Trading other people's money

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mercante

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trading OPM FSA

Hi I have a question.


Let's say I start a UK limit to trade for OPM (other peoples money). In this case I have to file with the FSA correct ?

Ok lets say I trade for non resident aliens, like Italy, Austria, Swiss, Germany. Does the FSA care?

Second if the firm only trades for business professionals that allready have FSA licence do I have to file with the FSA.

In Germany for example if you trade only for firms that have registered with the BAFIN you do not need a BAFIN approval.

And at last what is the tax for income at a LLC in UK ? 30% 40% 50% ???

Thanks for help


mercante
 
This is a minefield!

Here's my ha'penny's worth:

If you are ever going to solicit for public money (i.e from someone you don't already know), the chances are that the FSA will be interested. This is a sweeping generalisation, but not inaccurate.

The only "get-out" is if you do not market in the UK and general UK investors cannot apply. However, if you market elsewhere, the relevant regulator will need to clear you.

The exception that I have seen is a private investment fund of less than 50 members.

The tax rate will be at least 30% - but again, this is not straightforward to answer. Any INVESTMENT (as opposed to trading) company will pay tax at the highest marginal personal rate, so it makes sense to base the fund offshore, e.g. Cayman, Vigin Islands, Bermuda, Gibraltar.
 
Hi thanks for your answer.

We plane to make a UK Limited to trade OPM from Germany (professionals only) that are registared with the BAFIN, so we allowed to advertise this here in germany.

We don't want to bring the managed money in this company.
We trade for managed accounts and get paid based on the performance.

Lets say we have a Managed account of 1M € we make 20% and get 5% performance fee for that.
So the Company get paid for there service 50K. Lets say this is the only paiment we get and the firm do not do anny other business. how high is the tax?

We have allready registart a BVI company but is nearly impossible to get a serios bank to open a account with.

Thanks for all infos
 
Why would anybody want to trade with something/someone who isn't legal.

[Mod's note: Edited to tone down language - final warning]
 
I'm assuming you want to just register the management company, as opposed to the FUND in the UK. As the management company is a trading company (i.e. does not hold investments) then UK smaller company tax applies to it. This can be quite favourable - both in terms on income and capital gains tax.

My suggestion would be to register the management company as a limted liability partnership, which avoids the bulk of national insurance on withdrawals. However, if you many want to sell the business one day, then a limted liability company is a cleaner vehicle. You will pay tax on a sliding scale (I think zero on profits up to 10k, only rising to 30% on profits over £1m).
 
Hi,

I have a certain knowledge of the UK regulatory regime having sat various exams in it.

The answer to your question is that you may not trade 3rd party funds without being FSA registered. If you want to set up a Ltd company and trade your own money within that structure you require no regulation but as soon as you manage anyone else’s money regulation is an absolute must. This process takes around 6 months and will cost you a lot in legal fees. (I know, I am in the process).

If you do want to get regulated here are some important considerations:

1) What sort of company the management company is. If it is in the UK this would typically be a standard Ltd company.

2) The legal structure and jurisdiction of the fund you manage. BVI and Cayman Islands are popular. Note however that the majority of directors of the fund must be off shore. It is easy enough to get a few brass plate lawyers to sit from your firm within your jurisdiction of choice.

3) Will the fund be listed? For transparency and liquidity most funds are. The Irish Stock Exchange is currently popular. There is no requirement for the fund to be listed in the same jurisdiction as it is domiciled in most cases (but not all, there are one or two exceptions).

4) Who will be the prime broker, administrator, cash manager and custodian of the fund? You can not perform any of these roles yourself by law. You must also have an internal back office and compliance / money laundering administrator.

5) Assuming you charge industry standard fees of 1%-2% management and 10%-15% of profits you will need to commence with circa $30m to make it viable for 2 people. Do you have offers of such funds in place?

Sorry that this is in no particular order but I am writing it as I think. There are various other considerations but this is the backbone of the process.

I hope that this does not serve to discourage you but it is important that you know what you are letting yourself in for before you start.

Best regards,

VN
 
I don't want get this thread off topic but a quick Q for anyone who knows and is browsing this...

are there any special tax/accounting rules for trading money held by a UK limited company where you are the only shareholder and director and you are normally resident in the UK?

currently i treat my trading income as investment income. this income is not the primary income of my company but is likely to be soon.

any help/pointers appreciated.

thanks,

Ste1
 
volatileN thanks for you extensive answer.

We want to manage money for austrian and german moneymanager that are regulated by BFMA and BAFIN.
BFMA und BAFIN are the same as FSA in GB.

We wanna manage there Accounts (managed account)

A limited company in austria that trades for a registered company do not need any registration. Same in germany.

Even the states have the same rule. When you trade for a registared CTA or Stock Advisor you do not have to register with the SEC or CFTC.

Are you sure that we have to registerwith the FSA when we ONLY trade for "business professionals"?

We have not planed to bring any money in the company. It should only be a manage company.

Why do we not start a company in austria or germany?
You need at least 50K to open a Ltd company and the tax is around 50% of all profits.

volatileN thanks for any advice in this topic.
 
Hi mercante,

it seems, you want to evade tax- , liability- and investmentregulations, and this in 3 different countries! Good luck, but i doubt you will succeed. In theory you can form a UK Ltd, run it offshore and try to avoid legislation in both countries. A public sport in Germany.

But in reality you will be prey to legislation in each of these countries: Managing the firm by german AND UK standards, taxation procedures in both countries, liabilities by both legal systems (which are incompatible and very different) and fees for laywers and accountants in both countries.

And -as you already noticed- banks will not be happy and any firm you want to trade for as a subcontractor will not either, cause there will be an insurance problem concerning third parties: Otherwise I could just start an investment fund, collect investors money, let some dumb guys trade all day and make my money from a commission kickback of the (most expensive) broker around. Won`t work, or only to the pleasure of some ghastly lawyers. Those days have gone.


Still, good luck

Hittfeld
 
Mercante, I forgot to mention: A german GMBH is 25 K €, not 50 -, a UK Ltd. which is operated from Germany is subject to german taxation, and german officials are rather keen to tax you anyway. So if you don`t live in the UK (without an additional german flat), run the operations from UK only, you will be taxed by german irs anyway (Umgehungstatbestand).

Hittfeld
 
volatileN,

Because I trade the Bund and my average trade is less than 5 ticks profit...

Ste1
 
hittfeld the server that makes our trades is running under a UK IP adress and 25 grands for a gmbh is a lot compared to 0.2 Grands for a Ltd no to mention the Körperschaftssteuer. ;)

And i dont want to EVADE liability- and investmentregulations as there are no regulations if I only trade for pros. Check WpHG § Absatz 9(2).

Yes I want to SAVE taxes legally.
 
STE1

The Revenue are pretty switched on to tax avoidance with the use of limited companies. The basic guidance is that you should be no better off by using a limited company rather than trading on your own account. What you have described is a "closed investment company". You can look up the tax rules regarding these if you want more detail, but basically, you will be taxed at your highest marginal rate of tax on investment/"trading" profits in a limited company.

You will not be able to be taxed at the lower or standard rates of corporation tax on these profits if you own/control the limited company.

Hope this helps.
 
volatileN

I agree with most of your response - except that I believe there are loopholes that allow you to manage "private" money that hasn't been solicited through open marketing. This is the get-out that managers of family offices use.

I'm fairly certain this exemption applies - but am willing to be proved wrong!
 
Can I send you some money to invest for me Mercante - you seem to be my type of fund manager - likes to fiddle the system - invest other people money! charge extortionate managment fees - take no risk - get offshore to avoid liability in any shape!! looking for mug punters to swollow hype stories.
Tell me Mecante are you a former pensions manager mortgage advisor or Politition. - You got to be ......or your high on something - called self belief... and realise there are people willing to part with cash for no reason..... I also think your on the wrong board ...... try fool.com
 
I could tell you stories about the German private client firms that used to exist all over Dusseldorf.
This is how the charges used to stack up..
Account Open fee: 16.66%
Com: 140USD/rt
Profit Share: 20% on each profit trade.
Result, customer always got screwed.
 
Zenda wrong why you attack me ? Did you had another loosing day in the markets?

Send me your money but i bet I couldn't burn it that fast as you did.
 
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