For anyone who has/is doing this now: What's the best setup in terms of operation/types of trading accounts if a family member/friend wants me to trade their money for them? Is it as simple as that person opening up a new trading account (or keeping the one they already have), and adding me as "power of attorney"? This is not a big-time operation, and it only involves 1 or 2 people. I'm not planning on starting my own fund and issuing shares, we just want me to have the power to execute trades on behalf of these folks? Would I need any kind of licenses, or have to form my own company first, or can I just execute the trades whenever with no obstacles? Thanks in advance for any replies.
____________________________________________ easy question. easy answer. NO. you do not need to have a license. No series 3. No series 7. YES. you do need to sign the limited power of attorney forms that give you the authorization to trade the account only. You will not have the power to deposit or withdrawl funds from the account. _____________________________________________ Sign the forms and trade away!
Yes, a limited "power of attorney" to trade another persons account. As far as licenses, If you hold yourself out to the public as an investment advisor, commodity trading advisor (CTA) or any other registered representative under the NASD, then you would have to register in the states that you wish to "market" and hold various NASD series licenses, ie., Series 7, 63 , 55 etc.... It sounds as tho you are just wishing to trade for friends and family which is perfectly fine. Question? Are you going to charge a fee for trading these accounts? Percentage of profits or Management fees?
Thanks for the quick responses. It sounds from your answers, (and what I suspected) is that I just need to sign the power of attorney forms. And yes, there will be some fees and percentage of profits taken out, but the amounts have not been decided yet. Does that affect the setup in any way?
The SEC mandates that the aggregate amount under your control be less than 25 million, and that you have a small number of accounts. for most of us, we fly with that requirement. Just also check with your Dept of State to see your State's limit on the number of accounts you're permitted to trade before being required to register as an investment advisor: http://www.nasaa.org/nasaa/abtnasaa/find_regulator.html
Great point. Also, if you do not hold yourself out to the public and you decide to trade futures contracts as well then you may not manage more than 10 accounts and/or under $200k or you might have to register as a CPO/CTA since now you are talking about percentages & fees.
Back to this thread... If I'm going to make trades on someone else's behalf, and we open up accounts at IB, with "power of attorney", does it matter if the account is an individual account with power of attorney, or IB's family and friends type of account with power of attorney? I really don't see what the difference is? Opinions?
no difference but with the ib fa account you can trade all the accounts with one order. you can allocate say 100 share to each account ahead of time and just make one trade and it allocates trades to each account automatically.