# Legal to trade other people's money?



## stonedpirate (28 October 2010)

Hello,

I have been quite successful trading on the forex and now members of my family and a few friends want to give me money to trade for them.

I was thinking about incorporating and essentially having them as shareholders in the company. Is it legal to trade this way without some kind of fund managers license?

Also, what kind of setup for taxation do traders use here?

Do you just include your profits/losses to your asseable income? Or are you a trading business?

Thanks


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## tech/a (28 October 2010)

*Re: Legal to trade other peoples money?*



stonedpirate said:


> Hello,
> 
> I have been quite successful trading on the forex and now members of my family and a few friends want to give me money to trade for them.
> 
> ...





Madness.
The depth of stupidity in the average Joe never ceases to amaze me.
But then again You'd have to be mad not to give money to a "Stoned pirate."


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*

lol

what?


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## doctorj (28 October 2010)

*Re: Legal to trade other peoples money?*

Don't mind tech. What he lacks in subtlety, he generally makes up for in good intentions. There are a few hunderd other threads at ASF that ask similar questions, so feel free to search for them, but generally the message boils down to it not being worth the risk to mix business and family/friends.


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*

fair enough


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## nunthewiser (28 October 2010)

*Re: Legal to trade other peoples money?*

where do i sign up?

i have heaps of cash that needs to be grown by someone thats good at that stuff .

pleases tell me how i can join up or at least prosper also.


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*

Interesting attitude from a bunch of traders.

Sorry you havent had much success to share around.


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## nunthewiser (28 October 2010)

*Re: Legal to trade other peoples money?*



stonedpirate said:


> Interesting attitude from a bunch of traders.
> 
> Sorry you havent had much success to share around.




i heard a story the other day where a bloke went from 1k to 1 million in 38 trades. 

he was on the internet but would not give any proof of this great feat.

whats your story?.....obviously you have one to tell.


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## Julia (28 October 2010)

*Re: Legal to trade other peoples money?*



stonedpirate said:


> Interesting attitude from a bunch of traders.
> 
> Sorry you havent had much success to share around.



You might like to explain how you conclude the logic of your second statement?

I'd rather say that ASF members are successful enough to know, as Tech said, that to mix personal/family relationships with whatever trading expertise you may or may not have is the ultimate in stupidity.

However, by all means ignore the advice offered, on the basis that it doesn't support what you seem to already have unwisely decided to do, and box on.
Good luck.  You'll need it.


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*



> i heard a story the other day where a bloke went from 1k to 1 million in 38 trades.
> 
> he was on the internet but would not give any proof of this great feat.
> 
> whats your story?.....obviously you have one to tell.




my story is that i have traded the forex consitently for a few years and people that know me want a piece of the action.

The reason i post here is because the forex forums i use are mainly american and need some aussie traders with experience in this kind of thing to give me a few pointers.

I have only ever worked for a living so corporate law and fund management confounds me 

Quitting my job at christmas and trading full time next year.

Just trying to set myself up to pay the least tax possible and not get busted trading other peoples money.




Anywho, looks like i came to the wrong forum 

cheers


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## mazzatelli (28 October 2010)

*Re: Legal to trade other peoples money?*



stonedpirate said:


> I was thinking about incorporating and essentially having them as shareholders in the company.




LPOA


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*



> You might like to explain how you conclude the logic of your second statement?




Figured if they were confident traders, they would trust their families money with their skills rather than have them invest with the other dodgy fund managers out there.



> I'd rather say that ASF members are successful enough to know, as Tech said, that to mix personal/family relationships with whatever trading expertise you may or may not have is the ultimate in stupidity.




Thats your opinion.

My dad lost 16% in super and his house lost $100k off its price, my account is making steady gains.

I'll just give my family crap opportunitys and keep the cream for myself like you guys.

Cheers


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*

LPOA??

oh right

I heard on other forums that LPOA doesnt protect you from certain legal outcomes.

But thanks, i'll read up on it.


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## doctorj (28 October 2010)

*Re: Legal to trade other peoples money?*



stonedpirate said:


> I'll just give my family crap opportunitys and keep the cream for myself like you guys.



This is out of line.  It's not about how good one is at trading or whether or not they are selfish.  It's about managing downside risk.  Family is invaluable.  There's every chance that you could be profitable and they could benefit, but what if it doesn't work out as planned?  What might they do to your relationships?

Anyway, good luck.  My only last piece of advice is, if you want legal advice, ask a lawyer.  If you want practical advice, ask a practioner (as many are here).


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*

Where do you recommend your family put its money?

They come to me for financial advice because they know i'm a finance guy, they dont have a clue.

Its either manage their money or recommend they put it elsewhere and in this economy, elsewhere is losing money.

Or i could get rid of them by sending them to a financial planner with a diploma in bs only to be stung by some cheesy salesman.


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## Gunlom (28 October 2010)

*Re: Legal to trade other peoples money?*

I think you need to consider the down side as well as the up side...

This could well be a great opportunity for you and your family, But like any business or enterprise it always pays to plan and think about both the positive outcomes and the negative ones, that are possible.

If by chance,  some series of trades that went against you, your stop losses kept getting hit, and you lost your parents 30% - 40% of their retirement nest egg,  and they had to keep working a few extra years instead of retiring now ( or if they are currently retired, and have take a income reduction)

Could you and your family happily sit around the Xmas table and still be a happy family, Or would the pressure and stress affect your relationships with them.

Just have a think about the possibilities, before embarking... and talk to your investors about both upside and downside risk. So they fully understand it all. 

Good luck with it


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## stonedpirate (28 October 2010)

*Re: Legal to trade other peoples money?*

Look guys, i appreciate the advice. All very good advice at that.

But i'm no idiot and have thought about and discussed at length all the possibilities with my family.

I am not betting the farm, and they consider my account a reasonably safe place for their risk capital.

I'm not gambling their super, their house or their life savings. They each want a modest punt on the forex via me as my returns for the last year outperform anything they can get in the mainstream asset classes.


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## mazzatelli (28 October 2010)

*Re: Legal to trade other peoples money?*

What legal outcomes are you concerned about [as always consult a expert for > concise information]?


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## skc (29 October 2010)

*Re: Legal to trade other peoples money?*

What's wrong with you people? This guy asked for advise on setting up a structure to trade other people money, and hardly anyone answer the question.  Surely calling this "ultimate in stupidity" is taking it a bit too far.

Larry Williams traded his Mum's money and lost big time. The conversation went something like this...

Larry: Mum I have terrible news.
Mum: What is it?
Larry: I lost a lot of your money today.
Mum: Oh thank God! I thought you have cancer or something.

IF you have family like that why does it have to be a problem? Every family situation is different but as long as you explain and they understand the risks involved, they are investing on an informed basis and it should not affect the relationship. And like the OP said, they are entrusting money to other money managers who they don't even know, charge more and perform worse.

Every entrepreneur when they need money for their business, the first sources are always FFF - family, friends and other fools. The "fools" is meant to be taken lighthearted, but also highlights that many new start up businesses fails. Nonetheless, you have to make a start to build something.

I am planning about the same thing but is still early days yet. I will PM you on a structure that may or may not work.

Good luck.


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## Governor (1 November 2010)

*Re: Legal to trade other peoples money?*

stonedpirate, don’t listen to these people! 
If you have people offering to give you money to trade with then take it! You never know, you might be taking your first steps towards becoming one of Australia’s largest fund managers!!  Don’t listen to the people saying you are stupid. I think it’s a great idea and I wish you all the best! 

I can't comment much on the legal aspects in this environment. But I thought I would just give you some encouragement unlike the majority of people who have criticised you! 

Have fun with it!! You only get one life, so might as well make some $$$$$


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## gordon2007 (1 November 2010)

*Re: Legal to trade other peoples money?*

Honestly people, why all the negative sentiment towards pirate? He asked a simple question and basically got attacked, ridiculed, challenged and sorts of other crap. 

Really, there has been talk that this board is getting closed and boring, well you've all got yourselves to blame. Just because someone new asks a question what you may think is stupid is no reason to attack them. 

Would of it hurt to just give pirate an informed and decent answer.


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## oztrades (1 November 2010)

*Re: Legal to trade other peoples money?*

"Ullo Guvner!"
What are you talking about?
Don't you appreciate that people can see the problems that could happen. 

Trading, just like life is about taking risks, and the worst risk you want to take is to
a.) alienate family OVER money 
b.) have your trading plan determined by unplanned family emergencies.

However if stonedpirate can organise a plan that means that both above conditions can be met then I don't see a problem.

Doesn't a husband and wife both work towards wealth management? Do they have to have a financial licence? No.

The risks are very real though with a & b above stonedpirate. You don't state whether you are going to charge commission which is a more relevant disclosure and may have a bearing on the whole financial relationship.

Simply from a personal view I dont see a problem if you look at the "PROS" BUT anyone with any sense would also look at the "CONS" after and agree on a PLAN.

Cheers


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## Governor (1 November 2010)

*Re: Legal to trade other peoples money?*

I fully appreciate the risks! 

They are to me insignificant if the opportunity to make money arises! 

I’m just saying that he has an opportunity to make more money and maybe a career out of it! 

The risks are insignificant when up against the possibility to make some serious $$$ and I think everyone should support a person’s ability to make money. 

We can’t choose our families but we can choose to be rich!! 
So I say go for it, but make sure you act in the law.......can’t make money in jail!!!!


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## adobee (1 November 2010)

*Re: Legal to trade other peoples money?*



mazzatelli said:


> LPOA




Latino Peace offers association ??
http://www.nlpoa.org/


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## DaveMac (1 November 2010)

*Re: Legal to trade other peoples money?*

Pirate,

I believe your question was about how to incorporate, whether it's legal and the setup for taxation.

1:  You could use a Unit Trust owned by a company, with you as Director.  Your family could then buy units in the trust.  You may need a better-than-average accountant to organise this.

2:  There is a provision in corporate law that states if you don't approach more than 20 investors in any 12 month period and your funds are < $2 Mil, you don't need to lodge a Managed Investment Scheme with ASIC.  Your investors of course should know the risks of your scheme not being overseen by ASIC, but I'm pretty sure the other forum members have addressed this already.

Hope that helps.  I'm not an accountant.  Take everything I say with a grain of salt and do your own further due diligence.

Dave


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## Julia (1 November 2010)

gordon2007 said:


> Honestly people, why all the negative sentiment towards pirate? He asked a simple question and basically got attacked, ridiculed, challenged and sorts of other crap.
> 
> Really, there has been talk that this board is getting closed and boring, well you've all got yourselves to blame. Just because someone new asks a question what you may think is stupid is no reason to attack them.
> 
> Would of it hurt to just give pirate an informed and decent answer.



I don't think any ASF members have any interest in 'attacking,' or 'ridiculing'.
The OP asked for opinions and those who responded did so, as far as I can tell, with honest reservations about the risks involved when you mix family relationships and money.

Are you suggesting that the OP will never make a mistake with his financial movements which involve the funds of his family?  Hardly likely.

The odds then are that the loving family will pretty smartly start wishing they'd never consigned their hard earned over to the Pirate, given he may well have now lost their fortunes, their houses if they all were to become overconfident and follow the Storm model.

I don't think anyone is doing anything other than warning that it may not be worth the personal kudos and presumably a bit of commission to risk lifelong relationships.

If Pirate is so skilled at making money, he should continue to do so on his own account and when rich as Croesus, share his good fortune with his family.  That way, good will is retained all round.

Never underestimate the wrath of a family member who perceives themselves badly done by via another family member.


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## skc (1 November 2010)

Julia said:


> The OP asked for opinions




The OP never asked for opinion about managing family money. He asked about the legality of it.



stonedpirate said:


> Hello,
> 
> I have been quite successful trading on the forex and now members of my family and a few friends want to give me money to trade for them.
> 
> ...






Julia said:


> I don't think any ASF members have any interest in 'attacking,' or 'ridiculing'...




Everyone's definition of "attack" and "ridicule" may be different, but you must agree that these quotes below can easily be perceived as such, even if there was no intention to be so.



tech/a said:


> *Madness.
> *The *depth of stupidity *in the average Joe never ceases to amaze me.
> But then again You'd have to be mad not to give money to a "Stoned pirate."






nunthewiser said:


> where do i sign up?
> 
> i have heaps of cash that needs to be grown by someone thats good at that stuff .
> 
> pleases tell me how i can join up or at least prosper also.




I fully appreciate the otherwise good intentions from members advising against mixing money and family, I just think the choice of words and tones being used were rude and unconstructive.


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## nunthewiser (1 November 2010)

yes im a bad bad nun.


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## nulla nulla (2 November 2010)

stonedpirate said:


> my story is that i have traded the forex consitently for a few years and people that know me want a piece of the action.




Having defined your market there are several posters in this forum who could offer sound advice on trading forex.



> The reason i post here is because the forex forums i use are mainly american and need some aussie traders with experience in this kind of thing to give me a few pointers.
> 
> I have only ever worked for a living so corporate law and fund management confounds me
> 
> Quitting my job at christmas and trading full time next year.




I find this contradictory, you work full time (not trading) but are so successful trading forex that all your friends have heard about it and want a piece of the action?



> Just trying to set myself up to pay the least tax possible and not get busted trading other peoples money.
> 
> Anywho, looks like i came to the wrong forum
> cheers




I suspect the answers you will get in any forum will follow the same lines. 



stonedpirate said:


> Where do you recommend your family put its money?
> 
> They come to me for financial advice because they know i'm a finance guy, they dont have a clue.
> 
> ...




And this is the most contradictory post of all. You have gone from someone "who works for a living and is confused by finance and law" to a "knowledgable finance guy that your family and friends come to for financial advice".

At this point I think you are only trying to wind up members of the forum and are not genuine. But thats only my opinion. Nothing personal.


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## Trembling Hand (2 November 2010)

Points from experienced,

But firstly. Its hard to reconcile a profitable long term trader not having to deal with the questions you ask while taking care of your own business. If you're truly profitable over a decent period you are already filling in monthly/quarterly tax/PAYE/BAS etc already and if your really profitable you are already set up in a company structure and would know most of your questions. But anyway....

Company structures for friend/families with small amounts of $'s are a pain in the Ar$e. No sooner are they set up and shares issued for capital raised that someone wants to take out or put in more money. 

Discretionary trust from looking into it maybe a better option. Maybe.

Easiest way would be to use IBs Advisor set up where you open accounts in "clients" names, in this case family/friends, and all money stays in the "clients" name and under their control other than the actual trading which you have control of from 1 log in. Basically how it works is you trade your "Advisor" account and IB split the trades up of into your clients accounts based on predefined allocations.

Word of warning. A trade with OPM is not just another trade especially family $. Tread very very carefully. Even consider putting up $500 for every $10,000 you raise as a stop loss/insurance. Once you are down $1000 you both lose $500 and close out the accounts. Lesson learnt etc etc. 

There are no real legal issues of needing a fin lic etc as long as you keep it within a small family/friends circle, 5-10 people for example (from my understanding)


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## gordon2007 (2 November 2010)

skc said:


> I fully appreciate the otherwise good intentions from members advising against mixing money and family, I just think the choice of words and tones being used were rude and unconstructive.




My point exactly. It's not just this thread, I've seen it in other topics as well.


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## awg (2 November 2010)

I dont believe anyone has suggested a "syndicate" arrangement

To my knowledge this can be as simple or refined as one wishes to have it arranged, within certain regulation.

Share trading/investing and property syndicates abound, Solicitor should be able to draft an agreement 

DYOR on ASF, Google etc.

I share some posters misgivings about the risks involved, unless you have a proven track record of several years at least, and further would insist that any participants do not overcommit.

Do you have an accountant?... you may seek an opinion from him as to whether he thinks what you are proposing is financially sensible
( in other words are you able present a viable business plan, with statements, P&L etc)


Check the Storm Financial thread for what can happen when family are encouraged to get on board a well performing, but highly leveraged investment.


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## Julia (2 November 2010)

skc said:


> The OP never asked for opinion about managing family money. He asked about the legality of it.



So he did.  You're quite right.  My apologies for the misinterpretation.


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## medicowallet (2 November 2010)

I am with many others on this one.

Do not do it.

For the extra potential gain, it is not worth it imo.

Why risk potentially wrecking your relationship with your family so that they can have a few extra dollars, because believe it or not, you, like every other trader, are no better than the big guys at "picking the market". For that matter, the market probably outperforms a lot of them too.

You have no insurance, no legal protection, and no formal trading (I assume).

Most professionals will never advise their own family, within finance, law or medicine for example.


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