Can I as a sole proprietor have a relationship with someone on profit sharing basis provided that the other person doesn’t have a license?
Or is it necessary for me to form a nbfc
You will have to either become a stock brokerage firm or get NBFC license. Not possible to do without either.
As a sole proprietor you can have a profit sharing relationship. You wouldn’t need any license.
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would getting nbfc license provide any benefit , will it be easy for company be able to get funding from markets for its trading activities. (Not deposits )
hmm… no… it is very tough to raise equity capital for trading activity. Like I said earlier, Hedge fund or Cat 3 AIF is the best way to do this.
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So basically I can hire people who trade on my account without them having a pms license or aif license and neither me being a nbfc or brokerage?
Right??
I meant not exactly hire but have a professional deal?
What if a Private limited company become alpha member ? Does company still require NBFC license ?
From all the research i have concluded that - you can’t take outside money for profit sharing without being PMS or AIF , you can give advise but cannot charge a fees without RIA or RA license .
Apart from this however you can execute trades from another persons/entity account and charge a fees ,commision, profit share for the same without any license since you are not actually taking money in your own account.@nithin am i right?
And it would be better if the entity in whose account we are managing is regulated like prop firm having membership , nbfc etc. Correct.
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Yeah. This is okay as long as your trading account is an individual account. But if it is a company account, you will need an NBFC or broking license.
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Not needed.
Not sure about prop firms, but wrt other people and ‘entities’, placing trades in their accounts without verifiable confirmation before every trade might bring up issue of unauthorised trades if you end up losing their money, no? @nithin
Right unless they are pms/mf/Aif.
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Actually it’s a grey. Suppose you are a trader(account owner) and have hired two others for making trades in your account and have authorised them to undertake decisions as they seem fit like an agent . And even if it’s not compliant I don’t think it falls under SEBI ,maybe general contract law may apply . In above example suppose they make a loss ,so what would you complaint to sebi , when you on your own gave them authorisation as well as credentials of your account.
This may extend to professional contracts as well .
However one should always consult a good lawyer for this, this was my view on this according to my knowledge,maybe it could be missing something.
and actually, on further reading turns out the unauthorised trading thing is for brokers, not for people looking to trade on client accounts
Yeah unauthorised trading notification is for brokers /sub brokers (now merged with authorised person).
And giving credentials to someone is an implied contract that you are authorising him to make transactions unless otherwise stated.
you have info regarding any circular where, as @nithin earlier said, you’re prohibited from charging fees for trading in other people’s accounts?