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Oct 21, 2010 7:34 am

Hello All. First time post, longtime magazine subscriber. 

I have a quick question that through my research (other than contacting my lawyers) that I though someone here may know the answer.

Can you run & operate your own R.I.A. and at the same time set up private placement offerings for clients. For example, operating my RIA and then creating a Private Placement (establish the LLC, create offering documents, set up business accts, file w/state, etc.) that invests in distressed Real Estate or distressed businesses or Tax Liens, etc..? 

Is there any conflict of interest? I am asking because I was at one time set up as an RIA, but for the past 10 years have switched to Commissioned - based with my own practice. With the current economic enviroment I would love to have the oppurtunity to do so much more, and I know how difficult it is to get a Private Placement Fund approved as an OBA (outside business activity) with your Broker/Dealers and was tossing around the idea of going back to Fee-based RIA and also having 2-3 private fund offerings.

Can this be done if I switched back to an RIA?

In advance, Thank you for your Help, and I am truely amazed with the amount of knowledge on this Forum and website.

Best regards,


Oct 21, 2010 5:49 pm

Too funny, I'm contemplating exactly the same thing, have similar questions. I'm an Indy rep, and I see the potential in r/e prop trusts to be quite appealing. I have all the connections when it comes to legal and re, and potential investors.

Oct 21, 2010 6:18 pm

You should ask Wet_Blanket, but he doesn't come around here anymore.  Try the other site.

Oct 21, 2010 6:25 pm

My indy dealer said we can't be involved with private placements or property trusts. Bummer.

I'll read our compliance manual sections, see if there is any hope.

I can frankly see the issues here, and why a bd would be opposed. We've had two high profile cases in our area where reps have defrauded clients, and one pertained to this kind of stuff.

Oct 30, 2010 11:13 am

On the fee-only RIA side, I've seen a fair number of Registered Investment Advisory firms also operate a Separate Hedge Fund so I believe your question is similar.  On the surface, I say the answer is "yes" but probably be prudent to speak with a compliance consultant for RIAs and get their take on it.  As the earlier post had mentioned, I'm not aware of broker-dealers firms allowing the approval -- I believe supervision of the activity makes it too difficult; probably why some have left the B/D and gone RIA.  Proper disclosure is 100% key.  

Similar also to RIA firms establishing their own mutual fund (this I know for sure to be quite common) and 100% A-OK, but again, not sure what the reaction to the broker-dealer would be if you made a request like this too -- they might look like you have three heads and think your crazy!