Trading a family member's personal account, question

[Girija]

Suppose a family member says:
"Here's my login info, make some trades in my personal brokerage account for me. Purely as a favor with absolutely no compensation at all and no liability."

Let's immediately stipulate at the outset that it is very likely not WISE to do so for any number of reasons, such as family member getting big mad when I blow up their account, claiming theft of password and suing, etc.

But is there any Federal/State legal or other regulatory consideration that you are aware of? Aware of any brokerage's rule that would be violated?

Also given that I am not a professional, am unlicensed, and not presenting myself as in the business of being an advisor.

Illegal but depends on who the family member is and their ability to trust you even when you make a substantial loss. I trade on my husband's retirement a/c and technically that is also illegal but psychologically it is not.

 

[newwurldmn]

Thanks for the replies.

I'm not doing this currently, and based on the replies, I think the answer for me is that I would discuss with my broker before doing so, just to be as absolutely above-board as possible. And probably have a written agreement as well.

I guess an alternative would be to go through a 3rd party such as collective2 so that the family member's account would auto-trade my signals. But that would be a relatively painful way to accomplish what would amount to exactly the same thing.

there’s only one answer to this question and lpope gave it.
Get a power of attorney from your broker. They do this all the time and will likely have a boilerplate form. This allows the broker to talk to you regarding the account.

then have a side agreement between your family members and you. It should be written down but it doesn’t need to be written by a lawyer assuming your family and you love each other and really understand what you both are getting into. If you both do not understand the risks and motivations involved then you shouldn’t be considering managing their money for them in my opinion.

 

[Girija]

there’s only one answer to this question and lpope gave it.
Get a power of attorney from your broker. They do this all the time and will likely have a boilerplate form. This allows the broker to talk to you regarding the account.

then have a side agreement between your family members and you. It should be written down but it doesn’t need to be written by a lawyer assuming your family and you love each other and really understand what you both are getting into. If you both do not understand the risks and motivations involved then you shouldn’t be considering managing their money for them in my opinion.

Not sure about other countries but in US this doesn't work unless the person is a licensed advisor.

 

[RedSun]

A lot of BS here.

A lot of brokers offer the form to designate another person (even stranger) to be your trader and have full trading right. There is nothing against the law as long as the paperwork is done.

On the form, there is a section of the liability from the broker. The broker is not responsible for any legal issues arising from the designated trader arrangement.

This is the same as the legal "power of attorney".

 

[RedSun]

The only thing you'll have to get careful is if both accounts trade the same instrument at the same time. Try to avoid the impression of collusion of trading from two or more accounts.

 

[newwurldmn]

Not sure about other countries but in US this doesn't work unless the person is a licensed advisor.

Not for friends and family and under a certain asset limit. For family I don’t even think an asset limit exists.

power of attorney doesn’t require licensed advisor. Collecting fees does in certain cases.

 

[newwurldmn]

The only thing you'll have to get careful is if both accounts trade the same instrument at the same time. Try to avoid the impression of collusion of trading from two or more accounts.

brokers facilitate this.
You send one order and then split the fills.

 

[d08]

I don't see any violation of any laws as this is purely a private agreement between two parties authorizing one to access the personal account of another to trade on behalf of the other person. It's none of any federal or state or anybody's business what this family member has authorized you to do with his/her personal account. It's his/her personal account. He/she can damn do whatever he/she wants. Anti-money laundering rules only stipulates that the source of fund to fund the account has to come from another account bearing the same name as the brokerage account but it or any brokerage agreement never dictated that it has to the person who holds the account to do all of the trading.

Debating theory is great but in practice, that is not what happens. Account will be frozen immediately. Speaking from personal experience.

 

[zdreg]

The only thing is if you want your a$$ covered, you need to have his/her this family member's instructions to be in writing, in a legal document with all the disclaimers, caveats, fine prints, and everything included, signed by the authorizing party, witnessed and certified or notarized by a lawyer in a form of Power of Attorney showing clearly what you are and are not authorized to do with this family member's account and consequences of what can happen if any scenarios happen. That way, if anything happens, you have a bona fide legal document to protect yourself in a court of law if anything happens.

Your remark is is complete nonsense. Financial institutions only recognize their own in-house forms.

 

[wmwmw]

there’s only one answer to this question and lpope gave it.
Get a power of attorney from your broker. They do this all the time and will likely have a boilerplate form. This allows the broker to talk to you regarding the account.

then have a side agreement between your family members and you. It should be written down but it doesn’t need to be written by a lawyer assuming your family and you love each other and really understand what you both are getting into. If you both do not understand the risks and motivations involved then you shouldn’t be considering managing their money for them in my opinion.

This is true.
I once traded for my friend after we both signed that form(power of attorney)and sent it to broker.