The Legal Dilemma with these prop firms

Discussion in 'Prop Firms' started by ProgrammerGuy, Aug 7, 2007.

  1. The Legal Dilemma with the prop firms

    I have read this before how these legal contracts that these prop firms make you sign are incredibly one sided. I got the contract from Bright, Assent, and Echo and had my aunt reviewed them who is a lawyer. It is commonly said that lawyers make a big deal out of the smallest things in contracts however; I’ve never seen my aunt react like this. She told me that they have complete and total control and can really tell you to do anything.

    She stated when you sign into one of these prop firms you become part of the company. When you become part of the LLC class A members (who are not you) have complete and utter control of you. When you become part of the LLC there is a part called the Capital Contributions. This is where rules are stated to determine how much Assent LLC can ask you as a member to contribute to the business.

    Get this. In the contract, they make you sign a clause that states that you agree to all the terms on conditions in table xx that explain the capital contributions part. Now here’s the best part.. This table was NEVER included in the sign up packet. I spoke with them and they weren’t able to locate this very important missing document. Now if those aren’t red flags I don’t know what is.

    So I had my aunt read the Bright Trading contract. Believe it or not, there is a clause in the Bright trading contract that says something to the effect of “you are responsible of any penalties incurred by the company” I read that and though you have got to be out of your mind. Also, Bright Trading like Assent has complete control, and you must agree that the class A members (again who aren’t you) have freedom to change all the terms and conditions of the contract and you must abide by the new rules.

    The lady at echo trade informed me that theirs wasn’t going to be pretty either.

    Well ya know, that’s my aunt she’s looking out for me. So I then took it to another lawyer who said the same exact thing as my aunt and completely advised me to stay away from these horrific contracts.

    Now it is very unlikely to happen, probably not, I can’t imagine the Brights who has TONS of money say, “All right class B member we need a huge new office building, everyone put up $100,000”You say Hell no, but you signed the contract and agreed with ever terms and conditions on that damn thing. Now I doubt that, that’ll happen, but I can’t stop thinking it is just bad practice to put yourself at the mercy of really people you don’t know at all.

    I’m sure that 99% of the people really don’t care about what they are signing, and not to sound like an ass, but don’t really have that much in assets that they’re worried about getting a big law suit against them, but this is something that that I take seriously. I’m wondering, from the ones who have looked into the contract if there is a way to protect yourself, what comes to mind is having your own LLC join the Bright LLC, and have the LLC with limited money. Any advice would be appreciated.

  2. It's been discussed before, many times, how dangerous going prop can be. All things considered, you may as well go to a loan shark for your additional capital and trading leverage.
    Thanks for the heads-up into the legal end of the business.
  3. So I had my aunt read the Bright Trading contract. Believe it or not, there is a clause in the Bright trading contract that says something to the effect of “you are responsible of any penalties incurred by the company” I read that and though you have got to be out of your mind.

    Since our traders "are" the company, they are certainly responsible for any rule violations they incur. They are not responsible for any other trader's violations.

    Some firms even keep traders money for 12 months (we don't of course)...there is a lot of legal stuff in these contracts, makes me want to go back to the days of a one page agreement that said something like "I put up $$, I take out profits" LOL.

    Anyway, if there are any detailed questions regarding our Firm, please send me a PM and I will have them responded to by our Compliance Officer.

    As far as "dangerous" - that is certainly a two way street. A trader "could" lose their deposit, the Firm "could" lose $millions with a rougue trader. But, overall, and business relationship has to be approached with due diligence.

  4. Joab



    I would vote for you for President,

    Spoken like a great politician... :p
  5. True, but you charge more than double the industry rate in commissions.

    Which one is worse?
  6. Please show me how those prop firm clauses are any stronger than ones you would find in a retail broekrage account. If you lose money or do something illegal at a retail account which incurs penalties, you think Fidelty is not going to go after you?

    retail brokers do not have rules about how much money you have to put in your account and how much you have to maintain to keep the account open?

    There may be a few unsavory props with bad practices but I cannot understand all the whining about the basic prop firm clauses. I am a lawyer too and advise some of you who trade retail to read your brokerage agreement and see how much power your retail broker has over your account as well.

    Main difference is retail accounts are protected at least from another trader's blow-up through SIPC or other measures while the prop firm can go under tomorrow quite easily. That is the main area you need to focus on of course.
  7. Midas


    These contracts are nothing compared to what you had to go through several years ago to get into the business in this capacity.

    You are right to pick through the details of the contract but you did not really expect the deck to be stacked in your favor did you?

    By the way the 3 firms that you mentioned are among the best out there.
  8. That is not even close to being true, and you need to take all things into consideration (capital usage, safety, security, etc.). Many traders who went to "bargain basement" firms have returned and are very happy to be back home again.

    We can't be all things to all people, but with some of the best traders on the planet, I guess we have a pretty good offering.

    Shop around everyone, do the due diligence. Same old story, LOL.

  9. I prefer the term "Public Servant" to "politician" LOL.

    Don :D

    PS: You know though, I do try my best to share what I can here, and as mentioned before, "you can't please everyone." At times I see why no other major firm ever posts here, LOL.
  10. Bright is the only "major firm" that forces new traders to pay a few thousand dollars for something called "boot camp".

    Many other firms don't want/need to recruit newbie's. It's simply not financially worth it.

    Bright is different because you make a few thousand off them before they ever even touch a keyboard.

    Not flaming...just answering with an honest opinion.
    #10     Aug 7, 2007