Managing clients money

@nithin
Recently I heard of Bangalore based company called minance which pools up the money from clients and uses that to trade options and takes 10 percent compensation without any limit of one crore which is there in AIF-3 funds.
How does it is legal then.

Hmm… I don’t think they are pooling funds, maybe double check with them. Pooling funds without either a PMS, AIF, or AMC license is illegal.

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They pledge stocks,mutual funds etc of clients to get the funds , which is used for trading but it could be the way to get away with the law as if it were this way many companies could ask small investors to pledge their FD ,mutual funds without any AIF/PMS license.

they have a product called Asset-Pay Cash

"

We use the margin gained from your mutual funds to execute very conservative derivative strategies. These strategies consistently generate returns between 0.8%* to 1.2%* every month."

You leverage your existing equity or debt funds invested with Minance. No additional monies need to be invested.

Seems they don’t follow 50:50 Cash & Collateral rule here.

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Zerodha also has started 90% collateral against your liquid mutual funds (Listed by zerodha) that acts as a cash component.

but zerodha requires you to have 50% cash in your account. you can’t use all the margin gained from mutual funds for fno trading.

Yes you can. There are a few liquid funds listed by Zerodha which act as a cash component themselves so you don’t need to have separate 50% cash. Pl check row nos 883 - 894 in the google sheet i have shared below -

(https://docs.google.com/spreadsheets/d/1vRI4NKpJ-3mnOWxUhSRMSQD5txy8QNumzSQrdfGKyL0/edit#gid=0)

When you pledge, the funds realized can be used to trade only in that particular client’s account. Especially after the SEBI circulars this year. So if trading happens on that individual’s account, this doesn’t really accounts to pooling of funds.

If a client shares his/her ogin ID and pwd to trade with a 3rd party, that is a risk a client takes. This is best avoided.

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Death knell for small PMS guys?

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