Legality of selling trading models

Hello,

Does anyone know what the situation is on these ridiculous people and firms that constantly spam us telling us that if we 'discover the magic of options' or use their proprietary platform blah blah we will all be billionaires... I just cant see how they are legal. Surely, well certainly in the UK, you cant conduct investment business of any sort without regulation, and no regulator would allow these ads! If you are purporting to teach people to trade, or give them a system, or whatever else - that is investment advice is it no? I know it is not in a specific product class necessarily, is this the loophole they use??

Sorry - but these things really wind me up. I got one last night, and I actually bothered reading it because I thought these claims are so absurd, I was just intrigued as to how the ad would possibly jsutify them. Long story short, it didnt really. Apart from suggesting that the strategy made money because it picked more options that were profitable than those than werent. Oh, and the profitable ones typically returned 200%

Now this 'well known trader' made 18 billion last year according to the add. When you read the ad, it sort of conceded itself this was rubbish, and explained that a hedge fund in california had made 18 billion. No related at all obviously, apart from the fact that the hedge fund used derivatives lol!! That was genuinely their explanation - and there was me thinking derivatives was a vast vast market, with thousands and thousands of products - turns out it is just options, and you cant lose on them

Oh, and the final justification for why he is not trading this himself - "I love to help people being held down, just because they dont know the market secrets".

How is this remotely legal?!? And if it is not, do you not have recourse to sue? Which I assume means that these must all just be based out of Bogata or something... Anyway - I hate these ads, and it astounds me they work. Like the ads on the tube that say come to a free trial workshop and we will teach you to trade... There was me bothering with 6 years as a student, thousands of consequent debt and everything else to make it in financial markets, and I could have done it in my lunch hour

Always look at the disclaimer these sorts of sites have.

it ends up being a double jeopardy as well, as some will give refunds, but only if you can show you took all the trades for a set period of time. if you are losing heavily, you will tend to stop trading, thus invalidating your refund option.

the legality comes from the disclaimers.
although, with the new Sale Of Goods Act, which overrules any restrictive Terms and Conditions, I wonder when the first challenge will take place, and the outcome.

are you planning to take someone on, or package your own system?

EDIT: Sale of Goods Act; may not cover services! (didnt think when I wrote that bit)

"the legality comes from the disclaimers.
although, with the new Sale Of Goods Act, which overrules any restrictive Terms and Conditions, I wonder when the first challenge will take place, and the outcome.

are you planning to take someone on, or package your own system?"

It is not that I particularly am bothered either way - I just find it slightly staggering that these people get away with it. Neither am I ever likely to get rumbled and stung myself by these people. It just amazes me that they can get away with it. Ultimately, I dont see how they can argue that they are not giving investment advice?!? I know they have the disclaimers, but I dont really know if they are in any way legally binding?

When I started out on a trading desk years ago, all our clients were end users, and as such we could avoid FSA registration since we were not trading or providing investment advice, we were just helping clients with phsyical exposure hedge. I dont think this would even be allowed now, and that was not that long ago!

Also, I am interested in knowing what software is available in terms of customizable software and black box trading. It is pretty tricky to find out the range without getting all this sort of nonsense coming up.

Finally, I work now building models and things like that. I have no interest in selling these models now, but I may do in future if I ever went self employed. I would not want to be banded in with these cowboys!!

Just constantly baffles me how all these sorts of characters can continue to operate.

A lot of the systems (that get marketed in the UK at least) are aimed at spreadbetting, which I don't believe is subject to the same regulations as trading advice, being considered gambling rather than investment.

graemenash said:

A lot of the systems (that get marketed in the UK at least) are aimed at spreadbetting, which I don't believe is subject to the same regulations as trading advice, being considered gambling rather than investment.

Click to expand...

Good point as you don't hear about horse racing tipsters being under FSA legislation when recommending a bet and I would expect the same applies to recommendations for spreadbetting.


Paul

Automatic trading systems/models are not sold to the public.

If you have got something that works in real-time trading hedge funds will pay you alot of money for it so no need to sell it to the public.

Regards

Baldur