http://www.rcfp.org/news/mag/29-3/lib-seeingre.html
"The U.S. Supreme Court has held that financial newsletter publishers are not “investment advisers” under SEC rules in the 1985 case, Lowe v. SEC. The court ruled that someone who provides impersonal trading recommendations cannot be regulated as an investment adviser. "
Otherwise I have a nice spot for Matt on the Bahamas. Very good connections for the C2 server…
You are exactly write Pedro - there are no issues if you JUST provide impersonal trading recommendations.
However, as soon as you offer those recommendations to be auto-traded, your reference from 1985 is irrelevant.
http://www.sec.gov/investor/pubs/autotrading.htm
Updated 7/1/05
Again, you are missing the point by saying that two ideas are the same just because they have similar names.
Jim,
On the webpage to which you refer, I read
"In an auto-trading program, you establish an account at a brokerage firm that has agreed to accept trading instructions from the investment newsletter. In order to allow auto-trading in your account, you must sign an agreement with the broker authorizing it to accept trading instructions directly from the investment newsletter and to execute trades in your account without first getting your permission."
This clearly means that what we do is not autotrading: I did not sign such an agreement with my broker. They do not accept trading instructions from C2 or the system vendor. They only accept trading instructions from me. That I have some device installed that reads newspapers, is my business.
Jules
“You are exactly right - there are no issues if you JUST provide impersonal trading recommendations.”
Thank you and since that’s what we do here, the conversation should end here. You probably didn’t read the link you provided (and I was already aware of) because then you would have realized that it wasn’t a law, just a recommendation, a warning. You don’t have to believe me, just read the bottom of that page (in yellow so hard to miss):
“We have provided this information as a service to investors.It is neither a legal interpretation nor a statement of SEC policy.”
So kindly go back where you came from and educate yourself before you stir the shit…
So your theory Pedro is that if is not an official “law” by SEC standards, then don’t worry about it?
Never mind the fact that this publication is on the SEC’s website and it CLEARLY states right there that if you have a service that can be auto-traded you MUST be registered.
Very well done. Let’s just ignore this thing on the SEC’s website, but if something does happen later, I’m sure Pedro will be first line in screaming "Well, Matthew said we did not need to!"
It appears some here would like to just ignore any possible issues with the gov’t regulators till they actually show up and start asking questions.
They only accept trading instructions from me. That I have some device installed that reads newspapers, is my business.
Jules - I guess it is irrelevant then that the software you installed to do this came directly from C2? It is irrelevant that without this software you could NOT perform the activity that is ‘your business’. It sounds to me that you are 100% reliant on C2 to have your account automatically traded. Wait, I think we just defined auto-trading. =)
-Jim
Actually, the AutoTrading software doesn’t come from C2. (Not that it matters - according to my interpretation of the regs.) But since you’re making a point of it, I feel I should let you know that the software comes from independent, third-party developers, not C2.
Matthew
“So your theory Pedro is that if is not an official “law” by SEC standards, then don’t worry about it? "
Duh, yes. If it is not against the law, I can not break it, can I?
>”…it CLEARLY states right there that if you have a service that can be auto-traded you MUST be registered."
Excuse me, but it doesn’t state it CLEARLY. I will quote it for you:
"Generally, the SEC considers firms that publish investment newsletters and that also engage in auto-trading to be investment advisers. "
GENERALLY. If I have my own website, I post trades there and it can be autotraded, I assume that falls under that category. Again, generally. Not clearly. On C2 there are 3 parties involved, thus the case is way more complicated. Not to mention the definition game, where C2’s and the SEC’s definitions are different…
But since you are so worried about the small investors and you think that a SEC registration will help vendors to be better traders, let me ask you this:
Whose system would you rather subscribe to:
1. P. K. (no disrespect, but such an excellent example) registered trader, both his systems losing money.
2. Little Pedro, not registered, but who had no losing month yet, and up 80+%.
The point here is that registration doesn’t make you a better moneymanager or trader. I bet all the managers at LTCM were registered and they still almost took down the whole investment world in the US…
Oh I just realized that since I trade futures, SEC rules don’t apply to me, so I guess I am going to sleep well tonight…
Whose system would you rather subscribe to:
1. P. K. (no disrespect, but such an excellent example) registered trader, both his systems losing money.
2. Little Pedro, not registered, but who had no losing month yet, and up 80+%.
The point here is that registration doesn’t make you a better moneymanager or trader. I bet all the managers at LTCM were registered and they still almost took down the whole investment world in the US…
That’s just a cheap shot Pedro. Your question is completely irrelevant to this discussion. There are plenty of registered investment advisors that perform better than you. So, what’s the point?
MK - once again, trying to explain the technicality. As far as ‘normal’ person is concerned, the ‘auto-trading software’ does come from C2. It is promoted right here and endorsed right here. To just say ‘well, I didn’t make it, someone else did’ is a moot point in my opinion.
In the end MK, I see C2 has a lot of potential, but if this catches on, there will be scrutiny. I am one to err on the side of caution, but perhaps you and others here are not.
Note: you called the software here ‘auto-trading software’. Interesting… But, we are not auto-trading here…
The relevant law is (I think) in http://www.sec.gov/about/laws/iaa40.pdf
I didn’t read it fully yet, but the definition of “investment adviser” explicitely excludes
"the publisher of any bona fide newspaper,
news magazine or business or financial publication of
general and regular circulation;"
I see no exception to this exception if there is a possibility of automatic execution. If the SEC has that earlier quoted rule about autotradable advise, then that rule is against the law and it will not survive in the court.
Jules
On the other hand, reading further in this law, the law gives the SEC the authority to have additional rules. It would be quite awkward though if such a rule would contradict an explicit other part of the law. Anyhow, I think it is also clear from this law that such rules must be formally published. Just a quote of a webpage or some SEC rep saying it is not enough - neither the Director nor the cleaning lady.
I think that all rules are here: http://www.sec.gov/rules/final/finalarchive/finalarchive1997.shtml
Is there any rule here that says anything about autotrading? I can’t find it - but then I don’t want to find it either 
Jules
Jim,
You wrote
"Jules - I guess it is irrelevant then that the software you installed to do this came directly from C2"
Then MK wrote that it didn’t come directly from C2. On this you answered
"MK - once again, trying to explain the technicality."
So if you say something about the distribution then it is relevant, but if someone else says the opposite then it is a technicality?
Jules
Here’s one more technicality: I’m not a US resident so while I do mind US laws and regulations, the SEC has no more jurisdiction on me than the Zimbabwean Chamber of Commerce.
I would assume the same applies to all non-US system vendors.
Francis
Francis - you are probably correct, but your statement says a lot more than just the face value … you are providing an integral part of the auto-trading equation for ALL US residents. So, while you can take a step back and say “I don’t live in the US” I am sure you have no problem receiving compensation from US residents.
I suppose if the equation is C2 (US based I assume) > TradeBullet (Non-US Based) > Subscribers (many in the US I assume) - I don’t know that you could plead non-exemption to the SEC rules and regulations.
As I stated before, I do not work for the SEC, so take my opinion for what it’s worth.
OK guys, I’ve been scolded and am no longer allowed to post here about this topic.
It’s been fun and I wish you the best. In the meantime, I’ll see if I can get my final answer from the SEC after making sure they know my opinion since I am not allowed to post here anymore.
Again MK, if you don’t want posts about your business model, don’t have a forum.
Jim,
Looking forward to find out the truth regarding this matter. Please report to us when you have the answer at hand. Btw, as long as this is an open forum, no one has the right to stop you from sharing your opinions (emphasis on politeness and constructiveness of course). Best of luck.
If you want the truth find it yourself, why would you leave it up to someone who spouts words from nowhere.
The US has jurisdiction for business that you conduct in the US. They cannot force you to registrate as an investment adviser, but I think they can forbid you to sell investment advise in the US. (E.g. being a foreign person doesn’t give me the right to ignore traffic lights when I am in the US). If you’re not a US citizen and not physically present in the US then the source country is not the US with respect to tax treaties, but I wouldn’t be so sure that this is the same with other laws. I’m not sure, but I think that the US previously have convicted foreign persons for violation of US laws (selling drugs to US citizens) outside the US.
Jules
