What license is needed in order to trade clients' money?

Discussion in 'Professional Trading' started by M3racer2k1, May 20, 2007.

  1. I am currently trading my individual and family account and have gotten offers to manage other clients money. Which license would I need to obtain in order to do this? I have been told to register a firm with the NASD, and sponser myself for the series 7 after that. I have also heard that the series 60 something will do. Any info from anyone who has gone from managing their own account, to managing others as well would be greatly appreciated. Or just any info in general which could put me on the right track. Thanks.
  2. If I formed an LLC and used an online brokerage such as ETrade, IB, etc. would I have to register with the NASD? Anyone know the costs of starting up an LLC used for trading?
  3. lindq


    In most (possibly all) states you will need a series 65 - Investment Advisor. Not a difficult exam.

    An LLC can be arranged for a few hundred dollars.

    The LLC is no big deal, but registration with the NASD is a pain and lots of paperwork. Also be certain you cover everything with a good securities lawyer. You need to protect yourself from every eventuality. People can get very nasty if you lose their money.

    Good luck.
  4. With a Series 65 will I be able to trade the account using my own discretion (obviously a must for successful trading), or would I have to notify them and get permission for all trades?

    Do I need to register with the NASD? Or is it perfectly fine to just start an LLC and obtain the proper license, and then begin trading investors' accounts?

    Thanks for the help. Much appreciated.
  5. 2ez


    I thought one had to have a Series 6 for Mutual Funds and Series 7 for Equites and Mutual Funds.
  6. lindq


    Registering with the state is the same as registering with the NASD, because they are coordinated. States used to have their own regs, but they are now all under the umbrella of NASD.

    Check your state website, they will likely have all the necessary information, which will likely be very confusing to you. Welcome to government regulation. If you are lucky, they will provide a phone contact.

    If it is equities, you can trade whatever you want with proper registration and agreement with your clients, but you will be asked on the regulatory materials to report generally what you are doing. And your individual clients may have their own ideas about how they want to be notified.

    Check the NASD website for information on what they term IARD, which is Investment Advisor Registration http://www.iard.com/ Once you study for and pass the exam, there is much paperwork to complete, many forms to file.

    Once you move beyond a certain level of investor dollars, the SEC will get involved. Serious regulation at that point, and there are new regs on that subject.

    Again, most important that you contact an attorney familiar with your state regulations, because interpretations can vary as to what level of dollars you can trade, and the contractual commitments you must have with your clients. You can probably get some guidance in an initial phone interview if you play it right, before you decide to start the process.

    Because it is not a simple process, you should have complete confidence in your ability to generate trading profits before you get into it. Otherwise it is not worth the risk, expense, hassle, and exposure to litigation.

    Finally, unless you are trading for a couple very close friends and family members (still need a contract), do not go farther without proper state registration. Otherwise you can get hung out to dry and accused of providing a professional service without registration.

    The key here is, are you "holding yourself out to be in the business of providing investment advice or trading funds for others"? Once you cross that line, you need to be registered. And if you are not, you are putting yourself at great risk.

    (Disclaimer: I am not an attorney, and do not intend to become one. God forbid.)