How to raise money legally?

Discussion in 'Professional Trading' started by qll, Jun 23, 2006.

  1. qll


    I didn't take any exam. No licence. Since, my overhead is about 50k to 100k a year if I calculate how much I would earn if I take another job etc, I am in the stage that I need more capital. I was told that there are only 3 loopholes to raise money without licence.

    1 find clients willing to let me trade in their accounts. I can trade up to 15 clients' accounts without licence.

    2 form an investment club, ask members to put money in it and i take a performance based pay

    3 first, publicly promote myself, instead publicly raise money, then once they know me, and are willing to invest in me, their money become none public raised capital.

    Can anyone confirm those are the legal ways to do?
  2. Good questions. The answers are important enough that you ought to actually seek an attorney's opinion before taking the idea to the next level. I've wondered about the same things myself.
  3. I think you open yourself up to getting sued or put in jail. Why cant you get licensed? You have a criminal record or something? If you do, people are not going to want to invest with you. Its like...why would i invest with joe no-license when i can put my money with a real broker who actually got his license. When you say licensed you mean the series 7 right? That test is easy....couple of hours a day and in a month or 2 you are ready to go.

    If you go with trading other peoples accounts, you lose money, they sue you. You dont pay the losses, you go to jail. There is about a million different things that can go wrong with your 3 scenerios. Do things the right way and save yourself from what could be your demise.
  4. qll


    Thank you for the advice. Could you tell me why I being licensed will not be sued?

    Here is my reasonings why I don't want to be licensed
    1. I am not in USA.
    2. I don't like the trouble of filling all paperworks.
    3. I like low cost ways of doing business: I had and still have several small business, all are - cheap employee, cheap office, cheap computer, cheap overhead, cheap profit, type business.
    4. I hate risks, so I hate to pay some lawyers, accountants 50k to 100k up front, when I don't know if I can get any capital. If I can pay 5% capital finder fee after I get the capital locked for 5 years, I am extremely happy.
    5. I like to focus on investing, rather than dealing with administrative, legal, accouting. That will divert my best - picking the winning stocks.
    6. Most of all, I think series 7 is not related to how I make money: interest, bond, regulation have little or no impact on how I select a winning stock.
  5. gll,

    Seeing that you do not like to take risks, I would advice you not to trade your own account, nor anyone else's account for that matter.

    Trading in any type of market has risks, just ask any professional trader and if you can't live with that then don't trade because you'll end up losing everything you have.

    I would recommend getting certified in the market that you wish to trade in, being certified has many advantages. I myself am currently working on my CTA (Series 3) license. Even though there is a lot of paper work that must be submitted to the NFA and CFTC it is only to make sure that you provide truthful, honest and accurate information to your potential clients and clients.

    Best regards,
  6. Pekelo


    I know, you say "up to" but the real number is much less. The number 15 is usually based on IB's Family and Friends account and the limit there is yes, 15.

    But in real life in the US it is regulated by each State, and for example that number in Pennsylvania is 7. In other states the max. is most likely 10 and not 15.

    So you might want to call your state comptroller's office and ask before you accidentally get more clients than you should, without a licence.
  7. cdowis


    Do not publically advertise. This triggers alot of rules and regulations.

    You can legally trade for friends and relatives, etc, without any licensing requirement. There is a limit on the number of accounts.

    The legal entity under which you trade is between you and your attorney.
  8. range


    Regarding classic equities management (not a hedge fund set-up), so long as you do not receive compenation, you can legally trade equities for anyone, no limits.

    Federal law, as I understand it, allows you to trade equities, and charge, for up to 15 individuals, without registration.

    However, state law, often requires registration with that state if you trade, and charge, for more than 5 residents in that state.

    Some states, like the New England states, are strict. Being a Connecticut resident, I must register with the state of CT even if I have no CT accounts and only trade accounts for residents of other states. Other states, like Florida, allow Florida residents to trade, and charge, for up to 15 Florida residents without registration, last I checked.

    I am not an attorney, so check this for yourself.
  9. I do not mean to post rudley. But can you trade? Do you have a two-year track record? what do you trade? Do you have over a 15% drawdown?

    I think its all the same. If you can trade and make bucks...then you can manage money and the HF's try to pay you about 5%..or you can go prop...but why not just trade your own money and grow that way as you can keep all of the profits and compound as you wish. It seems to all work out the same....

    Now if you like politics...then by all means go for it...

    Michael B.

    I am in the stage that I need more capital
  10. qll


    I am in the market for 9 years. In early days, pure trading for large long only funds in a foreign bear market. Fund is lost due to poor management, then I went to graduate school to develope my own method, mainly targeting distressed companies. I am not active trading. Simply take positions and hold then get involved with the underlying company. My personal account is already not tiny. I don't use any margin because I think rate is too high. I borrow money heavily from low interest rate source between 2% to 8%. I am in the process of selling my business and real estates to add more to my accounts. I know a few guys in similar stock investing method. None of us lose. Most are part time in investment with no time to trade during 9-5. The best guy has return of 600% in 2.5 years. When you invest big in distressed companies, who is unknown or penny, you got great access to CEO, or daily business. If you know the business area, you can influnce the company. It is exactly 100% Buffett's method. Many of our investments are multi baggers, from unknow companies to well known stars.

    I tried to search for jobs on but I don't see money manager jobs - I guess mainly because those jobs are hired by people they already know. I contacted a few prop shops, they all denied me for a few reasons
    1. they asked about my volume, and i said, i would buy and hold
    2. they said to give me capital, but will not let me carry overnight
    3. i don't want to trade in usa, because i do not need to pay any tax.

    I need more money to run my operation, because unlike trading, I got overhead - time to research companies, time to interview managements. the time lost == what i could do in my other business. If I dont scale, I would rather be in my current business and just invest then forget.
    #10     Jun 24, 2006