Unusual Way to raise money

A

acwrky94

If I want to incorporate friends money into my trading but don't want to go through all the hassles, is it possible to take their money in form of a private loan?

I'm feeling fairly confident in my trading and would like to add capital but I don't want any overhead when it comes to monthly reporting and/or possible SEC or any other regulatory oversight. In that case can I guarantee someone 6% by doing a personal loan agreement with them while taking the risk/upside?

Does anyone have experience with this (and/or concerns)?
 
If you charge to manage money explicitly, you must set up an RIA (only need to be state registered, not SEC with nil assets) and you'll need series 65 or a CFA.

If you are paying to borrow money to do whatever you like with, I guess that does fall out of regulatory purview. But double check with an RIA compliance firm if you are in doubt.

FYI, interactivebrokers lets you manage friends and family no fee accounts without any registration requirement. This way if this person can keep their assets titled to their name. You won't legally be allowed to charge them for money management services without registration, though.
 
You could also get them to set up a brokerage account, and you trade it through a power of attorney form.However, I would not have to many accounts.
also, you do it as a laon from the friends, and pay them a flat interest rate on the loan, maybe with a year end bonus.
 
acwrky94 said:
If I want to incorporate friends money into my trading but don't want to go through all the hassles, is it possible to take their money in form of a private loan?

I'm feeling fairly confident in my trading and would like to add capital but I don't want any overhead when it comes to monthly reporting and/or possible SEC or any other regulatory oversight. In that case can I guarantee someone 6% by doing a personal loan agreement with them while taking the risk/upside?

Does anyone have experience with this (and/or concerns)?
More...

I am 99% certain it is ok legally.
 
Personal loans are unregulated, but you may have trouble finding people to lend you money for speculative trading at only 6%. Some brokers charge that much for margin, and they've got all your positions as collateral to liquidate in real time.

Do be wary of offering rates or bonuses that are tied to your trading performance. That starts to look more like an equity security and the SEC will want to protect non-accredited investors from you with reams of paperwork and lawyer fees.
 
I built my account up this way to become a full time trader 11 years ago. There are some pros to this method but some real cons. Two big cautions : 1) Make sure you have a significant reserve of your own cash. Otherwise you will be closing out positions you do not want to close, to pay the regular demand of interest payments. 2) Also be very careful who you take money from and the terms of the loans. On a big correction you may see a whole new side of people you were not expecting.
 
acwrky94 said:
If I want to incorporate friends money into my trading but don't want to go through all the hassles, is it possible to take their money in form of a private loan?

I'm feeling fairly confident in my trading and would like to add capital but I don't want any overhead when it comes to monthly reporting and/or possible SEC or any other regulatory oversight. In that case can I guarantee someone 6% by doing a personal loan agreement with them while taking the risk/upside?

Does anyone have experience with this (and/or concerns)?
More...

Ya trade your own account until it builds up.
 
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