Registered: Jun 2007
04-13-08 09:01 PM
I am of the opinion that Tuco was definitely operating in a gray area. But this has done nothing to make it "black and white" This did not go to trial. So basically the SEC charged Tuco with numerous violations, some of which were complete BS. Tuco agreed to stop doing business without admitting or denying anything.
What most firms have done is to stop accepting deposits and requiring a profit split. They are still giving out more than 4-1. If a prop firm doesnt take a deposit, how can the SEC argue they are customers? Without taking a deposit, traders are truly trading the firms capital. If there is a profit split, a true partnership exists. Under these circumstances, a prop firm should be able to give more than 4-1 and mark up trades. I say "should" because the SEC has never come out and clarified their stance on prop trading LLC's. Instead, they are just bullying firms around by charging them with violation knowing that they can't afford to defend themselves.