Legal issue regarding trading for relatives

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

  1. Robert Morse

    Robert Morse Sponsor

    Unless the State you do business in has an exemption. NYS has one for a small number of accounts as described in the link I provided.
     
    #11     Jan 12, 2020
    Bum likes this.

  2. Lots of exemptions for managing 3 accounts of family members...
     
    #12     Jan 12, 2020
    Bum likes this.
  3. Robert Morse

    Robert Morse Sponsor

    El OchoCinco-I think you live in Colorado based on your profile. I can't find an exemption if your place of business is in your state. They have one if you do business with a few residents but your place of business is not in Colorado. https://www.colorado.gov/pacific/dora/investment-advisers-investment-adviser-representatives Read the Investment Adviser FAQ. This is all very complicated and varies from state to state. Just because your broker allows you to do friends and family accounts, if you are charging fees, this does not mean you are compliant with your state laws.
     
    #13     Jan 12, 2020
  4. I don't think I have even visited Colorado but have flown over it many times....
     
    #14     Jan 12, 2020
  5. Bigger question is OP receiving compensation for managing the family accounts.

    Most states include this in their registration definitions:

    "Investment advisor" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities

    Without compensation you are just advising your family on what to trade or invest in. You are not holding yourself out as an adviser nor receiving compensation. If those facts are true then you might not need to register but POA might be good for personal security so that it is clear the family members are ok with you trading their accounts.
     
    #15     Jan 12, 2020
  6. In addition it is always wise to also draft an agreement or at least a LOI between you and your familiy members in order to 'legalize' the requirements, and what if's...
     
    #16     Jan 13, 2020
  7. RedSun

    RedSun

    If one person managing several other accounts with different names, the trader must make sure there is no conflicts of the trades in each account. You can't buy stock ABC and sell stock ABC at about the same time. Brokers and regulators do not want to see traders trying to manipulate the markets.
     
    #17     Nov 8, 2021