Here is a very specific question: If I ran a fund, is there any rule that states my clients must have access to the trade executions? If there is no rule, I have already thought of a potential solution. I will show my numbers to an accountant. The accountant can verify and view my brokerage statements while I am present. They're not allowed to make copies or anything. Then I can refer my clients to the accountant to verify my claims.
So I take it then that you have only recently...possibly in the last year....been trading "great"? Unless you have at least a three year record of "greatness", I wouldn't give you a dime, and you need to realize that others will not likely support you either. Your success could well be the result of particular market conditions - like a raging bull - that can quickly evaporate. Turn your 100K into 500K in the next five years, and you've got my attention. I would also ask that with your confidence in your strategy, and the leverage available to any trader, why in the hell would you want to take on clients with all the attendent hassle and legal requirements? You don't need that, and trust me, you don't want it. You are very young, and I'm going to bet your motivation is more along the lines of letting other people know of your success and gaining praise for your skills. Put a million in cash in your own account, without owing anything to anyone, and you will have all the praise you'll need and far fewer problems.
The answer to your question is that there is no rule that requires your investors to see your trades. However, you will not be able to run any Managed Accounts without showing your trades (a structure that allows you to trade as an authorized trader in their accounts). Managed Accounts are a way many CTAs run money. Nonetheless, you are not forced to do any Managed Accounts. As for not allowing your Accountant to take hard copies of statements, I think that is a little bit overboard. His 'audit' or NAV calculation will be sufficient for an investor, however, you will need to allow him to keep copies of the statements, etc. Remember he has a fiduciary responsibility to you in terms of confidentiality, etc. Hope this helps..Neal.
Thank you, trade-ya1. You're right, I probably am being a little too paranoid. I have another question for anyone who can answer. I've been planning on starting a corporation for my own trading. Should I do this now and then do the fund stuff later, or should I hold off on my corporation and just wait til I start a fund (if I were to do that)? Thanks
I'm not a lawyer but I'd hold off as long as you can. There are tax reporting reporting requirements and other hassles involved in having a corporation. You can't just form it and forget about it. Also, you are not sure yet which type of corporation is most suitable. For example, a single member LLC provides very limited if any corporate veil protection. There is no mystic in forming a corporation unless you can show revenues to claim expenses against for tax purposes. Just my nickel thought.
if you're any good with a track record and trade with a real fcm it won't be too long before they'll approach you, i'd venture to say.
I dont understand why you wont to bring all these legal, corporate rules, extra fees to setup & run a corp, & deal with people?? All that just to get more money to trade? I know you dont want to sell you trading strategy so you jsut want to have more money to trade. Why not just use margin? Your young enought to create a million dollares by the time your in your low 30's!! Trust me I have seen other traders go down this road and They DONT DO IT ANYMORE!! All the extra work to deal with ppl and paper work ect.. the list goes on & on & on. You will not enjoy trading for very long if you get stressed out with clients. Trade you own money and retire early. P.S I'd like to see your trading strtegy work in a down market
Agreed 100%. Thats exactly what I was thinking. S.R. Hadden you remind me of mrmarket. you definitely have a dose of the arrogance. Pay attention to lindq's comments.