RIA's & private offerings
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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.
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.
You should ask Wet_Blanket, but he doesn't come around here anymore. Try the other site.
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.
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!