Trading in Others Account

#1
I have a few friends who are willing me to manage their trading account for fees and profit sharing. I would like to know that how can it be done legally without me getting into any legal issues in future. I consulted my CA and he asked me to get a power of attorney from them to manage their account. So in case of any issue which may arise in future for any reason, I will be legally safe and can produce the power of attorney to any govt authority or court if needed. I would like to know if this is the right way of getting into this arrangement or is there any other arrangement which I need to get into to put me not wrong legally.
 

suri112000

Well-Known Member
#2
To put it otherway, your friends consented you to trade their account for some consideration. Legally, you should be an authorised portfolio manager to do that. You need permissions and licenses from authorities to do that.
As said by CA, power of attorney is one way to get the job done. But this is to be done without consideration.
When you charge for managing an account, you need permissions and licenses to do that to be legally valid.
 
#3
It is dangerous to do any trading on other people’s accounts unless one has portfolio manager’s registration from SEBI and one enters into proper legal documents with his clients....taking power of attorney is no fail proof way as the same investors in case of a loss will say that they are cheated and they lost their “ hard earned money “ and can even initiate police action.Trading is still considered as speculation by general public and these “ hard earned money “ types will be very happy as long as the profits come but in case of loss,they will find out ways to accuse you of over trading,cheating,duping etc...

PMS companies have proper licence and agreement for profit sharing and they do investments and they don’t trade frequently. Anyone managing trading account for others without any licence/ registration from SEBI has to do it at his own risk.

Smart_trade
 

simplebuthard

I can work as trade executor. Anyone in need?
#4
Managing others money not only needs SEBI approval and I am sure you need to have solid proven experience on managing money in stock markets in first hand before doing anything for others.

Just because you have a demat acct, done buy/sells for some time, doesn't make you superior to your near and dear one, colleagues, friends who don't have a demat acct.

Think twice or thrice before doing this!! Highly dangerous regardless of how much paper works you do!!
 
#5
To put it otherway, your friends consented you to trade their account for some consideration. Legally, you should be an authorised portfolio manager to do that. You need permissions and licenses from authorities to do that.
As said by CA, power of attorney is one way to get the job done. But this is to be done without consideration.
When you charge for managing an account, you need permissions and licenses to do that to be legally valid.
Agree. But what if the consideration is independent of the POA. I mean the consideration aspect can be handled separately. Like it can be shown as salary in the books of my client.
 
#6
It is dangerous to do any trading on other people’s accounts unless one has portfolio manager’s registration from SEBI and one enters into proper legal documents with his clients....taking power of attorney is no fail proof way as the same investors in case of a loss will say that they are cheated and they lost their “ hard earned money “ and can even initiate police action.Trading is still considered as speculation by general public and these “ hard earned money “ types will be very happy as long as the profits come but in case of loss,they will find out ways to accuse you of over trading,cheating,duping etc...

PMS companies have proper licence and agreement for profit sharing and they do investments and they don’t trade frequently. Anyone managing trading account for others without any licence/ registration from SEBI has to do it at his own risk.

Smart_trade
That is the reason why I am taking a power of attorney, right. Anyone is welcome to approach anybody, if I have the power of attorney, I will be safe, wont I.
And the question of trading at own risk does not arise as all the respective people are well aware of pros and cons, including loss of captial. No PMS company can generate returns nor take leverage or exposure to derviatives like what you can I can potentially do.
 
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#7
Managing others money not only needs SEBI approval and I am sure you need to have solid proven experience on managing money in stock markets in first hand before doing anything for others.

Just because you have a demat acct, done buy/sells for some time, doesn't make you superior to your near and dear one, colleagues, friends who don't have a demat ac

Think twice or thrice before doing this!! Highly dangerous regardless of how much paper works you do!!
What if I have people who are ready to go with me even when I have their consent of capital erosion in the process of superlative returns.

So refer to my original query relating to me being legally safe, would something like a power of attorney be enough and would it need to be submitted to the brokers etc. So any thoughts on this are welcome.
 
#9
I would advise against it. It is not suitable to trade on behalf of anyone. I know they are your friends, so you can make them understand. You should help them in how to trade properly, teach them some helpful strategies instead of the short-cut.
 

pannet1

Well-Known Member
#10
Without going into whether you win or loss and how your friends will react .. its very difficult to do things legally in india .... its all devised by british and we indian still follow that without knowing why ..

lets assume your friends gave their ATM cards to you and you withdraw money on a monthly basis ...... whats legal way to do this ...... i think its similar ... just cover your tracks by not having any proofs that you are trading in their account ...... see how it goes ....? after you are super successful lets see what we can do .... may be start a company in singapore ?
 

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