club_cafe: Startup issues

iras1 on

In a message dated 1/22/2004 9:58:24 AM Eastern Standard Time, sir_quasar@bivio.com writes:

Because of the nature of our business (offshore oil
drilling), the inherent scheduling, and our scattered
residences, the club which I am attempting to form will most
certainly not be able to shape itself in the most typical of
fashions. The biggest difference (among many) will be the
fact that trading decisions will be made by myself on behalf
of the group, and the group has agreed to give me
compensation for this. I have read where this may be
feasible as long as I only do this for a "small group". I'd
like to get some feedback from this forum regarding legality
and any other related issue.

Thanks, Ed Stewart

Check with your state, the SEC and NASD. What you are proposing either borders on or is a licensed activity in most jursidictions. The fines for screwing up (such as not being licensed) can be substantial.

Ira Smilovitz

Rob Nagler on

IraS1@aol.com writes:
> Check with your state, the SEC and NASD. What you are proposing
> either borders on or is a licensed activity in most
> jursidictions. The fines for screwing up (such as not being
> licensed) can be substantial.

Here's the link to the SEC investment club page:

http://www.sec.gov/investor/pubs/invclub.htm

There are many ways to structure a private fund with management fees.
You may be safe if you are only handling execution/accounting and not
responsible for investment decisions.

Cheers,
Rob Nagler
bivio Inc.

Disclaimer: statements are opinions expressed by bivio Customer
Support and are not official statements from the IRS. These
statements are not intended to replace professional tax or
accounting advice. When in doubt, follow the advice of your
local tax advisor or accountant who is familiar with your
particular circumstances.

Ed Stewart on

Rob, this site was the precise one that I had gotten the
info concerning a small group. Here is the passage in
question:

"Do securities laws apply to a person who provides advice to
an investment club?
If the adviser is compensated for providing the advice
regarding the club's investments, the adviser may need to
register according to the Investment Advisers Act of 1940.
Also, if one person selects investments for the club, that
person may have to register as an investment adviser.

In general, a person who has $25 million or more in assets
under management is required to register with the SEC under
the Investment Advisers Act of 1940.

A person managing less than $25 million may be required to
register under the securities laws of the state or states in
which the adviser transacts business.

Both the Investment Advisers Act of 1940 and many state laws
do not require registration for advisers with a small number
of clients."

Our assets will fall well shy of the $25 million level...at
least initially... ;)

Rob Nagler wrote:
> IraS1@aol.com writes:
> > Check with your state, the SEC and NASD. What you are proposing
> > either borders on or is a licensed activity in most
> > jursidictions. The fines for screwing up (such as not being
> > licensed) can be substantial.
>
> Here's the link to the SEC investment club page:
>
> http://www.sec.gov/investor/pubs/invclub.htm
>
> There are many ways to structure a private fund with management fees.
> You may be safe if you are only handling execution/accounting and not
> responsible for investment decisions.
>
> Cheers,
> Rob Nagler
> bivio Inc.
>
> Disclaimer: statements are opinions expressed by bivio Customer
> Support and are not official statements from the IRS. These
> statements are not intended to replace professional tax or
> accounting advice. When in doubt, follow the advice of your
> local tax advisor or accountant who is familiar with your
> particular circumstances.

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