There has been C2 dialogue about what "system vendors" can and cannot do. What I do know is, we are allowed to be publishers, but cannot trade the money of others, or give personalized advice. (An RIA is probably similar.) But the the following (seems even more restrictive) is from a website of Al Brooks (supposedly a price action trader). I have not verified I am not a CTA, and have not verified how precise/true his information is:
I am not a CTA (commodity trading advisor) and therefore need to restrict what I publish on this site. … I called the NFA and asked what my limitations are and they told me that:
I cannot make trade recommendations
I cannot discuss my trades or trading results
I cannot answer specific questions about particular trades that anyone has taken or contemplates taking.
However, I CAN publish my reading of charts and I can discuss trades and management in general terms.
Again, if this is true, some C2 vendors appear to go over the line at times. Comments??? Any CTA/RIA here that can shed their wisdom on this?
What I do know is, we are allowed to be publishers
We??? who are you Index-10%? (smile)
but cannot trade the money of others, or give personalized advice.
Not true. Even in the states you can trade investors money under certain levels without licensing and related with the titles restrictions.
therefore need to restrict what I publish on this site.
I think the guy just covering his butt from possible lawsuits from his followers. Ohh… gurus. (smile)
At C2 the topic is more complicated, because there are system vendors from around the globe. i.e. If I’m Panama’s citizen I’m not under US jurisdiction. The site is under the states regulation I’m not (smile). If I don’t violate C2’s TOS I can discuss anything that is legal under Panama’s laws.
Comments??? Any CTA/RIA here that can shed their wisdom on this?
If you have a title and you’re on C2 it’s better to not advertise it. Otherwise you would be immediately opened for lawsuit from sick people (smile).
Eu
Great topic Index.
I have checked with the Securities Regulators in my province (I’m Canadian) and was given similar guidelines. As I am not a Certified Financial Planner I cannot provide advice specific to an individual (e.g. Charlie, you should buy XYZ) but I can say that I bought XYZ. Also, I could publish a newsletter, for example, in which I state that I recommend buying XYZ (this recommendation is not specific to an individual).
I do not answer questions from other investors such as “Should I buy QQQQ now?” as that would constitute providing individual financial advice.
Fred
Great topic Index.
There is nothing great. It’s obvious that regulations of your country is first, C2’s TOS is second. Applying the stats laws around the globe is stupid. Knowledge of your country laws about hmmm… investing is a must. (smile)
Eu
but cannot trade the money of others, or give personalized advice. This is the key sentence. Nobody trades on C2. All results are hypothetical and we only give our opinion. Personalized advice insofar as saying “Because I know something about you, then” is forbidden. Discussing trades is fine, hopefully they were real ones, though. As an RIA Rep, there’s nothing wrong with building a track record, or having subscribers. We are all covered under our first amendment rights on C2, and that’s pretty much what the disclaimer says. I have no idea why he would say he can’t talk about trades. I’ve never read anything like that from the NFA.
" I have no idea why he would say he can’t talk about trades. I’ve never read anything like that from the NFA."
That was part of my surprise also. Trade results seem fine, as that is what the hypothetical disclaimer is for. Trade recommendations, that is the whole point of “publishing.” Even guest analysts on the CNBC/Reuters/Bloomberg channels give their thoughts on individual stocks, as part of "publishing."
I am wondering which NFA he called. Maybe the National Flounder Association 
I wrote the SEC and asked them. Here is their response (requires some reading on your part though):
Please first review sections 202(a)11, 203, and 203A of the Investment Advisers Act of 1940 (see our webpage http://www.sec.gov/divisions/investment.shtml , follow the link, choose subchapter II - Investment Advisers, sections 80b 3, 80b-3a, 80b-3 and 80b -2 ) as a starting point to determine if you are an investment adviser and if you need to register with the SEC. In addition, special considerations apply for Internet investment advisers (please reference webpage http://www.sec.gov/rules/final/ia-2091.htm ) You should also check with the state or states you may be an investment adviser in as most of the states have specific requirements for being an investment adviser (www.nasaa.org may be helpful).
You may also want to research the publishers exemption to registration in section 202(a)(11)(D) of the Advisers Act. I believe the Lowe vs. SEC case, the Mary Lee Botsaris no action letter, and the Russell H Smith no action letter may be helpful regarding this exemption.
After reviewing these items, if you are unclear whether or not you are an investment adviser or are required to register, please seek legal counsel familiar with the securities laws to assist you. Please let us know if you have any other questions. Thank you.
Office of Investment Adviser Regulation
Division of Investment Management
U.S. Securities and Exchange Commission
202-551-6999
Kenneth:
This point has been answered in several places at C2.
Here is the answer: The First Amendment allows you to publish whatever you want to publish.
Offering general trade recommendations – not tailored to an individual’s financial circumstance – counts as publishing, and is protected by our Constitution. That is what you do here at C2: you essentially publish a newsletter (glorified, and higher-tech, but in its essence, that is what your system’s trade signals amount to).
As long as you don’t cross the line and begin answering personal financial questions or offering advice tailored to individual circumstances (such as: “Frank, you should definitely buy IBM because you are approaching retirement, and you need a blue-chip stock in your portfolio.”) you are within your rights, and all is fine.
Matthew
This is at the Federal level. Kenneth has a very good point, that many states have their own investment adviser requirements. I read the link he provided. It raises concerns for US vendors.
For example: A Registered Investment Advisor manages assets, makes portfolio composition and individual security selection decisions for a fee, often a percentage of assets invested. The SEC regulates investment advisors that have over $25 million in assets under management. Investment advisors that do not meet this threshold are generally regulated by the state securities agency in the state where they have their principal place of business. This website provides information about both SEC- and state-registered investment advisor firms. Investment advisors file Form ADV to register with the SEC or the states. Form ADV contains information about an investment advisor and its business operations.
http://www.investmentadvisorsearch.com/
http://www.moneymanagerservices.com/Laws/222.cfm
Thanks for the reply Matthew. Of course your statement "The First Amendment allows you to publish whatever you want to publish" is incorrect. You cannot publish liable, you cannot publish anything that infringes on copyrights, etc., etc. Publishing under the first admendment is indeed restricted by laws that protect other people.
I would feel much better knowing for certain that our activities here are completely legal. Do you have a legal reference that you could show us? Something in the investment advisor code, a specific law suit, a no action letter, etc.? I am assuming you did your homework before statrting this site - could you share that with those of us concerned with this? Thanks,
Ken
The 1985 U.S. Supreme Court Case Lowe vs. SEC (472 U.S. 181) is what you’re looking for.
Matthew - if I may make a suggestion… You said question this had been answered before here at C2, and here it is again. If people keep wondering about the legality of our activities, why don’t you add a “Legal” section to the web site that lists the court cases and decisions, no action letters, etc. that apply? Then anyone with questions can see the evidence for themselves. That would keep this subject from coming up again and again.
He already has, it’s under FAQ’s, and has been there since the beginning.
The full text from under “Frequent Questions” (old C2 interface)
“Do I need to register with the CFTC or the SEC in order to sell my trading advice? Do I need some kind of license to start a trading system?”
If you are an American citizen, the short answer is: No, you do not need to register with any government agency, or pass any kind of test, or have a license in order to publish trading advice.
However, you must be aware of certain restrictions. The most important restriction is this. You cannot provide individualized advice to clients. That is, you cannot offer different advice to different clients based on their individual financial situations.
Here’s an example.
Allowed: "Attention all subscribers to my trading system: Buy IBM because I believe it is going up!"
Not allowed: "Dear John Doe: based on our conversation earlier today, in which you told me you were nearing retirement, I think you should buy IBM, because it will appreciate in value!"
The other important restriction is that you cannot manage clients’ trading accounts on their behalf. You can’t have access to their money, or issue trading instructions to their brokers. Otherwise you cross the line from publishing, which is allowed, to asset-management, which requires registration.
You must simply restrict your activity to publishing non-personalized advice which your clients can choose to act upon or not. (Note that using Collective2 to disseminate your trading advice via a Web site and email is considered publishing.) Remember that our right to publish and say what we like is protected by the First Amendment, a right that our citizens fight for, to this day. No small matter, that.
If you are not an American citizen, then I have no idea what kind of constraints your government places upon you. Please check with a local attorney.
