Portfolio gaining >20% per yr. Should I be a discretionary broker?

Question

I would like to start a website where people can invest in my portfolio making me a discretionary broker. Is this a good idea? What are the legal implications? What should I know to get started if at all? Though Im doin well without it I think this idea would give me liquidity and leverage, as well as a percentage of my clients gains.

Answer 1

No you shouldn't.

The reason is deeply practical. Being a discretionary broker is a large full time business. It is like opening a bank in all respects. You have daily financial requirements, internal controls that are mandatory, you must have a separate legal compliance department, you must register with each separate state, you must meet minimum capital requirements and so forth.

If you have a spare three million dollars so that you will have sufficient capital (Pennsylvania for example requires you to have at least $2,000,000 in unencumbered capital it could seize) to keep the operations going and meet capital requirements, then you could open a small brokerage.

If you meet the education, training and experience requirements and you pass the NASD tests, then you can apply for a brokerage license in your state, get NASD membership and set up with a broker's broker to buy stocks and have them held in custody.

Also, it is illegal to take a percentage of your clients' gains as a broker.

Answer 2

The answer is no as you will need certain requirements. First you will need a broker's license which involves in relavant qualification, capital and of course years of experience dealing with clients with good track records.

Answer 3

You can't do it without a brokers licence, you can't get that without adequate, courses , training, and probably internship in a brokerage.

You must follow a lot of legal regulations, and have very high insurance.
And if you don't know what you are doing, you could easily end up in jail because of a mistake.