Legal Q Regarding Trading Other People's Money

Hi all. I am wondering if anybody knows of any legal ramifications if I were to go out today and start offering to trade for either friends or family. I know absolutely zilch in the area so any advice would be good.

I am considering it because I am undercapitalised and despite a decent % performance the actual amount is too small to be useful for anything.

Thanks all.

That's a great question - I know that there are regulations around doing that but I don't know what they are. I'm interested to hear what others know... You're doing the right thing checking up before diving into it.

Start here http://www.traderstatus.com/

If this site will not answer your question you can google it I remember seeing a free half hour video on traders tax return I cant remember the site name but it is out there if you have the patienc
to search for it.

I hope it helps

khamare1: That mostly deals with your tax status from what I can see. Feng is asking about regulatory rules and laws regarding the trading of other people's money. There will of course be tax implications but I don't think that's his concern yet...

Feng

In the US you can trade up to 14 ppls accounts without being licensed. I don't know what the rules are for your Provence in Canada. With that said it also depends upon your clearing house and how many accounts they feel comfortable allowing you to trade. Diff brokers will allow diff things.

The bigger issue here is that you are not ready to trade other peoples money. You yourself are still learning and in the discovery stage. Nothing good will come from trying to rush your learning curve.

Don't sabotage yourself by adding the extra stress of being responsible for other peoples money. I know that you are committed in learning how to trade but you haven't yet arrived.

There will be a corner that you turn and then you will know you are ready. It wont be because of any back testing or prior results.

And now to answer your question....besides following the proper trading protocols there are still legal issues of all sorts. There is no way to get around this except for having a legal teem on retainer. For example you can be in full compliance with Canadian trading laws but your client sues you for deceptive advertising. In an advent like this your following the law offers you no protection.

If you still plan on handling other peoples money expect and plan for the worst. It wont go the way you think it will even if it profitable for them.

If you trade other peeps money leave family OUT of it ...

Howdy,

You can trade other peoples accounts. They cannot give you the money to put into your account. The customer will fund their own account and fill out a form with the Broker to allow you to be authorized to trade their account. Whatever you work out for your fees they will have to send you the money separate along with a 1099. Now this is in the USA. I would not attemp to trade other peoples accounts till you can show them at least 6 months (in a row) of your own profitable statements.

John

Thanks guys for all the replies. I am now considering joining a prop firm instead. Can anybody recommend any something that requires little to no deposit and where I can trade intraday ES?

There's a number of clearing firms that let you trade ES and other futures intraday with $500 margin. Check some of the broker recommendations on this site. I don't know much about prop firms but finding a prop firm probably isn't necessary.

just because you can trade with 500 doesnt mean you should...

You're right but it's my understanding that the primary reason for using a "day trader" prop firm is the high leverage they provide which is already available to you as a solo retail trader.

If you're looking for a prop firm to bankroll you to trade their money without a track record, well good luck.

I asked my broker how many accounts one may in reality trade without a CTA license ... he said his clearing typically allows 3-4 without asking questions and after that it's harder... the maximum they would allow is about 8, not more, due to increased risk. Ha, that's way below the 14 that the law says!!