Trade options for someone else s account, Should You Manage Your Friends Money?
The views expressed here are my own and do not necessarily reflect the views of the Commission, the Commissioners or of other members of the staff.
As some of you may know, I worked in or around the industry for 24 years before joining the SEC.
MANAGING YOUR MONEY
Like you, I enjoyed working with colleagues in a highly competitive, rapidly changing, business … trying to help our clients, employees, and owners achieve their objectives. My recent experience with the Commission has confirmed the complexity and adaptability of the market … a complexity and rate of change that can be fascinating, exhilarating, challenging, or frustrating … but that can also cause us to forget our fundamentals and to lose the forest for the trees.
We can get lost in the many regulatory agencies, laws, rules, and regulations. We can also get lost in the accelerating pace easy money binary options strategy technological change. Today, just 20 years later, technology has transformed the industry … and you best not blink, or you may fall far behind.
Market participants now clamor to receive news releases only hundredths of a second before their peers. I want to go old school.
Can You Trade Stocks for Someone Else?
I want to go back to basics. I want to talk about people. We in OCIE therefore spend a lot of our time and resources trying to help the good people get it right.
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We are transparent. We have also been publishing Risk Alerts to flag areas where we have found noncompliance across firms, again giving you the opportunity to look into these issues preemptively in your organizations. What are they? Liars, Cheaters, and Thieves We can dispense with the first vice quickly. The ways and means of man are many, but the methods used by some people to separate their brethren from their money are relatively unchanged.
- Trading in a trend example
- Once you have a few successful trades under your belt, you might find that family or friends ask if you can make some money by trading securities for them.
- So it is wrong to say that if POA was allowed, all of them were not needed.
- Certain procedures must be followed to finalize the transfer.
- W Sure lenryxxl I have years of experience in trading and happy to assist you June 4,pm 8 You should educate yourself and trade by yourself mate… Tell me more, why do you want others to trade for you for free?
- How to Buy Stock for Someone Else | Pocketsense
They lie, cheat, and steal. You may have seen that the Enforcement Division recently charged a Los Angeles-based attorney as the alleged architect of a fraudulent scheme that raised money through a boiler room operation.
Investors were allegedly falsely told that actors ranging from Donald Sutherland to Jean-Claude Van Damme would appear in the movie when trade options for someone else s account fact they were never even approached. Instead of using investor funds for movie production expenses as promised, the defendants are charged with spending most of the money on themselves. While I believe that liars, cheaters, and thieves are a very small minority of the industry, the SEC spends a significant amount of time and resources trying to detect their bad behavior and to prevent them from harming investors.
You must also. From the moment you hire your second employee, or your 20th, or your 2,th, the odds increase that you have employed someone who will resort to bad acts to separate other people from their money. My first boss in the industry ran our legal and compliance department, which oversaw well over one thousand employees. We get to work with smart people in an interesting business.
We help our clients achieve their financial goals.
How to Invest for Your Family and Friends
Our employees make a good living and provide for their families. This is a great company. Most are having fun, following the rules of the pool, but you just know that someone may be out there, peeing in the pool, ruining it for everyone. Our job is to find that person.
No one wants liars, cheaters, or frauds in their firms or in the industry. But, importantly, the record is devoid of any facts indicating that the firm had adopted reasonable controls to ensure that disbursements of client funds by pre-signed LOAs, or cut-and-pasted signatures, or remote log-in were actually authorized by the client.
It was an accident waiting to happen. It could have been a problem employee with a drug, alcohol, or gambling problem who was tempted to misappropriate client funds … or it could have been a client who tried to stick it to the firm and falsely claim that a withdrawal or series of withdrawals were unauthorized and there would be no record of the authorization.
Someday, somehow, the absence of controls was going to bite the firm. Identifying people behaving recklessly within your firms can be difficult. Financial services is fiercely competitive. You are trying to keep up.
Should You Manage Your Friends Money?
Trade options for someone else s account are finite. And, depending on the size of your firm, people can sometimes roam out of your sight and over the hill before you realize they are no longer with the herd.
It could be new products … or new lines of business … or rapid growth … or acquisitions … or contractions and retrenchment … or bending over backwards to serve your clients. When OCIE staff and I look out into the industry today, one of the areas where we are beginning to conduct exams to assess the existence and effectiveness of controls is in the alternative mutual fund space.
Alternative funds are the bright, shiny object. There is certainly nothing wrong with alternative investments or alternative investment strategies, per se. Many investors have benefitted from their inclusion in portfolios.
This is particularly true for advisers that may have experience with alternatives in private funds but are trade options for someone else s account to implementing them within the strictures of the Investment Company Act … and for advisers that may have experience with the Investment Company Act but are new to alternatives.
In short, daily valuation and daily liquidity require a tremendous amount of control and discipline. Alternative funds are the bright, shiny object … but they are a sharp object.
If any of you have launched, or are considering launching, a mutual fund that uses alternative investments or strategies, I implore you to evaluate the reasonableness and effectiveness of your controls. Conflicts of Interest That brings us to conflicts of interest — the vice that is most difficult for the people within an organization to detect because they are often impaired by it.
OCIE staff and I see instances where otherwise honest, hard-working people are blind to the fact that they are putting their interests ahead of their clients. We can come into such situations independently and unaffected by the same pressures and incentives as the adviser and see immediately that client money is being handled primarily for the benefit of the adviser, not the client … but the adviser will cling insistently to the notion that its heart and actions are pure.
I remember reading the story some years ago but could not find the original source when preparing these remarks, so I cannot attest that the story is true … but it has the ring of truth. At any rate, as you know, Abraham Lincoln and Stephen Douglas engaged in a series of debates in on the issue of slavery.
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They alternated who went first. The leader was scheduled to speak for 60 minutes, and then the other would take the stage. Conflicts are also interesting and insidious, because we see them at an individual, firm, and industry level.
One person, a close group of people, or seemingly everyone in the entire system, can incrementally, over time, through the accretion of justifications, customs, and excuses convince themselves that they are entitled to money and opportunities that fairly belong to their clients.
The Risks Involved
Take a conflict at an individual level. The complaint alleged that over a period of more than two years, the principal allocated almost 2, option trades more than an hour after their execution, enabling him to routinely cherry pick winning trades and allocate them to favored accounts including his own.
Inthe Commission settled charges against a Portland, Oregon based firm  that was receiving compensation for placing its clients in certain mutual funds. The firm also created and offered proprietary asset allocation models to its advisor clients. The models used a variety of mutual funds, ETFs, and equity positions.
From time to time, the adviser would change weightings, as well as the funds used, in the models. In Septemberthe firm entered into an arrangement with a broker that agreed to pay the firm a percentage of AUM invested in certain funds.
That arrangement included a scaling provision that increased the payout rate to the firm if it achieved higher levels of investment in the funds covered by the agreement. So, of all the thousands of funds available to the firm, it had a direct financial incentive to use certain funds, and to use them in increasing amounts, in the construction of the models that it offered to its advisory clients.
How did they get comfortable with this arrangement? What rationalizations and justifications were required? Incentives and conflicts and the human mind are powerful things.