Lon_Eagle, Why would he be liable for losses when he has put in place all the necessary disclaimers,etc... ?
If you are only managing one persons money then you will be fine - as long as it isn't a little old lady who doesn't understand the markets and it is her entire life savings! I would use one of the brokers who use Currenex and the max brokerage you should pay is $20 per million. I would not use a non ECN type set up. However this depends more on your style of trading - do you trade news, scalp or a long term trader - all these things make a difference to who you use. Although you have $1m to manage no need to keep the entire amount with the broker - say you are trading on 4 times leverage (ie notional 4m) then the broker would only require say $120k margin. Leave a buffer for losses and keep the rest in a bank. The interest rate will be better, a bank will be more secure than a broking house and also say a disaster did happen and a currency did tank when you were not watching a position then a natural stop would be in place.
Yes, because the agreement would have broken the law and been invalid. However if he is only trading it for 1 person then it is a grey area and as MM said he could become an employee. He could not have this arrangement though if he was trading 100 people's money even if the total amount was the same. Also if the person he was an employee of had raised the money from a large number of people then that would be possibly illegal as well.
Contractually I wouldn't because my employment contract makes no reference to performance, I guess the worst could happen would be I'd get fired. The FSA have their own ideas about liability though, irrespective of contacts or disclaimers between parties people can't sign away their rights apparently.
Agreed. If someone has been deemed to be managing 'investments' without the correct FSA approval then it is a criminal offence. Making yourself an employee of the person whose funds it is, is a loophole that works if you are only managing a few people's funds.
I suppose he falls under FSA regulations because he is located in the UK ? He could also use a letter of credit for safety reasons having Refcofx in mind.
Lon, Mick and all I have been offered some small forex accounts to manage but am concerned about the legal aspects. I live in Asia so presumably the FSA have no authority, and the accounts are European so I think nothing to do with CFTC..? I might form a Limited partnership or LCC in an offshore location. Any suggestions or things to look out for with regards to legalities..
Oops.. pressed submit by mistake.. . How about placing the funds with a large wire house and investing these funds in some sort of asset allocation in short term Bonds, a strategy where your client will be assured 5% on her money. You can even get sexy and ladder the portfolio if you wish to take on additional risk. Most of the firms out there have FX platforms which allow you to take leveraged FX positions out based on your collateral and allow for 10X leverage (which should be enough at that level). Note, most of the platforms are not as nimble as Oanda for scalping, per say, but they are far more transparent and safety of funds will never be questioned with a UBS, Deutche Bank, ML, Smith Barney etc..... I understand IB also let's you place your funds in Treasuries while you trade your futures... something to think about. Keep your strategy and have those 1MM generate an additional USD50K to cushion losses. What I would'nt do is take that 1MM and deposit it at some online broker where you can't invest the funds in some sort of AAA investment. You have enough risk behind you and surely don't want to take on "Broker Bankruptcy Risk" regardless of how solvent the online broker is.... Stick with the brick and mortar guys... especially for that amount. Good luck...