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Kevin_in_GA
4,553 posts
msg #112547
Ignore Kevin_in_GA
3/31/2013 7:36:34 PM

No. Here is an except from the Collective2 FAQ:

"Do I need to register with the CFTC or the SEC in order to sell my trading advice? Do I need some kind of license to start a trading system?"


If you are an American citizen, the short answer is: No, you do not need to register with any government agency, or pass any kind of test, or have a license in order to publish trading advice.

However, you must be aware of certain restrictions. The most important restriction is this. You cannot provide individualized advice to clients. That is, you cannot offer different advice to different clients based on their individual financial situations.

Here's an example.


Allowed: "Attention all subscribers to my trading system: Buy IBM because I believe it is going up!"

Not allowed: "Dear John Doe: based on our conversation earlier today, in which you told me you were nearing retirement, I think you should buy IBM, because it will appreciate in value!"

The other important restriction is that you cannot manage clients' trading accounts on their behalf. You can't have access to their money, or issue trading instructions to their brokers. Otherwise you cross the line from publishing, which is allowed, to asset-management, which requires registration.

You must simply restrict your activity to publishing non-personalized advice which your clients can choose to act upon or not. (Note that using Collective2 to disseminate your trading advice via a Web site and email is considered publishing.)


ZeroSum
33 posts
msg #112548
Ignore ZeroSum
3/31/2013 8:10:19 PM

Makes sense. 80% of the yahoos selling videos and DVDs about trading should be slammed in jail. I doubt they could pass a Series X exam on their best day.

Kevin_in_GA
4,553 posts
msg #112550
Ignore Kevin_in_GA
3/31/2013 9:03:30 PM

The other important restriction is that you cannot manage clients' trading accounts on their behalf. You can't have access to their money, or issue trading instructions to their brokers. Otherwise you cross the line from publishing, which is allowed, to asset-management, which requires registration.


I had planned to start a trading LLC with several coworkers and trading friends this year, but when I found this out I put that idea to rest. This system (and one other daily pullback system I have) were to be the foundation of the LLC - now I figure it makes sense to try Collective2 for this one. The daily one would require automated trading and therefore can't really be used by most individual investors.

drew9
171 posts
msg #112551
Ignore drew9
3/31/2013 10:03:25 PM

Hi Kevin,

Just an FYI, I use Interactive Brokers for my brokerage and also manage some family members accounts. They offer an Advisor Account set up where you can trade up to 15 accounts as a non-professional including your IRA's, margin accounts and other folks accounts. You can group accounts for various strategies so trades are proportioned to those that you wish. Not sure if this would meet your needs for your work friends but you might want to look into it.

http://www.interactivebrokers.com/en/index.php?f=2321


Kevin_in_GA
4,553 posts
msg #112553
Ignore Kevin_in_GA
3/31/2013 10:08:23 PM

Cool - thanks. I'll look into it. I think TD Ameritrade has something similar, and there I could use their StrategyDesk automated trading software.

wkloss
230 posts
msg #112557
Ignore wkloss
4/1/2013 11:13:40 AM

Kevin,

Re:The other important restriction is that you cannot manage clients' trading accounts on their behalf. You can't have access to their money, or issue trading instructions to their brokers. Otherwise you cross the line from publishing, which is allowed, to asset-management, which requires registration.
I had planned to start a trading LLC with several coworkers and trading friends this year, but when I found this out I put that idea to rest. This system (and one other daily pullback system I have) were to be the foundation of the LLC - now I figure it makes sense to try Collective2 for this one. The daily one would require automated trading and therefore can't really be used by most individual investors.

I'm not sure I agree with your conclusion here. Most asset management firms don't make their investors members of an LLC. I believe that is the major difference. I think people can join together in an LLC for business purposes whether they are doing so to trade a trading system or operate a McDonald's franchise. I think you would have to have accredited investors and probably some of your own money in the trading pool.

I bring this up not because I fault the method you chose but to keep you from eliminating an option that may be useful at a later date.

Bill

drew9
171 posts
msg #112559
Ignore drew9
4/1/2013 12:28:26 PM

Thought I would bring up this again for those folks that are not aware of the Advisor structure. This is the main reason I switched all my accounts to Interactive Brokers years ago. It allowed me the opportunity to trade all my wife's accounts and mine in one click. I hated having to log into all the various accounts to try and trade. Many have margin and IRA accounts and then your wife may have similar accounts. It was too cumbersome to manage them all. This structure allows the opportunity to trade them all along with other friends up to a total of 15 accounts. This might also work for those like Kevin that may have other folks that could benefit from others trading or managing their accounts. You have all privledges except for the ability to withdraw funds. Everything is completely transparent to the account holders as they can see every trade and run unlimited reports. You can also mark up the trading fees or charge advisory fees in this structure. I will tell you that there is a learning curve as it is geared towards professionals but the customization capabilities for setting up screens and trading is outstanding. They are also not geared towards novices as they charge extra to "hold your hand." However, their online support, webinars and tutorials are great.

duke56468
683 posts
msg #112565
Ignore duke56468
4/1/2013 4:34:33 PM

Kevin how many trades do you average/day?

Kevin_in_GA
4,553 posts
msg #112569
Ignore Kevin_in_GA
4/1/2013 5:04:33 PM

It varies - today there are 5 candidates. For Thursday it was 2. Some days it is 0.

Today PVH triggered its limit order at $105.74. Pangolin-Z is now in 4 trades, all of which are up at the moment. The system only holds 5 positions at any time, so tonight subscribers will get limit orders to place for tomorrow. One will likely fill. None of the current trades are close to triggering an exit yet.

gmg733
623 posts
msg #112579
Ignore gmg733
4/1/2013 10:50:57 PM

You can start an advisement firm and do not need to be certified as a RIA if you only have up to 15 clients. This is probably why IB is set up the way it is. Regardless, as a RIA you have to directly solicit clients and a ton other barrier to entries set by the banks and investment houses. You can't even use a urinal ad.

http://www.fwallstreet.com/article/170-how-to-start-your-own-hedge-fund/

Locked out. It is still a good idea to form your LP and LLC for tax purposes.

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