Legal issue regarding trading for relatives

Discussion in 'Professional Trading' started by bobj, Jan 12, 2020.

  1. bobj


    I am managing 3 accounts of close relatives and myself with the same brokers. I use their username/pwd to trade and move fund. Of cause, the login and trading are on same PC and same IP. The broker should know it if it wants. Is there any legal issue with such practice? thx.
  2. IAlwaysWin


    I believe it is completely legal to take investments from family members without needed to be licenced to do so.
  3. Are you trading stocks, forex, forex options or commodities? Stocks and commodities are highly regulated, and it not only depends on Federal law but also what state you live in. I see you say you're from NY, if so NY has some fairly strict laws about stock and commodity trading, so you might want to check to make sure.

    Usually though, in the US it's an under 15 rule, meaning if you have fewer than 15 clients, and you don't publically offer to trade for others, than you should be fine.

    Just be sure to get the proper authorization forms from your broker to trade on your relatives' behalf to cover your backside if you lose too much money from your relatives.
    drm7, IAlwaysWin and comagnum like this.
  4. Bum


    comagnum likes this.
  5. MattZ

    MattZ Sponsor

    You do need a POA over the accounts. The "broker should know" is not a way to get around this.

    Get a POA over the accounts, and then ask the broker for a Block Account so you can execute in one account and BackOffice would allocate the trades.
  6. lukas


    You need POA. You can trade each account separately or in a block account although this comes with a higher commission. Your relatives in theory should not share their username/password for the trading platform with anyone
    PaulaTrading and MattZ like this.
  7. Like everyone else says get a POA. You would always lose the court case if one of them were to sue you for taking a large loss as you legally aren't supposed to be trading their account in the first place. Most brokers would just require a simple form for the owner to sign off that you're authorized to trade on their account.
  8. Robert Morse

    Robert Morse Sponsor

    I can't provide legal advice, only what our process is. The owner of the account must open the account. The owner then signs a Limited Power of Attorney (LPA). That document has information about you and with your ID, it is then processed to allow you to trade. The keyword is "Limited". The LPA can trade and discuss the account with us but never move money. The owner can rescind the power at any time.
    comagnum and Trade Theory like this.
  9. Robert Morse

    Robert Morse Sponsor

  10. schizo


    These are snippets taken from Quora (read the links provided):

    1) You CANNOT advise, trade, manage, or otherwise influence investments without being a Registered Investment Adviser. (RIA) . In the US, the regulations are established by both the SEC, FINRA and each state. RIA’s are licensed by each state pursuant to their “blue sky” laws. In most cases you will find that you will have to have a Series 7 and/or 63 license from FINRA and an RIA from the state if you are acting as an investment adviser. You will have to file a registration statement ADV-2 which is available for public inspection. ( see | Form ADV).

    2) As a general legal matter, when you take someone else’s money to invest, you assume fiduciary duties. That means you are required to act in the investor’s interest rather than your own. The precise details will differ by jurisdiction, but adhering to that principle covers a lot of the potential issues.
    #10     Jan 12, 2020