Internet business is a gray area. It might be quite possible to set up a shell company anywhere and run a trading room on behalf of that company. So any kind of complaint would to that company domicile. I believe this is how it is mostly done.
I have been to few rooms in past, ALL are saying this is for educational purpose only, please don't copy, this is demo. But I remember there was a live broadcast of a working screen of a trader trading 5-8 Mio forex fund. He was good and money were real. He did not call trades or explain anything in real time, but he did trade.
In the EU and the US, if you provide investment advice to let's say German clients, you must be registered in Germany. Not sure how it would impact chat rooms, but with the recent implementation of AIFMD, it has become a criminal offence for a fund to be distributed in a country it is not registered in. That means that directors of a fund (no matter where it is registered) could face jail time in Germany should they try to solicit German clients. edit: unless the fund is authorised to distribute in Germany of course
I am not sure if offering "financial advice" would be seen in a different light in the EU, it is not something I am involved in. However, whenever you try and dodge regulation by setting up a company in a different jurisdiction, the directors can still remain liable for civil and/or criminal charges.
Last edited by grausch; April 15th, 2015 at 10:03 AM.
Reason: see above.
Basically it should also mean, that anybody having a German passport cannot open a forex or futures account outside of Germany, because usually there are all kinds of advises going on, recommendations, participation in signals, etc. Is that the case?
Trade to live. Not live to trade.
Last edited by xelaar; April 15th, 2015 at 10:40 AM.
Completely unsure about the internet business. AIFMD was implement here at EU level and has gone live last year (2014).
UCITS funds are usually registered either in Ireland or Luxembourg (their country of domicile). If they wish to market their products to German clients, they will set up a relationship with a German distributor, inform the Irish / Luxembourgish regulator and that regulator will inform the German regulator. Thus, everyone along the entire chain is regulated.
Your example of the German client contacting a Swiss bank is called "reverse solicitation". Until AIFMD was implemented, Swiss banks could say, "Well, we did not contact him. He came to us." After the implementation of AIFMD, this is no longer the case. In most cases it would now be regarded as illegal and unless the Swiss bank is regulated in Germany the client can not invest in any bank-run products.
Not sure about US investors in a fund...never worked with that as all EU/Cayman funds I was involved in did not accept US investors. However, if you have US clients as a bank, you still need to report certain items to the IRS in terms of FATCA. Not sure what that will be as I have never worked with US clients.
Third world countries - depends on the country. In South Africa, for instance, if you are a financial professional and tell your friends over drinks to buy stock XYZ, it could be seen as financial advice.
The following user says Thank You to grausch for this post:
See you edited your above post while I was typing. Should you wish, I can delete my post if you send me a pm.
While I am not in Germany, I am in the EU and Interactive Brokers (UK) accepted my deposited quite willingly. I can also open accounts with banks in other countries, although most of the do raise eyebrows if you are not resident. For instance, a Cayman non-resident trying to open a bank account will have a tough time.
As I said in my first post, I am not sure how "financial advice" is affected by AIFMD (Alternative Investment Fund Management Directive...or something like that). I work with funds and never needed to look into individual investment advice. I have looked into this personally (while not in the EU), and the laws were similarly restrictive. However, since offering financial advice generally means you are not in control of client deposits, you may find that in some jurisdictions the regulations is not quite as strict. For instance, in Cayman you can offer financial advice to their residents as long as you do not receive compensation. Once you receive compensation you must be registered with the regulator.
Unfortunately, this is a very complex issue and laws vary by country. I am no lawyer and I have only dealt with certain issues. However, in the cases I was involved we had lawyers and auditors advising us, so I don't think what I am saying is completely baseless.
thanks for the information, no need to delete anything, it's just I posted and then re-read it and found it being pretty much useless, just my rant!
I have a very good friend, German. He had ask me if he can place some money with me so I can trade them together with my own money. Friends and family scheme, you know. So now it appears if I do a favor to him next time I drive to Munchen I might be put in Der Karzer? Oh my.
Yes, if you are accepting money from him, you may find yourself in Der Karzer. You will also find that in terms of most AML regulation, should a big amount of money be deposited into your account, the bank will ask questions. Also, the broker needs to ask questions if suddenly you deposit a large chunk of money. All of this is done under the guise of anti-money laundering / anti-terrorism financing, but it is a really effective way of keeping tabs on citizens. First time I withdrew $2k from my OANDA account, my bank gave me a polite phone call querying where the money came from.
Unfortunately the friends and family exemption is only applicable to the US (to the best of my knowledge). I wish other countries would implement this too, as there seems to be a very definite trend towards over-regulation. It raises the barriers of entry to such an extent, that unless you already have several million, it is just not worth it to accept client money.
I had been wiring 50k+ amounts to and from broker without any questions. AFAIK Friends and Family rule also stands in UK, because when I queried about opening a PAMM with LMAX FX exchange firm, they asked for a license in a country I am based in (CZ) but regardless of client's nationality (bar US due to reporting hassle). For Friends and Family no such requirement. Also anybody can open a block account with FCM in US and use Friends and Family type of regulation without any license. My friend has one. There are no restriction on nationality or domicile of clients, bar Iran, etc - nationals of countries for whom broker won't open an account. What you are saying is that everyone is breaking the law and warranting a place in Der Karzer courtesy of German taxpayer?
I think the legislation you are mentioning is geared towards different level of funds and allocation schemes. Otherwise is too Orwellian. Even for Germany.
ps I have had PAMM accounts with Finnish and NZ brokers, there were no restrictions whatsoever for client's nationality. Nor any requirement for a license.
Trade to live. Not live to trade.
Last edited by xelaar; April 15th, 2015 at 11:39 AM.
If you are wiring funds without them being queried, then it is possibly because it is not unusual. In my case, it was the first time I ever withdrew money from OANDA. If it had been TDAmeritrade, they would have asked no questions.
Do I need to be authorised? - Financial Conduct Authority. I checked the website and could not find the friends and family exemption (or any exemption based on AUM, etc.). If you do find it, please let me know. However, this will only be applicable if your friends and family are in the UK. Even if everyone involved has an account with Interactive Brokers UK, if you are providing advice to a CZ client, then CZ laws apply and you would need to research those.
In my situation, I understand the laws applicable quite clearly. This may differ from yours. If you are truly interested in having your friend invest money with you, then I would suggest contacting a lawyer who specializes in this. My take on the situation - if your friend deposits money into your account to trade with, then you are accepting client money and that nasty section of AIFMD applies to you. If you are merely letting him tag along on your trades, then you are still in breach of the law (see Scalpingtrader's post on page 1), but I am unsure whether this is criminal or civil.
Edit: I see you had PAMM accounts previously. I am not sure what the legal requirements for those brokers are, i.e. whether they need to report it or not. All I am saying, is before you accept client money whether PAMM or otherwise, it might be a good idea to get legal advice.
Last edited by grausch; April 15th, 2015 at 11:51 AM.
Reason: added info