whether a proprietary trading firm needs be regulated by FCA in the UK or not?

[icekb]

I am looking to setup a proprietary trading firm in London. anyone knows whether a proprietary trading firm needs FCA regulation in the UK or not?

And is the company allowed to recive any invests from the outside? For instance, my friend wants to invest my company (he's willing to buy my company's shares).

So many thanks, everyone.

 

[highbury fx]

I am looking to setup a proprietary trading firm in London. anyone knows whether a proprietary trading firm needs FCA regulation in the UK or not?

And is the company allowed to recive any invests from the outside? For instance, my friend wants to invest my company (he's willing to buy my company's shares).

So many thanks, everyone.

Hi Ice

If you are trading money that is invested in to your managed account program then you are carrying on a regulated activity and you will therefore need to be regulated.

You don't have to go to the FCA and apply for your own license, you can find a company that already has the permissions you require and ask them to 'umbrella' you.

Don't try and get Authorised Representative cover as the AR permission will not allow you to trade on a discretionary basis.

Brokers in the UK and the EU should not knowingly pay rebates to any unregulated introducer that is carrying out a regulated activity.

It's not difficult to get what you need although it isn't cheap either. Expect to pay around £1,000 to £2,000 per month for the FCA permissions from the umbrealla company and possibly a percentage of your broker rebate also (somewhere around 10% - 15% is normal)

 

[icekb]

Hi Ice

If you are trading money that is invested in to your managed account program then you are carrying on a regulated activity and you will therefore need to be regulated.

You don't have to go to the FCA and apply for your own license, you can find a company that already has the permissions you require and ask them to 'umbrella' you.

Don't try and get Authorised Representative cover as the AR permission will not allow you to trade on a discretionary basis.

Brokers in the UK and the EU should not knowingly pay rebates to any unregulated introducer that is carrying out a regulated activity.

It's not difficult to get what you need although it isn't cheap either. Expect to pay around £1,000 to £2,000 per month for the FCA permissions from the umbrealla company and possibly a percentage of your broker rebate also (somewhere around 10% - 15% is normal)

Hi highbury,

So many thanks. Yes, it needs the FCA permissions to manage other people's money. But can I just set up a company with my investors (we are all the shareholders of that company) to trade without needing the permission?

Also if I need a umbrealla company, is there any information can help me to find one? So many many thanks.

 

[highbury fx]

Hi highbury,

So many thanks. Yes, it needs the FCA permissions to manage other people's money. But can I just set up a company with my investors (we are all the shareholders of that company) to trade without needing the permission?

Also if I need a umbrealla company, is there any information can help me to find one? So many many thanks.

you can set up a corporate account at any brokerage. They will want details of any person with a shareholding above 10%.

you will also need to supply your incorporation certificate, a company summary, mems and arts, and an authorised traders list.

They will also want details of the funding bank account. Your corporate trading account will only be able to be funded from a bank account with the same name. Withdrawals (should you ever make any!) will also need to go back to this account.

I don't really ever want to recommend anybody on T2W but if you PM me I'll point you in the right direction should you decide you do want to attract other peoples money and therefore require a regulators permission.

 

[icekb]

you can set up a corporate account at any brokerage. They will want details of any person with a shareholding above 10%.

you will also need to supply your incorporation certificate, a company summary, mems and arts, and an authorised traders list.

They will also want details of the funding bank account. Your corporate trading account will only be able to be funded from a bank account with the same name. Withdrawals (should you ever make any!) will also need to go back to this account.

I don't really ever want to recommend anybody on T2W but if you PM me I'll point you in the right direction should you decide you do want to attract other peoples money and therefore require a regulators permission.

So many thanks, highbury. you are a star. I've PMed you.

 

[Aston1st]

Hi Ice

If you are trading money that is invested in to your managed account program then you are carrying on a regulated activity and you will therefore need to be regulated.

You don't have to go to the FCA and apply for your own license, you can find a company that already has the permissions you require and ask them to 'umbrella' you.

Don't try and get Authorised Representative cover as the AR permission will not allow you to trade on a discretionary basis.

Brokers in the UK and the EU should not knowingly pay rebates to any unregulated introducer that is carrying out a regulated activity.

It's not difficult to get what you need although it isn't cheap either. Expect to pay around £1,000 to £2,000 per month for the FCA permissions from the umbrealla company and possibly a percentage of your broker rebate also (somewhere around 10% - 15% is normal)

From what I read doing my regulation and financial conduct exams and reading the FCA website, I was under the impression that if I as an individual want to trade my own money then I do not need to be regulated. Like wise if I as a "Legal Person" i.e a company I as long as I set up a corporate account one doe'snt not require to be FCA regulated, as you are trading your own company's capital.

Like wise the rules on a joint partnership are not black and white, as provided they are trading their own capital it's purely proprietary.

Proprietary trading is technically exempt in most cases. Although I know in some cases such as Banks it is not.

I am open to stand corrected on this but would very much like to be pointed in the relevant paragraph and clause that refutes my understanding of the rules. Otherwise we are saying that to trading one's own account one must be regulated, whether one is an individual person, a partnership or limited company seeking to trade their capital only and not outside money.

Answers on a postcard please!

 

[robster970]

The advice I was given by the FSA was no.

Check out PERG 2.8.4 - http://fsahandbook.info/FSA/html/handbook/PERG/2/8 - "Dealing in investments as principal"

I would double check this is still valid. Call them, they are helpful.

 

[Aston1st]

The advice I was given by the FSA was no.

Check out PERG 2.8.4 - http://fsahandbook.info/FSA/html/handbook/PERG/2/8 - "Dealing in investments as principal"

I would double check this is still valid. Call them, they are helpful.

Cheers Robster970, shall look into it.

 

[Aston1st]

Reading from the FCA text the operative sentences for me would be :

" is that a person must hold himself out as making a market in the relevant specified investments or as being in the business of dealing in them, or he must regularly solicit members of the public with the purpose of inducing them to deal."

Then:

" Entering into a transaction relating to a contractually based investment is not regulated if the transaction is entered into by an unauthorised person and it takes place in either of the following circumstances (a transaction entered into by an authorised person would be caught). The first set of circumstances is where the person with whom the unauthorised person deals is either an authorised person or an exempt person who is acting in the course of a business comprising a regulated activity in relation to which he is exempt."

My understanding of the text is essentially, provided that one is not a Market maker or dealing in the regulated/specified activity on behalf of anyone else one is okay to trade as principle as long as it is with an authorised person.

May just give them a call though for belt and braces confirmation.

 

[Memento]

Did you manage to get an answer from them?

 

[Trading Spaces]

Start off with an Interactive Brokers friends and family account. You can link 15 sub accounts to it and trade them without having to be registered.

 

[hhiusa]

Aren't there capital requirements? You have to have a certain amount of money before you are forced to file and be regulated. In the US, I believe it is $10,000,000.

 

[Aston1st]

Capital requirements are for companies that are holding clients money. If one is trading an account held with a regulated company authorised to hold client money the trader\Broker would not require it, although liability insurance would be needed.

I am happy to be corrected on this.

 

[hhiusa]

Capital requirements are for companies that are holding clients money. If one is trading an account held with a regulated company authorised to hold client money the trader\Broker would not require it, although liability insurance would be needed.

I am happy to be corrected on this.

They require a large trader reporting form. I imagine it must be quite different in the UK. Nevermind then.

 

[ballsofgold]

there is too much misinfo on this thread

u dont need to register with fca for proprietary trading. if your friend wants to buy shares into the company then he is an owner like yourself

if you solicit funds for managed accounts, the investor still owns the managed account. putting trades into the managed account is an investment activity but the requirement to get registered as a regulated activity will depend on whether or not you are dealing with retail or sophisiticated clients. if you are tradihg funds from joe public, then yes. if you are trading a managed account for a sophisticated investor, then the threshold and requirements are less stringent. but then this is not proprietary trading.

dealing as a principle means you area dealer in the sense you are market making or taking the side of other peoples trades on your own account..this is not prop trading in the way you are asking. registration for dealing depends on the situation but in most cases will require registration

lastly, if you are prop trading and allocating company funds to other traders then yo u probably dont need to be registered...lbut if you are accepting deposits then you need to get registered....

it all depends.....

 

[ballsofgold]

Start off with an Interactive Brokers friends and family account. You can link 15 sub accounts to it and trade them without having to be registered.

i beleive bc ib is in the US and the nfa/cftfc rules state that any cta's are self exempt up to 15 accounts or a certain amount of agreegate funds.

the question was about fca. ib uk is just a service office.

 

[Fibking]

Reading from the FCA text the operative sentences for me would be :

" is that a person must hold himself out as making a market in the relevant specified investments or as being in the business of dealing in them, or he must regularly solicit members of the public with the purpose of inducing them to deal."

Then:

" Entering into a transaction relating to a contractually based investment is not regulated if the transaction is entered into by an unauthorised person and it takes place in either of the following circumstances (a transaction entered into by an authorised person would be caught). The first set of circumstances is where the person with whom the unauthorised person deals is either an authorised person or an exempt person who is acting in the course of a business comprising a regulated activity in relation to which he is exempt."

My understanding of the text is essentially, provided that one is not a Market maker or dealing in the regulated/specified activity on behalf of anyone else one is okay to trade as principle as long as it is with an authorised person.

May just give them a call though for belt and braces confirmation.

Hi Aston,
Did you manage to get to the bottom of the FCA rules.?
if i had a limited company am I able to trade my companies funds without being FCA regulated.?
however i cant trade other peoples money as a "fund manager" as such without FCA approval and being regulated?
is that the case?

 

[Fibking]

Hi Aston,
Did you manage to get to the bottom of the FCA rules.?
if i had a limited company am I able to trade my companies funds without being FCA regulated.?
however i cant trade other peoples money as a "fund manager" as such without FCA approval and being regulated?
is that the case?

Also, can any company or trader apply for FCA approval without having any qualifications? just a retail trader that has lots of experince that wants to take it a step further and apply to be regulated?

 

[hhiusa]

Also, can any company or trader apply for FCA approval without having any qualifications? just a retail trader that has lots of experince that wants to take it a step further and apply to be regulated?

Why would you want to be FCA regulated if you had no clients. They will make you pay a large annual fee to be a member. In the US, to be a FINRA member firm, it costs between $7,500-55,000 per annum based upon how many employees you have. If you have one employee, namely yourself, it will cost $7,500. I am certain it is similar in the UK.

FCA member fee calculator
http://feecalc.fsa.gov.uk/fy2016_17/consultation/feecalc.asp

 

[Fibking]

Why would you want to be FCA regulated if you had no clients. They will make you pay a large annual fee to be a member. In the US, to be a FINRA member firm, it costs between $7,500-55,000 per annum based upon how many employees you have. If you have one employee, namely yourself, it will cost $7,500. I am certain it is similar in the UK.

FCA member fee calculator
http://feecalc.fsa.gov.uk/fy2016_17/consultation/feecalc.asp

Well the intention is to take on clients, i have people that want to invest into this,
However I'm not confident the 15 "family and friends" rule applies in the UK and was hoping from some clarification on that and also the previous questions.