With the rise in the volume of day traders entering the Forex market over the course of the past 10-20 years, it comes as no surprise to see a recent spike in the volume of Entrepreneurial Traders realizing that there is money to be made by allowing others to copy their trades and charging for the provision of such information.
Such an arrangement enables an experienced Forex Trader to allow novice traders/investors to “piggy” back on the frame of the experienced Trader (ie copy the trades of the experienced Trader) without the Trader having to endure the red tape, hassle, cost or legal risk that would likely otherwise come into play were the Trader to trade the Novice’s money directly.
If you are an experienced/successful Forex Trader, chances are you will have had (or will soon have!) friends or family or acquaintances come at you asking you to invest (ie Trade) their money.
Generally speaking, if you take people’s money and invest it (or if you offer financial/investment advice) such endeavours would require one to apply either for a Mutual Fund License or a Broker’s License or a Financial Adviser’s License.
If, however, all you are offering is a Copy Trade Facility/Service it may be possible to incorporate such a business in a low regulation/low tax jurisdiction without needing to apply for any form of Special License. This could potentially be achieved by characterizing your business/offering in a certain way eg:
- You could take in investors via the set-up of a Private (non-licensed) Closed End Fund. Click on the following link to read details of how this might be achieved: https://www.dropbox.com/s/vy9xgzj3gtu9dq1/Structuring%20Options%20for%20a%20Non%20Licensed%20Closed%20End%20Fund.doc?dl=0 ;or
- You could utilise a tax-free International Business Company (“IBC”) eg a Seychelles or Belize or Nevis or Samoa IBC – which could be contracted to trade an investor’s money in a/the broker’s account under Power of Attorney. Click on the following link to read details of how that can work: https://www.dropbox.com/s/h74029saaaa3mmm/How%20To%20Trade%203rd%20Party%20Funds%20Using%20a%20PoA.docx?dl=0 ;or
- Your IBC could enter into a service contract or consultancy contract or an information supply agreement with the “investor” whereby, in consideration of you supplying details of your trades or some other person’s trades as/when placed (or if you supply an introduction to some other service provider who provides the trade data), the investor agrees to pay you a fee (which could potentially be a percentage of the investor’s profits made from such trades). Such an agreement, if drafted very carefully by an appropriately experienced/knowledgeable Lawyer, could get you around the need to apply for a Special License.
Moreover, provided the Company is seen to be managed and controlled from Offshore and, (eg if you live a country that has CFC laws), is seen to be beneficially owned from Offshore, the profits from such a venture could be banked Offshore potentially tax free.
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