Looking for advice how to get funding legally in EU

[Haridas]

Could anyone offer their advice how to get funding legally if I am profitable trader? I am based in Europe. I did some research and below is the summary.

1. PAMM and other shared accounts are not possible in Europe.

You can forget about UK brokers - you need to be registered with the FCA to manage other peoples money, and thats fairly impossible for a private individual. It also depends on your country of residence, and where (and where not) you are marketing your service. Europe is rather complicated.

I think there are exemptions in the USA if you only have a small amount of clients, but not enirely sure about the current situation, and how applicable that is to foreigners, and where you are allowed to market and if you can take clients from other jurisdictions.

Generally speaking, you need to legally cover your ass. If a client sues you, you can easily get into deep **** if your paperwork/regulatory/legal stuff is not watertight. That means getting an attourney involved, and that means paying him fat fees. You also likely need to be registered as a moneymanager with the regulator, and they also want fees.

Its a bad idea. You are exposed to a lot of legal risk, and unless you can manage really big accounts(and you wont), its just not worth it.
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I've been through this process and have both regulated and unregulated MAM's. Unless you plan on doing public marketing I'd suggest you find a well known broker that doesn't require you to be regulated and run the MAM/PAMM through that.

I'm ASIC regulated and it's not only a pain in the ass, it's very expensive to maintain. I pay $3k per month, a 0.2 pip rebate and $50 per client in addition to external audit fees (thousands of dollars per year).

So unless you NEED it, I'd stick to the unregulated side.



2. PAMM with Power of Attorney:

You can trade other peoples money with a "Power of Attorney" using a PAMM account ... just go talk to the brokers. The first step would of course be to build a verified track record. I would suggest you to read: "How to Trade a Currency Fund: The step by step guide" by Jarratt Davis

3. Signal selling services (but from what I researched you earn very little):

There is actually a number of different sites out there .. Collective2, liveforextrading, rapicapintro, ayondo + many brokers have some sort of signal selling service.
I do not agree here, i live in Belgium and i am working moths now on starting some kind of investment business in Forex.
The problem is i would need a license from FSMA to do this legal, if i do manage other people's money without their license the FSMA will sue me.
The fines are from 12k up to 100k euro, i do not want to take this risk.
There are brokers which asks no license, but almost every country requires one, so if anybody want to take this risk, it is up to them, but i would never do it.
I found another solution, trade copier, i will use ATC Brokers, so i am not managing other peoples money, i am just trading my own capital and people can follow my trades if they want to, they can even adjust max draw down and how much they are willing to risk on every trade.
All the decisions are made by the "investor" himself, all trough the trades are coming from me.
A little bit more work because performance fee is not calculated and payed automatically, but it is the only legal way for me to do this kind of business so i have no choice.
I can only say think twice before anybody start a investment business, there are more rules and legal issues then most people think.
If you want to do it, do it the legal way!


4. Any other ideas?

 

[Pharaoh]

I'd say you would want to get your track record established before anything else. Some people can trade fine privately, but once they start showing off a track record, they succumb to stage fright. Maybe you won't, but it's best to get that out of the way long before you have any clients.

 

[Haridas]

Yes, I know about this issue. But I am curious if it all possible before heading this way.

 

[Shevvy]

The answer is simple Haridas, you won't get any funding from any anyone whether in Europe or America. As Pharoah said you require a track record of consist profits over a period of 3 to 5 years or as a fund manager at a recognised hedge firm.

The only other way is to make a large amount through trading (not borrowing, you need the track record). Then with this money start your own boutique Forex fund assuming you can pass the regulatory exams. A small hedge fund that you can then use as a showcase for your talent and attempt to get accredited investors (US term) to invest in your fund..

That is not enough, even if you have a great talent unless you can get either yourself listed as a fund manager or your forex fund listed in the Mornigstar Rating, see Wiki Morningstar, you will never become successful.

But I do wish you every success.

 

[EuroTrader]

The answer is simple Haridas, you won't get any funding from any anyone whether in Europe or America. As Pharoah said you require a track record of consist profits over a period of 3 to 5 years or as a fund manager at a recognised hedge firm.

The only other way is to make a large amount through trading (not borrowing, you need the track record). Then with this money start your own boutique Forex fund assuming you can pass the regulatory exams. A small hedge fund that you can then use as a showcase for your talent and attempt to get accredited investors (US term) to invest in your fund..

That is not enough, even if you have a great talent unless you can get either yourself listed as a fund manager or your forex fund listed in the Mornigstar Rating, see Wiki Morningstar, you will never become successful.

But I do wish you every success.

It is very much true that as a trader we need to have a good and consistent income from our trading if we are looking to become a successful trader in this business

 

[ElaineMDG]

Could anyone offer their advice how to get funding legally if I am profitable trader? I am based in Europe. I did some research and below is the summary.

1. PAMM and other shared accounts are not possible in Europe.

You can forget about UK brokers - you need to be registered with the FCA to manage other peoples money, and thats fairly impossible for a private individual. It also depends on your country of residence, and where (and where not) you are marketing your service. Europe is rather complicated.

I think there are exemptions in the USA if you only have a small amount of clients, but not enirely sure about the current situation, and how applicable that is to foreigners, and where you are allowed to market and if you can take clients from other jurisdictions.

Generally speaking, you need to legally cover your ass. If a client sues you, you can easily get into deep **** if your paperwork/regulatory/legal stuff is not watertight. That means getting an attourney involved, and that means paying him fat fees. You also likely need to be registered as a moneymanager with the regulator, and they also want fees.

Its a bad idea. You are exposed to a lot of legal risk, and unless you can manage really big accounts(and you wont), its just not worth it.
--------------
I've been through this process and have both regulated and unregulated MAM's. Unless you plan on doing public marketing I'd suggest you find a well known broker that doesn't require you to be regulated and run the MAM/PAMM through that.

I'm ASIC regulated and it's not only a pain in the ass, it's very expensive to maintain. I pay $3k per month, a 0.2 pip rebate and $50 per client in addition to external audit fees (thousands of dollars per year).

So unless you NEED it, I'd stick to the unregulated side.



2. PAMM with Power of Attorney:

You can trade other peoples money with a "Power of Attorney" using a PAMM account ... just go talk to the brokers. The first step would of course be to build a verified track record. I would suggest you to read: "How to Trade a Currency Fund: The step by step guide" by Jarratt Davis

3. Signal selling services (but from what I researched you earn very little):

There is actually a number of different sites out there .. Collective2, liveforextrading, rapicapintro, ayondo + many brokers have some sort of signal selling service.
I do not agree here, i live in Belgium and i am working moths now on starting some kind of investment business in Forex.
The problem is i would need a license from FSMA to do this legal, if i do manage other people's money without their license the FSMA will sue me.
The fines are from 12k up to 100k euro, i do not want to take this risk.
There are brokers which asks no license, but almost every country requires one, so if anybody want to take this risk, it is up to them, but i would never do it.
I found another solution, trade copier, i will use ATC Brokers, so i am not managing other peoples money, i am just trading my own capital and people can follow my trades if they want to, they can even adjust max draw down and how much they are willing to risk on every trade.
All the decisions are made by the "investor" himself, all trough the trades are coming from me.
A little bit more work because performance fee is not calculated and payed automatically, but it is the only legal way for me to do this kind of business so i have no choice.
I can only say think twice before anybody start a investment business, there are more rules and legal issues then most people think.
If you want to do it, do it the legal way!


4. Any other ideas?

Haridas: What about a Prop trading firm? I know Blue-Point Trading has international offices-as well as allows you to do it "virtually", (from home). Although they don't have any reviews here on FPA, I actually did some checking on them-and William Thompson, the gentleman that founded & runs BPT. So far, everything I've found out & people I've spoken to, have all been very positive. I'm actually considering it in the future-I'm still new to trading and want to build more of a foundation, gain more experience as a retail Fx trader, AND make sure I have a cushion of capital to fall back on in case it didn't work out for some reason. I'm sure there are other proprietary trading companies that you'd have access to, but this is the only one I've really looked into. (I'm also in the US, so I'm aware of several US-Based firms; not available outside the US)
Good luck!

 

[iMusingKiMi]

I thought IB could do so but only under Friends and Family Adviser. But I believe it is more than enough as starter as it can manage under 15 accounts with amount of USD 25 million. Run it consistently profit, get your track record, then go for regulatory processes.

Even Warren Buffett start as illegal before going to fully regulate, think near what you can act first instead of dream big first.