legality of managed accounts in the U.K

[SCFX]

Hi, would anyone with more knowledge on this topic give me some advice. I have now been trading full time for 4 years, the first two years were spent training in an institution.

I now feel i am ready to move on and start trading client accounts while also offering a signaling service to other individuals. I have signed my systems up to Collective2 so that potential cleints can see my actual trades without fear that i am a con artist.

However; what is my legal position to offer these services in the U.K? I know that in the U.S an individaul can trade up to 20 futures accounts without being registered with the appropriate regulatory body. I also mainly trade FX and i also know this is unregulated in the U.S, is this also the case in the U.K?

I really believe i am now in a position to offer third parties a good service as i trade fully automated algorithmic systems, so trading client accounts should not have an impact on my trading success.

Thanks in anticipation!

Charlie

 

[RogueTrader888888]

You may need to be regulated by the Financial Services Authority (FSA) since you are investing/advising 'a specified regulated activity' that carries a certain amount of risk.

contact the FSA directly.

 

[grantx]

You will need to be authorised by the FSA.

Grant.

 

[protrade]

I think if you are only promoting via collective2 you don't nned to be licensed.

 

[grantx]

Protrade,

Even "promoting" is regualted by the FSA. But what would be the point of promoting on its own?

There is nothing ambiguous here: FSA authorisation is required.

Grant.

 

[the blades]

Protrade,

Even "promoting" is regualted by the FSA. But what would be the point of promoting on its own?

There is nothing ambiguous here: FSA authorisation is required.

Grant.

Grant,

I'm stunned - well not quite but - if I were to post a system on Collective 2 and take subscriptions, I would need to be FSA regulated? Surely not? I'm missing the point, aren't I?

UTB

 

[grantx]

Blades,

Everything is regulated. However, an exemption may be possible if a trading system does not constitue "investment advice".

From my discussions with the FSA a few years ago, it would appear a technical analysis system does not constitute advice but an option pricing sytem does.

I fail to see the logic here. A technical analysis sytem will contain subjective elements, ie what the designer personally considers relevant. The subjectivity or opinions seem to be "advice". But this is not the case.

However, an options programme using standard mathematical models, eg Black-Scholes, does constitute advice. But mathematics isn't opinion, it's fact - there is no subjectivity, hence no "advisory aspect".

So, you should be OK taking subs for a TA system as long as your not advising on trading (but isn't this implied within the system?).

Grant.

 

[Crap Buddist]

with collective2 I think they term it as "publishing your trades" to which people may subscribe, obviously it would be up to them whether or not to act on a published trade.


do you need to be FSA registered to publish your trades in the U.K. ? cant see that you would need to be, after all you are just publishing your trades

 

[Crap Buddist]

Power of Attorney may be a/the way forward I posted a link in wasps paperwork thread. An individual may be able to obtain authorized control of peoples money with specific intent, may be an option for a small number of people , or maybe theres another way to get umbrella cover , somehow, someway?

I think for joe public to walk in an give POA one would have to have a very convincing setup and able to prove (to the public) ethics,morals and controls are in place... bloody hell ,sounds like a mare...

if you have a pedigree and you get recco's then POA should be all you need I would of thought.......

just thoughts...

 

[grantx]

CB,

Power of Attorney is OK as long as you will not be remunerated or receive any material benefit.So what would be the point?

What are "recco's"? Sound too much like RICO's, to me.

Grant.

 

[the blades]

Blades,

Everything is regulated. However, an exemption may be possible if a trading system does not constitue "investment advice".

From my discussions with the FSA a few years ago, it would appear a technical analysis system does not constitute advice but an option pricing sytem does.

I fail to see the logic here. A technical analysis sytem will contain subjective elements, ie what the designer personally considers relevant. The subjectivity or opinions seem to be "advice". But this is not the case.

However, an options programme using standard mathematical models, eg Black-Scholes, does constitute advice. But mathematics isn't opinion, it's fact - there is no subjectivity, hence no "advisory aspect".

So, you should be OK taking subs for a TA system as long as your not advising on trading (but isn't this implied within the system?).

Grant.

thanks for the clarification Grant.

UTB

 

[grantx]

Blades,

Anytime, mate.

Grant.

 

[sjerar]

As long as you don't keep funds (but a broker does).
And pay taxes over your earnings, you don't need any registration.

 

[grantx]

Sjerar,

Yes, you do (in the UK). You are deriving a benefit and performing a "recognised function".

From memory (a long time ago) but 85% certain of the following.

A broker not holding client funds is EU ISD (Investment Services Directive) Category C (if I remeber correctly); could also be non-ISD.

Holding client funds and dealing on a discretionary basis is Category A (Category B is holding client funds but dealing on an advisory basis).

Category D is not holding funds, not deriving a benefit, not advising, arranging, executing, facilitating, accommodating, eliciting, soliciting investments (I made this last one up).

Grant.

 

[Wolffx]

hello,
can see you trading system, may be i will invest some money. please send system name in Collective2

 

[aandragon]

Charlie, the regualtory issues surrounding Managed Account is difficult. At the end of the day of you want to trade 3rd party money, you have to be regulated. However, if you have a fully automated system, why not submit it to Zulutrade, Rent a signal or collective2 where its performance can be monitored and anyone can subscribe to it to have it trade their FX account and you will get paid as a result. Once you have a certain number of clients, you could then go it alone. Good luck.

 

[Marwan2010]

Hi, would anyone with more knowledge on this topic give me some advice. I have now been trading full time for 4 years, the first two years were spent training in an institution.

I now feel i am ready to move on and start trading client accounts while also offering a signaling service to other individuals. I have signed my systems up to Collective2 so that potential cleints can see my actual trades without fear that i am a con artist.
Charlie

Hi What is Collective 2??????????

When you contact FSA, they do not give clear cut answer
Lots of signal providers in the UK, and 99% are NOT regulated by FSA

 

[Jbat001]

These signal providers make it very clear that they are not providing advice. In most cases, if you are selling an investment system, making any kind of advice recommendation on a system, or in any way trading for anyone else, you will need to be regulated.

Trading for someone else makes you a discretionary investment adviser, meaning that you have to submit to capital adequacy checks, submit a six monthly RMAR report to the FSA, fill out a titload of paperwork, etc. I work for an IFA firm and we've looked at discretionary management, but it's more aggro than it's worth. Also bear in mind that if you do it illegally and then get caught, an unlimited fine or even jail beckon!

 

[leerees]

You could swindle it by charging a setup fee and then trading their accounts through power of attorny.

That way you are not giving financial advise but are legally allowed access to that money to trade. The fee becomes a setup fee and not a trading fee.

Like others have said though, it's probably more hassle than it's worth and you are better off just going solo and trading your own money.

Of course the obvious question is going to pop up and that is, unless you are working for a bank or on a trading floor then why would you want to trade other peoples money? Surely the dream for all traders is to trade their own accounts.

 

[Faceman78]

?

it's great if you have system, that consistently give a positive return.. but to answer the "why trade other peoples money" question....

unless you have a million quid of your own to trade and make massive profits on

why not accept OPM?

you make more money, plain and simple!