Yeah, I'm getting mixed signals as well. My people say "it looks like were fighting an uphill battle." (to stay Non S7)...but who the heck knows? With Philly merging with Nasdaq, of course they have to have full compliance with the 2 year (CE) rules, etc. As far as were concerned, we'll just continue to follow the rules as they're set down, and adapt as necessary...which I know your Firm has done as well. All the best Mav!! Don
good thing the founding fathers didn't keep adapting, sometimes principles are more important than money.
(Normally not political, and this is meant for both sides of the aisle).... It seems the founding fathers and their principles don't get the same respect as they used to, and rightfully deserve, IMO. Don
Nothing personal , but I wouldn't trust most prop firms with chinese money. Especially since chinese money is pretty good right now.
This is an attorneys response (i guess) to the tuco trading/sub-llc Attorney Responds: Unregistered B/D Accused of Defrauding Day Traders ..." Comment #1 - Before Reading TucoTrader Response. I have a bad suspicion that the SEC is leaving some very important facts out of this case. I don't know Tuco and am not involved in this case, but I know this fact pattern. There are a lot of day trading shops that set up as LLCs. The day traders become members of the LLC. They may think of their capital as their account - but it's not. They made a capital contribution to the LLC and became a member of the LLC. The profits and looses of their trades are credited to their capital account with the member - but it isn't a real "account" in the securities-law sense of the word. Understood in this context, the unregistered BD isn't one. A broker is defined as someone engaged in the business of effecting securities transactions for the account of others. But there's no "other" here. The LLC is engaged in the business of trading its own capital. And it doesn't steal customers' money to pay expenses and cover other customers' losses - it uses the LLC's money to pay the LLC's expenses and cover the LLC's losses. And Tuco didn't receive transactions-based compensation for its members' trading, members of the LLC traded the LLC's account. This is a very common arrangement that three separate offices of the SEC have started looking into and they all think these firms are getting around the spirit of the law - they don't want to talk about the letter of the law. In fact, SEC's market reg won't even answer the regional offices' question whether these entities are BDs, because market reg isn't remotely sure they are. I don't doubt there may be some bad facts here, such as Tuco's marketing materials not always explaining all of this properly, but I'll be real surprised if these 250 "customers," some of whom are very sophisticated stat arb traders that worked for major broker-dealers, didn't sign an LLC Operating agreement spelling all of this out. Comment #1 - After Having Read TucoTrader Response. Ah. Sorry, didn't see that. I suspect he's exactly right. I'm not saying this is all one-sided. There is an SEC argument here on the BD registration, which is that the "lead" manager or organizing manager usually does take transaction based "compensation" by debiting each LLC member trader's capital account a commission-like fee for shares traded and crediting his own account the same amount. And that does make the LLC or its lead member look a little like a broker, but the counter argument to this is the charge is an internal function of the LLC operating agreement and, at least when viewed from outside the LLC, doesn't involve charging anyone anything. The LLC has the same amount of money before the fee as after, only the members' capital accounts have changed. As you can see from this guy's comments, he is no dumb innocent. He's a sophisticated guy. Real customers don't find their way to shops like this and shops like this don't want real customers. The lead members of these LLCs always have substantial amounts of their own money in the LLC and all the traders are fundamentally cross-collateralizing each other since they are equity holders and the broker-dealer carrying the LLC's account and extending credit to the LLC is a secured creditor of the LLC, not the LLC's individual capital accounts. These guys know and understand this. In other words, these LLCs look a lot more like SAC Capital and Citadel, a hedge fund with separate portfolio managers running separate strategies and that also happen to have contributed capital as a member of the fund. The SEC trying to cite them for day-trading margin violations is just plain sloppy. Whether or not the LLC should have been a broker-dealer, it clearly wasn't a member of any self-regulatory organization and therefore wasn't subject to the day-trading margin rules, even if a court subsequently determines that they were acting as an unregistered broker-dealer. _______________________________ Note. The above comments were submitted by someone who is not associated nor affiliated with Compliance Insights. Unless we state otherwise, Compliance Insights has not researched the accuracy of the above comments, and we have not expressed any opinion - pro or con - on the above comment or subject. ^Not me.. Good points though. I like it.
good post westward. the SEC knows it did not have the law behind it.. it acted quickly and with the intent to scare the others into all getting registered. if you read the complaint you can see how they forced the case to fit the law they cited... but sloppily. very sad indeed.
very insightful post. my guess is after a few months and this NONSENSE blows over,you will see more llc's advertising again but also making sure all their ducks are in a row. remember,this is a two way street,if all the traders lose money,so do the owners.i see nothing wrong with a properly structured llc who outlines everything in a contract that even a third grader could understand. the sec is just trying to look as if they are watching out for the little guy. we all know that is utter nonsense. there are still many ways someone can trade with 5k and still get 20-1 margin without a license.
A lot of what is in this post has always had me scratching my head with some of the SEC actions (if traders contribute to the LLC, then it is all their own money in ONE real big pot - not a bunch of separate pots. Only accounting creates the breakdown of each traders own separate activity/funds). The actual law seems to support the LLC model operations - the SEC might not like how all these llc's are operating, but they will have to make a change in the law or manipulate the "interpretation" of the law by a court.
Tuco's assertion was similar to what that attorney wrote, and they intended to defend themselves in court and hopefully prove that what they were doing was not a violation of the law. However the way the sec operates is kind of like the mob. They come in to your office, freeze all activity and then start their investigation. That involves their lawyers, accountants, computer staff, various assitants etc. They all work for the government, but guess what? Tuco was getting billed for all this. To the tune of about $2100/hour. Time in court, guess who pays for the sec's lawyers and staff? Yep, the defendent. How long can a business defend itself and make it's case when you've got a government funded mob as your adversary. The sec's goal was basically to shut it all down and just bleed every dollar from the firm. That's why Tuco quickly dediced to just wave the white flag, cave into every sec demand and try to get trader's their money as quickly as possible. There is excess capital in the master accounts, but when the protector of the traders, the sec, is sucking your money away at the rate of >$100,000 a week, it's only so long before the god damn government would be the ones taking trader's money. Oh yeah and guess who pays for the court appointed reciever?