't charge them a performance fee. However, if you are a non-registered operation you can charge them a performance fee. Google CFTC rule 4.7, and 4.13. There are others but I can't recall them off the top of my head. Just read all the rules that begin with a 4.

Disclaimer: I'm not a lawyer.

No, what I said is completely true.

What I said is if you take non-accredited investors, you're a lawsuit waiting to happen. Any lawyer will advise you to avoid them like the plague unless they're close family. The lawyer will also tell you to avoid lawyers in your fund!

ByLoSellHi · Jul 22, 2009

Get down with OPM.

Ya' down with OPM?

TraderZones · Jul 22, 2009

Quote from jeffly:

I trade Gold futures for myself. If someone else wants to give me 50K to add to my account to trade with are there any compliance issues I have to deal with such as being registered. They can handle the tax side of it.

In the very likely scenario this account goes underwater (Risk of Ruin is nearly 100% for everyone, given enough time) and given you are leveraged trading...

Everyone making profits thinks they are clever until their ship hits the North Atlantic iceberg...

Is this person going to expect you to make up the deficit in case of a disruptive market event and you owe the broker money?

cstfx · Jul 22, 2009

Can't you just have them open their own account and give you LPA? You never touch the money and taxes are their concern. You just have to rely on the honestly that the compensation agreement worked out is followed. No?

pulsescan · Jul 22, 2009

Quote from cstfx:

Can't you just have them open their own account and give you LPA? You never touch the money and taxes are their concern. You just have to rely on the honestly that the compensation agreement worked out is followed. No?

This is by far the best arrangement.
I like it because all of the paperwork is done by the IB and the client has to pay you based on your written agreement with them. It also allows you to avoid ever touching the money or being responsible for it. Just split the profits down the middle. if you make the client $$$ then YOU make $$$. if not then you don't eat but all fiscal liability as far as the burden of actually handling the money has been shifted to the IB.

the1 · Jul 22, 2009

Ok, I stand corrected. My bad.

Quote from Angrycat:

No, what I said is completely true.

What I said is if you take non-accredited investors, you're a lawsuit waiting to happen. Any lawyer will advise you to avoid them like the plague unless they're close family. The lawyer will also tell you to avoid lawyers in your fund!

bashatrader · Jul 22, 2009

Quote from Angrycat:

You will need a PPM, an operating agreement and subscription documents.

How many Parts Per Million do I need?

Angrycat · Jul 22, 2009

Quote from cstfx:

Can't you just have them open their own account and give you LPA? You never touch the money and taxes are their concern. You just have to rely on the honestly that the compensation agreement worked out is followed. No?

Only one small problem with that. The state and the SEC may view you as an "Investment Adviser" and require you to register as one with the SEC and the state. You want to check into that before you set up a private arrangement.

Enough government intrusion into your private arrangements for ya'? It's unbelievable.

Also, for the guy who said taxes will be their problem under this arrangement...

that's true, but it's also true if you form a partnership. The IRS regards partnerships as "disregarded entities" for the purposes of taxation and your pay taxes at the individual level. So, your taxation will not change.

There's lots of advice here and a few ways you can structure this. But, I strongly advise you to seek legal counsel before you enter any arrangement. First of all, a competent lawyer in this field will be able to tell you which arrangement will likely work best for you and most importantly, help you avoid legal and regulatory pitfalls (of which there seems to be no limit).

When you're trading your own dosh, it's very simple. When you start accepting OPM, it gets a whole lot more tricky.