running a fin company/company designated to trading

[ThatDevAaron]

okay, so how would one go about creating a company, that is allocated funds from shareholders to trade, forex etc and other assets - I don't know if it would be classified as a hedgefund, I don't want it to really be one from what i've read online - if you know about this area lmk

Example use-cases:
1. for a group of pre-defined companies/people whom will be shareholders at the date of incorporation, to pool funds into one company, for investment purposes, but to be honest, will be more of a trading kind of company, where allocated funds are used to buy/sell assets within short timeframes - i know the tax implications (i think), such as capital gains etc.

2. for a new company to accept investment from outside parties

I know some of this stuff may require crazy FCA stuff, if that is the case, lmk cause I know FCA can be a bit annoying to deal with when you end up doing highly regulated stuff

 

[mikewilliam474]

okay, so how would one go about creating a company, that is allocated funds from shareholders to trade, forex etc and other assets - I don't know if it would be classified as a hedgefund, I don't want it to really be one from what i've read online - if you know about this area lmk

Example use-cases:
1. for a group of pre-defined companies/people whom will be shareholders at the date of incorporation, to pool funds into one company, for investment purposes, but to be honest, will be more of a trading kind of company, where allocated funds are used to buy/sell assets within short timeframes - i know the tax implications (i think), such as capital gains etc.

2. for a new company to accept investment from outside parties

I know some of this stuff may require crazy FCA stuff, if that is the case, lmk cause I know FCA can be a bit annoying to deal with when you end up doing highly regulated stuff

Yeah, sounds like what you’re describing edges close to a collective investment setup. Even if you don’t call it a hedge fund, once you start pooling investor money and trading on their behalf, the FCA usually sees it as a regulated activity.

If it’s just a few shareholders funding a company that trades its own capital, you can structure it as a private limited company and avoid most fund regulations — profits just go through corp tax and dividends. But once you start taking in outside money or promising returns, you’ll likely need FCA authorisation.

Best to get legal advice before scaling it — the line between “trading company” and “investment fund” gets blurry fast.

 

[ThatDevAaron]

Yeah, sounds like what you’re describing edges close to a collective investment setup. Even if you don’t call it a hedge fund, once you start pooling investor money and trading on their behalf, the FCA usually sees it as a regulated activity.

If it’s just a few shareholders funding a company that trades its own capital, you can structure it as a private limited company and avoid most fund regulations — profits just go through corp tax and dividends. But once you start taking in outside money or promising returns, you’ll likely need FCA authorisation.

Best to get legal advice before scaling it — the line between “trading company” and “investment fund” gets blurry fast.

Okay.

So if I have, lets say, 10 investors to invest in a company that trades, I can sort of run it similar to a hedge, except there aren't any return promises and the shareholders have simply invested into the company, and may see returns via dividends

i assume we'd pay corp and capital gains tax and thats all

 

[jack52]

Even if you create a limited company with just yourself as the shareholder and you just trade with the companies money... that can still be a regulated activity. Search 'principle trading firm' on FCA's website.

 

[fisicx]

@ThatDevAaron - why not just ask the FCA? They will be able to advise if your proposed business needs to be regulated.

 

[jack52]

@ThatDevAaron - why not just ask the FCA? They will be able to advise if your proposed business needs to be regulated.

That assumes they are able to be precise about what the business does.

If you have a vague notion or a general concept then any answer is going to be meaningless. A lot of the regulatory perimeter depends on the exact details and is constantly changing.

In my opinion, if any business idea even has the smallest hint of investment, lending, or anything remotely finance related then you must get proper legal advice.

 

[Mark T Jones]

The FCA themselves are pretty confused & conflicting, however where investment is concerned, the concept of 'sophisticated/unsophisticated investors' is significant.

To add to the confusion, on one hand the FCA encourages authorisation for any one dealing with debt or investment, on the other hand, it actively discourages 'badge authorisation' - IE authorisation for credibility where there will be no regulated activity.

 

[ThatDevAaron]

How do I ask the FCA something like this? Just call them and ask?


Not planning on asking them, just curious what the proper channels are for this kind of communication.

 

[fisicx]

Last time I just called their support people.

 

[WaveJumper]

I have also always found them to be very helpful. Pretty sure you are going to find that whatever way you cut it you are a ltd trading in financial instruments, fine if your the sole investor but by the sounds of it you are not going to be.

It then begs the question what experience have you got trading forex etc, what advice are your likely "investors" going to be looking for before risking their money.

Something else to look out for would be platform fees, for a business these are higher than those for an individual and many platforms do not support a business account, so worth checking that out.

 

[tony84]

This sounds iffy at best.

I think if you had 10 mates and you all put a grand in and came up with a plan for investments - thats probably one thing the FCA would turn a blind eye to because if it loses money nobody is going to complain.

When you start looking at people buying shares in a company whose main income is from shares - I cant help but think it is a hedge fund.

The FCA can be vague in their answers. But if you plan on doing what you describe and it goes wrong, would you rather say you ran it by the FCA and got their advice/guidance and whoever told you it would be fine/not. Or would you rather stick your head in the sand, hope it goes well and nobody makes a complaint if you do lose money?

Also - you need to check what type of investor the person is. Risk appetite, are they vulnerable, have they invested a large percentage of their income/assets etc. What have you done to check those people are staying within their risk appetite etc?

 

[FreddyG]

This sounds iffy at best.

Don't it just!

Fortunately for all concerned, it will never happen, as our protagonist has no finance or other relevant qualifications (judging by the questions asked!)

There is, on the other hand, nothing to stop anyone from setting up a private Ltd. company and investing in other private companies - well, nothing except failure, of course!