Okay btw are you aware of bse incorporating a subsidiary to manage activities of investment advisors and maybe from now on reporting and compliance might be managed by exchanges instead of sebi. Do you think this will make advisory process more efficient and bring in more transparency and accessibility here.
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Until now RIA didn’t really have any regulator actively monitoring them, I think BSE will end up acting like a first level of regulator for RIAs. Similar to how for brokers, exchanges act as a regulator.
No, I don’t think what you mentioned will really change. Rules on how RIAs can operate is defined by SEBI, that doesn’t change with this.
i have an Pvt Ltd company, can we trade using this ?any suggestions.
Hi Nithin
Can I trade for foreign prop firm? Bcz I guess this can be treated as service only…
Also what company format will be appropriate for this kind of foreign service? Sole proprietorship or partnership is ok or Pvt Ltd is needed?
Nishith
Hi Prakhar,
Bit confusion … If I trade other’s account then is it legal?
If you trade on another’s account, it isn’t really illegal as long as the customer gives you access to it. But if you take money from that customer for managing the account, then it is illegal.
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Yeah, trading for a foreign prop firm shouldn’t be an issue. You can do this in individual capacity itself, no need of a company I guess.
Thanks a ton sir
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If I hire traders to trade my account and pay commision including /in form profit share , I guess it should be legal for both parties.
Going further if I get in a contract with my trader for both shares of profit as well as loss, any issue doing it as individual.
Dear Nithin,
Does zerodha provides multiple login IDs for prop trading business commencement?
Is there any scope I can built trading business with Zerodha?
Regards
Nishith
There is no issue for you to pay, but the person receiving money has potential issues. He isn’t on a salary and makes a % of trading profits as a fee. Kind of comes under the RIA/RA regulations.
Ah no, we don’t Nishith. This entire allowing multiple people to trade on one account is a can of worms. Many outcomes where we might be held liable as a broker. Hence we don’t offer any such products.
Thanks Nithin…
Hello and Happy Easter dear sir.
I have been handling relatives money through both taking into my own trading account as well as trading on their behalf.
There are quite a few friends who are on the network where I just advice them on swing trading FX contracts and delivery based equities.
Having started before I realised that this is illegal.
Thankfully, I have not received a single penny in terms of cash compensation, but I have encouraged them to volunteer to send the proceeds to any charity or pay it forward to help educate poor children.
I am not aware of nor did ask accounts of who donated how much.
They can choose not to, but they usually do since they know I do not accept compensation in cash.
Things went well as long as it did. Then losses hit and I was severely reprimanded and I consoled them and we have recovered all losses and in good profits.
At this time, I realise that I am losing a lot to taxes as I have pooled in others monies.
Also, a few relatives insist that I trade using the same arrangement and are willing to give it in writing that they want me to handle their accounts as both ‘kin’ and ‘canny’
Reason being- the returns generated are able to provide for atleast 35% of the monthly expense- instead of it lying in FD or MF.
How do I convince them that their monies are not as safe as it sounds- given that I use FnO to generate alpha ( straddles on FX options)
By stopping this arrangement- I will be denting their cash flows but by continuing this- I am taking a risk that can be avoided.
Is there a way, I can create a trust account and ask them to add equal amounts in that account and then create a new trading account which is linked to the trust?
or- should I just return each one their shares and encourage them to trade individually?
Thank you!
Don’t have answer to your question, but that’s some entitlement here. Risk is part of trading, if they cannot understand then in long term your relations will get strained eventually. Does not seem worth it - until they understand how trading works and that you are doing them a favor and not vv.
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Money in to your account unless from brother, sister or any other lineal ascendants or descendants is taxable.
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The profit you make is again taxable like you seem to have noted. But if you transfer rest of the proportional profit to your relative (unless they are close like mentioned above) they will also have to pay tax.
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Trading for some one else in their account is not legal.
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But your answer is in contradiction to Nithin’s here:
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As long as you don’t take any money from the other guy it may be ok. But the moment you take some fee for that service you are crossing in to illegal zone with out the right license to do so from authorities.
But it is easy to bypass this. A family member can give money as a gift. An arrangement can be made to receive payment for coaching or renting SAAS.
No I am strictly not accepting money because the moment I do- it becomes transactional and I am treated like an employee or maybe a debtor- with passive aggressive targets.
In fact I feel stuck after having obliged for long.