Indy Liabilities
I was working for an small independent firm from '04 till end of '08, and am thinking about starting up my own place. Can someone please give me a brief rundown about liabilities of my LLC - DBA vs. the BD in case of arb and other key risks that are involved?
On another note… since i haven’t worked in '09 - i don’t have any trailing 12… i can prove significant gross for prior years and also have a nice business plan. Any ideas to what type of BD i should look for, or specific firms?
What has he/she been doing for the last year?
my old BD was giving me 50-60% payouts. i want to run my own place - not BD - but DBA - hire my own ppl, have my own co’ name etc…
My question is what type of liabilities does my DBA have. Say if i higher a trainee and he recommends to some old lady to buy 100k of some penny stock, she looses it all, etc… he is licensed with the BD not me, but do i + my DBA have any liabilities?
First half of year, i was studying for the Level III CFA exam, which thank g-d i passed. and the second half of year, i was doing a real estate project that i just completed.
If you are OSJ’ing him, it’s on you.
FYI, God is not a swear word.First half of year, i was studying for the Level III CFA exam, which thank g-d i passed. and the second half of year, i was doing a real estate project that i just completed.
[quote=ahrelep]my old BD was giving me 50-60% payouts. i want to run my own place - not BD - but DBA - hire my own ppl, have my own co’ name etc…
My question is what type of liabilities does my DBA have. Say if i higher a trainee and he recommends to some old lady to buy 100k of some penny stock, she looses it all, etc… he is licensed with the BD not me, but do i + my DBA have any liabilities?
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First of all, I’m not exactly sure how that would work. Do you feed him the weed?
Second, yes you have liability! Why wouldn’t you?
It sounds like you don’t want to “run your own place” either. DBA does not mean you will be running your own place. I know a guy who works for Met and has his own DBA.
FYI, God is not a swear word. [/quote][quote=ahrelep]First half of year, i was studying for the Level III CFA exam, which thank g-d i passed. and the second half of year, i was doing a real estate project that i just completed.
i thought this board was helpful… forget the stupid details! Is there anyone with some knowledge, kind enough to give me a brief rundown on how a BD - DBA relationship works in regards to liability. Please.
Again, will you be OSJ'ing him?i thought this board was helpful… forget the stupid details! Is there anyone with some knowledge, kind enough to give me a brief rundown on how a BD - DBA relationship works in regards to liability. Please.
i would open a office in NYC… BD would be in say NE… my office will higher 20 new brokers - in same office - my office. my guys get paid and do trades via BD but use my DBA - my co’ name , my letter head etc. i take override - so if BD pays 90% cm, i give employees 65%. after my costs, i plan on making some % of the difference. my question is, these 20 employees… if they f up, what consequences does my operation have vs. the BD. IE - if one guy screws up - arb - gets fined 200k - the guy bounces…?
Are you going to learn English as a second language first?i would open a office in NYC… BD would be in say NE… my office will higher 20 new brokers - in same office - my office. my guys get paid and do trades via BD but use my DBA - my co’ name , my letter head etc. i take override - so if BD pays 90% cm, i give employees 65%. after my costs, i plan on making some % of the difference. my question is, these 20 employees… if they f up, what consequences does my operation have vs. the BD. IE - if one guy screws up - arb - gets fined 200k - the guy bounces…?
Let me ask another way…WHO will be their OSJ, YOU or someone else? If you don’t know what an OSJ does, chances are it’s not going to be you. THAT will help decide who gets dinged for mistakes.
Im not sure what an OSJ does… i was thinking about calling a company like harbor, commonwealth etc. and open a dba like myname financial llc.
Don't.Im not sure what an OSJ does… i was thinking about calling a company like harbor, commonwealth etc. and open a dba like myname financial llc.
Are you serious, or are you just fukcing with us? No offense, but if you have big plans to raise $20mm in AUM in year 1, hire 20 guys, and DON’T know what an OSJ does yet, you might want to order one of those “where to start” brochures from one of the indy firms mentioned above.
An OSJ stands for "Office of Supervisory Jurisdiction". The OSJ is responsible for, among other things, reviewing and approving trades, supervise registered reps, maintain supervisory procedures, maintain books & records, approval of marketing, etc. If you are not going to get registered to be an OSJ, you will need to be OSJ'd under another OSJ. Someone has to be the OSJ. But you will also pay a fee to the OSJ to be OSJ'd. Typically, if you affiliate with an indy B/D, you will work under another indy offices' OSJ if you can't/don't want to do it yourself. If you are going to have 20 RReps under you, you might want to think about being your own OSJ. AND, if you are the OSJ, then yes, you are responsible for their actions.You just passed the level III and you don't know even the most basic things about legal entities? I guess that explains alot about how our mutual funds are performing! OK, now that I got that out of my system, if you establish a DBA you will be a sole proprietor. That means there is no corporate shield, DBA simply means Joe Blow doing business as Cheesy Investments. If you employ someone and they screw up, liability falls back on you. If you form a legal entity (LLC, C Corp, S Corp, LTD), the legal entity is the one doing the hiring, and is the one on the hook. If you have no assets to go after in the LLC, most attorneys wont bother suing you. The legal entity shield has been pierced by courts in the past, particularly in sole owner companies, but it adds a layer of protection. That being said, I AM NOT A LAWYER, SO DON'T CONSTRUE THIS AS LEGAL ADVICE.First half of year, i was studying for the Level III CFA exam, which thank g-d i passed. and the second half of year, i was doing a real estate project that i just completed.
You just passed the level III and you don't know even the most basic things about legal entities? I guess that explains alot about how our mutual funds are performing! OK, now that I got that out of my system, if you establish a DBA you will be a sole proprietor. That means there is no corporate shield, DBA simply means Joe Blow doing business as Cheesy Investments. If you employ someone and they screw up, liability falls back on you. If you form a legal entity (LLC, C Corp, S Corp, LTD), the legal entity is the one doing the hiring, and is the one on the hook. If you have no assets to go after in the LLC, most attorneys wont bother suing you. The legal entity shield has been pierced by courts in the past, particularly in sole owner companies, but it adds a layer of protection. That being said, I AM NOT A LAWYER, SO DON'T CONSTRUE THIS AS LEGAL ADVICE. [/quote] Joel, this is for a simple business. However, it extends beyond that in our industry. He really needs to look at the OSJ issue.[quote=ahrelep]First half of year, i was studying for the Level III CFA exam, which thank g-d i passed. and the second half of year, i was doing a real estate project that i just completed.
You just passed the level III and you don't know even the most basic things about legal entities? I guess that explains alot about how our mutual funds are performing! OK, now that I got that out of my system, if you establish a DBA you will be a sole proprietor. That means there is no corporate shield, DBA simply means Joe Blow doing business as Cheesy Investments. If you employ someone and they screw up, liability falls back on you. If you form a legal entity (LLC, C Corp, S Corp, LTD), the legal entity is the one doing the hiring, and is the one on the hook. If you have no assets to go after in the LLC, most attorneys wont bother suing you. The legal entity shield has been pierced by courts in the past, particularly in sole owner companies, but it adds a layer of protection. That being said, I AM NOT A LAWYER, SO DON'T CONSTRUE THIS AS LEGAL ADVICE. [/quote] Joel, this is for a simple business. However, it extends beyond that in our industry. He really needs to look at the OSJ issue. [/quote] I understand the simple business concept, but it is not hard in most states to form an LLC to do business. You can do it online yourself or an attorney would charge about $1,000. And you are spot on on the OSJ deal. For one, dont you have to sit for the S24 to be your own OSJ? Also, for a start up, the compliance headache would really put a kibosh on production in the beginning....[quote=joelv72][quote=ahrelep]First half of year, i was studying for the Level III CFA exam, which thank g-d i passed. and the second half of year, i was doing a real estate project that i just completed.
yes i am a CFA charter holder, we studied how to manage money - asset allocation, analyze investments, portfolio management… not start up businesses.
i am also series 4,24,7,63, life insurance licensed, so is my best bet to just become my own OSJ? will i become the compliance officer, or would i need to hire a specific person to do that? any other licenses that i would need (i plan on doing equity/bond/options/mf’s/annuities/life insurance)?
If you feel comfortable running your own compliance program, then yes, you can be the compliance officer and save $$ in haircuts the OSJ would charge.yes i am a CFA charter holder, we studied how to manage money - asset allocation, analyze investments, portfolio management… not start up businesses.
i am also series 4,24,7,63, life insurance licensed, so is my best bet to just become my own OSJ? will i become the compliance officer, or would i need to hire a specific person to do that? any other licenses that i would need (i plan on doing equity/bond/options/mf’s/annuities/life insurance)?
And also, don’t forget my post on forming a legal entity. Good businesses are built on strong foundations. I have a long background in commercial banking, I can’t think of one serious business customer that did business under a sole proprietor format, other than some farmers that were too hard in the head to understand the ramifications.
joelv, thanx a lot for you help/info.
Just to recap, you would recommend me open a LLC to be my DBA, and since i do already have a series 24 - i should make an arrangement with a BD - say harbor/cantella/cambridge that i would be the OSJ. (although finding one that would go for my current business - zero trailing 12 - wont be easy… do you have a recommendation for that?)
Hire an attorney. The money you spend will be a fraction of what you’ll need to pay out in a potential lawsuit. If you can’t afford one, don’t go into business for yourself until you can. It’s that simple.
If you organize a legal entity, it is like a person separate from yourself. The DBA format is Joe Blow doing business as Cheesy Investments. The alternate is Cheesy Investments, LLC, Joe Blow, managing memeber. Going further, Cheesy Investments could be Cheesy Investments, LLC, doing business as Gold Standard Investments. A dba only requires (at least where I live) that you go down to the courthouse and file a business name for $50.00, as long as it is not already taken. Broker/Dealers come in many shapes and colors. I have only been affiliated with one, so I am not the best source for that. I am currently organizing an RIA firm with a group of CPAs, in which I will be the IAR. Now that I have given you some info, here's what I would like to know. I don't want to be critical, but how could you not have at least a passing knowledge of legal entities after passing the level III exam. You say that it teaches you how to manage money and build portfolios, can you expand on that? I sat at a credit desk of a regional commercial bank for several years. In this industry's lingo, I was a senior analyst for private placements to institutional investors. Knowing corporate structure was one of the foundations of our analysis of a business. I would think that the CFA would teach that, but then again, I don't hold a CFA charter. As an Investement Advisor, I rely in part on analyst recommendations. This thread is making me re-think that position entirely. I think Ben Graham (one of the founding fathers of the CFA institute), is currently spinning in his grave...joelv, thanx a lot for you help/info.
Just to recap, you would recommend me open a LLC to be my DBA, and since i do already have a series 24 - i should make an arrangement with a BD - say harbor/cantella/cambridge that i would be the OSJ. (although finding one that would go for my current business - zero trailing 12 - wont be easy… do you have a recommendation for that?)
I’ve taken all three levels of the CFA exam. There is an entire section the CFA exam that involves corporate structure. That said, it’s not very detailed as far as how you should go about setting something up.
Also, the level III exam is mostly IPS.
The CFA exam does teach you how to manage money and build portfolios, but it also lays the groundwork for analysis. I would be interested to see what ahrelep scored on the Corporate Finance and Financial Statement Analysis portions of levels I and II.
The CFA exam is pretty all encompassing. Very comprehensive and a pain in the a$$. I would not worry about relying on analyst recommendations. Most CFA charterholders would know how to conduct a thorough analysis on a company.
I will ahrelep at his word that he is a charterholder, but I’ll be damned if you have a series 4, 24, 7 and 63 and NOT know the answers to any of that.
That said, I can’t believe that anybody who holds a charter would not know these answers either. Unless you did one of those Master’s programs that are joint MBA or financial analysis and CFA programs. But even then, damn.
I think he’s just fcuking with us.
The corp finance that the CFAI teaches, is more about things like corp structure as in equity vs debt, WACC, corp finance decisions - IRR and NPV of projects etc…
I think Moraen’s question about S24 (not really S7,S63,S4) is more on the point… and to be honest, i took the exam 4 years ago, and vaguely recall some things about how this whole thing works.
My main question on this board though was about e&o insurance and liabilities, and i would wager that in none of the exams/courses I’ve taken does it mention much (if anything) about that.
And to that point, i haven’t really been given a straight forward answer (i think there isn’t one - as each case differs, and its like anything else with law - depends on the case and lawyer…)
[quote=ahrelep]The corp finance that the CFAI teaches, is more about things like corp structure as in equity vs debt, WACC, corp finance decisions - IRR and NPV of projects etc…
I think Moraen’s question about S24 (not really S7,S63,S4) is more on the point… and to be honest, i took the exam 4 years ago, and vaguely recall some things about how this whole thing works.
My main question on this board though was about e&o insurance and liabilities, and i would wager that in none of the exams/courses I’ve taken does it mention much (if anything) about that.
And to that point, i haven’t really been given a straight forward answer (i think there isn’t one - as each case differs, and its like anything else with law - depends on the case and lawyer…)
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No dumbass, the point is that you have been given the best answer you can get. The fact that you still are asking the question is indication enough that the best thing you can do is spare your family the trip through bankruptcy court and just go back to selling.
Seriously dude, why don’t you stop trying to leach of the production of others and make your own way.
Stupid f***ing pikers…
SometimesNowhere… i don’t know you… but with all due respect (i doubt that any is due…) you should go to some anger management classes or something.
You posted 4 times on this thread… with all of them just being nasty and childish. Why don’t you do something productive with your life.
For some some reason the other 465 people that viewed the thread, either were helpful (thanx, Joelv72, B24 and Moraen) or just went along and minded their own business.
“if you have nothing nice to say… don’t say it.”
[quote=ahrelep]SometimesNowhere… i don’t know you… but with all due respect (i doubt that any is due…) you should go to some anger management classes or something.
You posted 4 times on this thread… with all of them just being nasty and childish. Why don’t you do something productive with your life.
For some some reason the other 465 people that viewed the thread, either were helpful (thanx, Joelv72, B24 and Moraen) or just went along and minded their own business.
“if you have nothing nice to say… don’t say it.”[/quote]
Oh golly! I sure am sorry Mr. sir! I sure did forget my manners! Let me say it a little more delicately for you…
Will you pretty, pretty please go get bent, you flaming piker? Please? It sure would be swell if you just would go and get bent!
What is it with people trying to make money off everyone else’s production?
The mega-producers in this industry create teams of people who are their employees and support staff to build a monster practice and at the end of the day they own it.
I’m sick of pikers who want to sit on their ass and have others go out and sell for them.
[quote=BerkshireBull]What is it with people trying to make money off everyone else’s production?
The mega-producers in this industry create teams of people who are their employees and support staff to build a monster practice and at the end of the day they own it.
I’m sick of pikers who want to sit on their ass and have others go out and sell for them.
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Golly Berkshire, if you don’t have anything nice to say, don’t say anything at all!
Don’t you know that a spoon full of sugar helps the medicine go down?
[quote=SometimesNowhere]
[quote=BerkshireBull]What is it with people trying to make money off everyone else’s production?
The mega-producers in this industry create teams of people who are their employees and support staff to build a monster practice and at the end of the day they own it.
I’m sick of pikers who want to sit on their ass and have others go out and sell for them.
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Golly Berkshire, if you don’t have anything nice to say, don’t say anything at all!
Don’t you know that a spoon full of sugar helps the medicine go down?
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Sorry, but damn, this is a board for people who are actually in the business of selling securities. Don’t you find threads by people who aren’t in the business of selling securities annoying?
Thanks for amplifying my point. Anger Management. Enough said.
Anyone who doesn't know the difference between hire and higher should not be running an office with 20 brokers!! If they work under you--you are responsible. That is the risk you take for getting the hire(LOL) payout.[/quote][quote=ahrelep]i would open a office in NYC… BD would be in say NE… my office will higher 20 new brokers - in same office - my office. my guys get paid and do trades via BD but use my DBA - my co’ name , my letter head etc. i take override - so if BD pays 90% cm, i give employees 65%. after my costs, i plan on making some % of the difference. my question is, these 20 employees… if they f up, what consequences does my operation have vs. the BD. IE - if one guy screws up - arb - gets fined 200k - the guy bounces…?
B24 said that on the first page. This piker is too stupid to get it.
Short answer to anything in life is plan and build as if you have 100% liability. FINRA or SEC deciding who pays the fine is nothing compared the the army of lawyers that will come after everyone and could careless what agreement you have with the BD.
BTW, you may also want to rethink the short to mid-term portion of your business model. Anyone who would work for someone with no experience is new-new or has some hidden issues. Regardless, you are looking at a management nightmare.
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