Proprietary firm contracts
- Thread starter NJTrader
- Start date
take it from a lawyer who trades with and owns a part of a prop/ pro firm in CA. You want 100% payout or very close to it (could be a bit of profit sharing to make it a real llc) if you are using your own money. If you are backed-- talk to people and negotiate something fair.
Figure out if you are going to have to pay self employment tax. Figure out what happens if you go deficit. Figure out what happens if other traders go deficit and how much money stands between them and you. Figure out how well capitalized the firm is relative to the traders risk. Are guys holding big arb positions relative to the capital the firm has.
Figure out what happens if the firm goes deficit and how likely that is. Find out what kind of risk the other traders in the firm take on and see who monitors the risk and how it is done. If they are doing arb work and the guy monitoring risk does not understand arb risk then you might not want to put your money there.
Then there will be some exchange required stuff with which a normal lawyer might not be familiar. (Pay attention to how long they keep your money if you want leave and whether the written rule is tougher than what they say happens.) And then there will be stuff your lawyer should understand even if he is not in the business. If the document is more complicated than that you are on warning.
You should understand the whole contract and then explain it to your lawyer. Then he can tell you whether your understanding fits the words in the document or you have been faked out. However if you do not get the name of a good lawyer for this subject matter make sure you go to a lawyer that spends most of his time doing contracts not an all purpose lawyer unless he or she is intellgent.
Overall you are balancing the risk of someone else losing all you money in exchange for the benefits the firm may be giving you. There is a risk of loss of all your money. So be careful and make sure the firm is well capitalized as that should avoid most problems
Figure out if you are going to have to pay self employment tax. Figure out what happens if you go deficit. Figure out what happens if other traders go deficit and how much money stands between them and you. Figure out how well capitalized the firm is relative to the traders risk. Are guys holding big arb positions relative to the capital the firm has.
Figure out what happens if the firm goes deficit and how likely that is. Find out what kind of risk the other traders in the firm take on and see who monitors the risk and how it is done. If they are doing arb work and the guy monitoring risk does not understand arb risk then you might not want to put your money there.
Then there will be some exchange required stuff with which a normal lawyer might not be familiar. (Pay attention to how long they keep your money if you want leave and whether the written rule is tougher than what they say happens.) And then there will be stuff your lawyer should understand even if he is not in the business. If the document is more complicated than that you are on warning.
You should understand the whole contract and then explain it to your lawyer. Then he can tell you whether your understanding fits the words in the document or you have been faked out. However if you do not get the name of a good lawyer for this subject matter make sure you go to a lawyer that spends most of his time doing contracts not an all purpose lawyer unless he or she is intellgent.
Overall you are balancing the risk of someone else losing all you money in exchange for the benefits the firm may be giving you. There is a risk of loss of all your money. So be careful and make sure the firm is well capitalized as that should avoid most problems
Review your contract, be absolutely sure that you review the complete balance sheets of the company (see how much $$ the "owners" have in the firm). Be sure that you get your money back if you decide to quit trading. Our contract went from a single page to many pages due to our increased size, and the number of States we were registered in, but we still keep it as simple as we can.
Good Luck!!
Good Luck!!
I do not know a particular lawyer for that case, in reality a good layer will look for restriction inposed on you such us non been able to trade for another firm with in the inmediate 2 years of leving,, etc....stuff that goes against you... and there is always a lot of it. I know Broadwayp JGM securities that used to hung allot of traders this way.
be carefull.
When you are reviewing contracts with your new trading firm, be sure that you are NOT joining an LLC "affiliate" or another franchise or some other type of entity. This has been a problem in the industry, wherein the "sub class" LLC (under the Main firm), has signed contracts with traders, gone "belly up" and the traders (who thought they were members of the "bigger" entity) found that their money was gone. Just because it says ABC trading, be sure that you have a contract signed by the parent firm.
This has been a good way for firms to "appear" bigger than they really are (using many LLC's - kind of like Enron).
This has been a good way for firms to "appear" bigger than they really are (using many LLC's - kind of like Enron).