Setting up Forex Fund

[MetaTrade]

Hi All,

I've tried the search option with little success, apologise if already covered.

I've been trading forex and some family and friends have expressed some interest and would like me to trade for them - I assume this makes it more complicated and therefore are legal implications/compliance's - according to UK legislation.

Have any one else have had any similar experiences and what legal implications are there or can point me into any direction.

Many thanks.

 

[Patricia12]

MetaTrade, I do not have much knowledge about UK rules for trading. You should contact local broker in your city to know the UK legislation and share your problem. They can better assist you.

 

[MetaTrade]

MetaTrade, I do not have much knowledge about UK rules for trading. You should contact local broker in your city to know the UK legislation and share your problem. They can better assist you.

Hi Patricia

Many thanks for your reply, much appreciated

Not sure if Brokers be sceptical of sharing such information.

 

[Mtweek]

I have never read any forex book before but i saw the list from cafedeart and don't know what to do. Is it worth to spend time on reading?

 

[aediaz1]

Why not managed account? Else you could apply for CTA.

 

[Nigel-P]

Hiya MetaTrade - If you were looking into just doing this on a fairly limited basis, i.e. just a few friends and family, as ediaz1 says, opening managed accounts for them might be a good way to go.

Not sure if you have considered this but some brokers allow you to link other other accounts to your own, so your trading activity is replicated in their accounts. The investors open the accounts in their own name and sign a limited power of attorney to you to permit you to execute trades with their capital. As you only have limited control over the funds (i.e. you could not withdraw the funds, and the account remains under the control of the investor) it would appear that you would not have the same regulatory burden as you would if you were taking the money from the investors yourself, putting the capital into an account under your sole control and trading from there.

Another advantage is that if the money was held in an FSA regulated broker the FSCS scheme would cover any losses should the broker go bust up to the personal limit. Obviously it wouldn't cover losses if your trading wasn't up to scratch! Some of the brokers have systems for automating a fee structure you may wish to put in place, e.g. monthly high watermark performance billing, etc.

I'm subject to correction here, and don't quote me to the FSA/BOE, but I would have thought that if you operated on the above basis and were upfront with your investors regarding risk, etc., it would be unlikely that you would get much grief off the regulator. Might be worth looking into, maybe check with the FSA or whoever it is who deals with this now.

Good luck!

 

[MetaTrade]

Many thanks Nigel and AEDiaz1, much appreciated for your advise. Surely will look further into it - guess it does help in ensuring that we'd be covered by the SFA.

Best Regards!

 

[Faceman78]

Hiya MetaTrade - If you were looking into just doing this on a fairly limited basis, i.e. just a few friends and family, as ediaz1 says, opening managed accounts for them might be a good way to go.

Not sure if you have considered this but some brokers allow you to link other other accounts to your own, so your trading activity is replicated in their accounts. The investors open the accounts in their own name and sign a limited power of attorney to you to permit you to execute trades with their capital. As you only have limited control over the funds (i.e. you could not withdraw the funds, and the account remains under the control of the investor) it would appear that you would not have the same regulatory burden as you would if you were taking the money from the investors yourself, putting the capital into an account under your sole control and trading from there.

Another advantage is that if the money was held in an FSA regulated broker the FSCS scheme would cover any losses should the broker go bust up to the personal limit. Obviously it wouldn't cover losses if your trading wasn't up to scratch! Some of the brokers have systems for automating a fee structure you may wish to put in place, e.g. monthly high watermark performance billing, etc.

I'm subject to correction here, and don't quote me to the FSA/BOE, but I would have thought that if you operated on the above basis and were upfront with your investors regarding risk, etc., it would be unlikely that you would get much grief off the regulator. Might be worth looking into, maybe check with the FSA or whoever it is who deals with this now.

Good luck!

This is all correct, but there is one very important complication you have not mentioned.

I assume the trader will want to be remunerated at some point for any trading success?

and at that point, when fees are deducted... the whole process becomes a regulated activity under FSMA 2000 and therefore the requirement of FSA approval/authorisation comes into play.

 

[Nigel-P]

This is all correct, but there is one very important complication you have not mentioned.

I assume the trader will want to be remunerated at some point for any trading success?

and at that point, when fees are deducted... the whole process becomes a regulated activity under FSMA 2000 and therefore the requirement of FSA approval/authorisation comes into play.

Cheers Faceman, I wasn't aware of that. Have you any experience of what you have to do to get approval for a small managed account business? I'll look into it too and see what I can dig up.

 

[Faceman78]

Cheers Faceman, I wasn't aware of that. Have you any experience of what you have to do to get approval for a small managed account business? I'll look into it too and see what I can dig up.

Go to a broker and let them house you, if you have the required FSA level 4 exams.