Asset Managers – Trading Under a PoA – Why Do I Need a Contract?

Powers of Attorney are commonly used by Traders (eg Forex Traders) to trade funds for a third party to avoid having to apply for a Fund or Broker’s License.


How it works is:


(a)  In the case of forex etc trading an account is opened in the name of the third party investor (“the Account Owner”);


(b)  The Trader sets up a tax-free Offshore Company (“IBC”);


(c)  The Account Owner (ie a third party investor referred to in a PoA as “the Principal”) signs a Power of Attorney with the Trader’s IBC which appoints at law the Trader’s IBC as the Account Owner’s Authorized Trader and attorney-in-fact (the “Agent”);


(d)  The Trader trades the Account Owner’s account and charges a trading fee as agreed (which is commonly a percentage which could be anywhere from 20% to 50%);


(e)  The Trading Fee is banked into the Trader’s IBC’s Bank Account free from tax


The Trader/Agent is given full power and authority on behalf of the Principal to buy, sell (including short sales) and trade in a range of things as specified in the PoA/Authority document including for example:

  • Currencies
  • Stocks
  • Mutual funds
  • Index funds and securities
  • Bonds
  • Options (including uncovered option writing)
  • Physical commodities
  • Financial instruments
  • Commodity futures contracts
  • Financial futures contracts
  • Equities and single-stock futures contracts
  • Foreign commodities
  • Foreign commodity futures contracts
  • Forward contracts
  • Contracts in unregulated foreign exchange markets, and options and other derivatives on each of the foregoing, on margin or otherwise,


If you are going to trade someone else’s money under a Power of Attorney, before a Power of Attorney gets signed, first and foremost, you will need to have a legal contract in place (ie signed by both you and the investor) which clearly sets out:

  • The services you are going to provide
  • How you are going to provide those services
  • That you are entitled to get paid for those services
  • What you are going to get paid for those services
  • How you are to receive payment
  • What out of pocket expenses you are entitled to be reimbursed for
  • When you are entitled to invoice/receive payment
  • That the client will provide you with a Power of Attorney
  • What the terms of the Power of Attorney will include
  • In what circumstances the contract can be cancelled by you
  • In what circumstances the contract can be cancelled by the investor
  • How the Power of Attorney can be revoked and by whom
  • Whether you can assign the benefit of the contract (and how you can assign the benefit of the contract)
  • Proper law forum (ie what Country’s courts are to hear the case if there is a legal dispute)
  • etc


OCI’s in house Lawyer can draw and settle this contract for you for a price of $1,000. Or you could retain an outside lawyer to do this for you.


Would you like to know more? Then please Contact Us:







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