Running a PAMM / MAMM account within Australia

Hello,
Has anybody out there had any experience in running a PAMM account within Australia?

It seems that you need an Australian Financial Services License (AFSL) to sell or run *any* financial product (insurance, financial planning etc). These are very expensive and time consuming to get, especially for small businesses. The costs are tens of thousands of dollars and regular (expensive) compliance auditing.

What is usually done for smaller companies is that they become an 'Authorised Representative' of the AFSL holder. In this case they come under the umbrella of the AFSL for a smaller monthly fee.

To operate a PAMM / MAMM account in Australia is considered to be operating a financial product (so hence you need an AFSL or to be an Authorised Representative). Within the AFSL you need to have permission to perform 'Managed Discretionary Account' (MDA) operator services, or be an Authorised Representative of an AFSL that has permission to perform MDA operator services.

Still got me?

Now... I have contacted a large number of AFSL providers who have MDA permission and are willing to take on Authorised Representatives. They are all giving me the same story - they don't want to touch me with a 10 foot forex pole. It's nothing personal (some of these people didn't even know my name), it is just that everybody is so scared stiff of the 'high risk' associated with forex that they are scared of the legal ramifications (it turns out they can be liable). I did find one guy who would do it, but he wanted 3 years of validated trading data, monthly access to my bank statements and $5,000 a month for the risk he was taking. I told him to go suck an egg.

All of this basically means I can't legally open and run a PAMM account in my home country. My intention all along was to get good at trading and then open a PAMM account for friends and family to share in the benefits. I feel like I have wasted my time.

Surely this can't be the case? Or is there some loophole that I don't know about?

Oh yeah, and these rules also apply to any Australian selling signals or selling EAs - so if you are doing it you better watch out because ASIC may get onto you. The fines are hefty and scary - we are talking jail time here.

Yep ASIC has gotten very strict about it (and its good in a way. Lesser scams). Unfortunately the legit ones get caught up in it too.

If you want to go legit, there's no shortcuts and you'll have to put up with the huge fees and stuff.

What about going offshore and trading a PAMM via an offshore company?

Are you sure about this Matthew? If you are directly handling clients money obviously you need to be fully regulated but I thought the whole idea of PAMM accounts is that the broker handles that side of things for you.

If what you are saying is correct, traders in Australia probably can't become Autotrade providers at Myfxbook either, since it works on the same principle as PAMM.

There are Australian brokers offering PAMM services - Pepperstone is one - it would be interesting to hear their thoughts on the matter. (Just be wary of sales pitches). I think if you contact ASIC five times you may get five completely different answers.... Australian financial regulations tend to be absurdly and unnecessarily complex (like the tax system).

It's probably best to contact one of the big four financial companies and get proper advice before making any decisions based on assumptions - I'm sure Australian brokers go to them too for their legal advice, and if ASIC comes at you later they will back off if you have been following written advice from one of the big four.

I think your right Aaron, we are in the process of working with Dukascopy on this, and have been in contact with their legal team, as we are in the process of setting up a small prop trader firm, and there are certain things you can do, unlicensed, that do not fit the description/terms of the AFSL requirements.

I've just gone through all of the definitions and information I could find on PAMM and MAMM accounts, and a heap of legislation and previous cases, and in essence, what we will be doing is defined as the following:

> Providing a signal or signals for educational purposes
> Providing educational services

What you cannot do is:

> Advise on placing or closing particular trades
> Advise on and/or suggest investments
> Entice/canvas (directly) for clients, especially as 'providing investment solutions'.
> Make false claims or any claims or promises in relation to ROI

What we can do is:

> Run workshops for educational purposes
> Advertise/display our trading results/accounts on-line, and allow the client to freely choose or access our account signals PAMM, MAMM, subscription services etc, from a list of others
> Offer educational material in relation to the markets (with disclaimer)
> Charge for workshops etc
> Offer free information sessions
> Sell indicators and signals (these are not financial products)!
> Run PAMM and MAMM accounts overseas and potentially in AUS via signal based arrangement/s.
> Sell subscriptions via Signal providers and also Myfxbook

This would appear to be the way that the brokerage and publications houses, in addition to those selling EA's, trading bots, indicators and signals on MQL sites etc, get around this.

Are you sure signals aren't classed as financial products? If they are, then you will need an AFSL.

In your case, are you having any luck setting up a PAMM account? Every time I have tried I have been asked to provide my AFSL number.

Hi guys.
Seems like there is an obvious niche market here for anyone with the money to set up a company in order to provide proven and verifed FOREX traders to legally trade PAMM and MAMM for family/friends and/or clients.

One of the main driving factors to learn to trade was to help my folks out of their financial mess but the only logical way to do this is to be able to provide a return on their money by trading their money for them by way of PAMM or MAMM. By doing this the profits made for them won't be pushing my income tax to the highest bracket which is a ridiculous 45%(approximately).

Hypothetically.... My folks live nearby. I could effectively just set up a live account on their computer and then open and close trades at their house for them. The only catch is that this couldn't easily be done on a hourly time frame so I would have to be setting them up with longer term trades.

Also the ATO considers most small time FOREX trading and trading in general as gambling and as far as I know Gambling is tax free or else they would have to give tax breaks on loses.

Thank you gents for your discussion, which is very topical for me at the moment.

I have also asked a few Australian brokers (IC Markets and Think Forex) about this in the past, however they have come back with very vague responses - one saying that the limited power of attorney was sufficient. I also recall discussing this with a crowd in Sydney and they could not set up a PAMM without an AFSL however they could set up a 'club' and have investors pay a 'membership fee' and place their funds in a managed account.

My interpretation is that Signals are ok, the signal purchaser is transacting with the provider (Myfxbook, SignalStart, Zulu Trade, MQL5 etc..) (where the provider has all the risk disclaimers ) and not with the trader providing signals. As long as the trader providing signals is not promising future returns or providing any form of financial advice then I believe it is ok.

MLAlford posted:
Hi guys.
Seems like there is an obvious niche market here for anyone with the money to set up a company in order to provide proven and verifed FOREX traders to legally trade PAMM and MAMM for family/friends and/or clients.

One of the main driving factors to learn to trade was to help my folks out of their financial mess but the only logical way to do this is to be able to provide a return on their money by trading their money for them by way of PAMM or MAMM. By doing this the profits made for them won't be pushing my income tax to the highest bracket which is a ridiculous 45%(approximately).

Hypothetically.... My folks live nearby. I could effectively just set up a live account on their computer and then open and close trades at their house for them. The only catch is that this couldn't easily be done on a hourly time frame so I would have to be setting them up with longer term trades.

Also the ATO considers most small time FOREX trading and trading in general as gambling and as far as I know Gambling is tax free or else they would have to give tax breaks on loses.

Hi @MLAlford , I see your comment about forex trading being tax free - are you sure? Would be fantastic if it was. I would assume forex traders would come under 'share trading' see here - https://www.ato.gov.au/general/capital-gains-tax/in-detail/shares,-units-and-similar-investments/claiming-losses-from-the-disposal-of-investments/?page=4 and you can claim losses. I will ask a mate who is an accountant and doubt that we would be that lucky! I see the ATO are auditing musicians this year and my brother who is a part-time muso sent me a notification from the ATO and the example they gave was that a musician earns $300,000 a year! It seems to be the case that the vast majority of musicians are earning more like $30,000 per year and less.

Depending on your circumstances and how you go about your trading determines your ATO obligations, me personally declare all income and losses as I trade not as an investor but as a trader.

https://www.ato.gov.au/general/capital-gains-tax/in-detail/shares,-units-and-similar-investments/carrying-on-a-business-of-share-trading/?page=1#1__Nature_of_activity_and_purpose_of_profit_making

I recommend reading and researching what you need to know when it comes to tax, hence I came here as I am looking into PAMM/MAM and was curious on the AFSL side seems you are providing a signal, yet also managing accounts to some degree.

I am a bit like MLAlford, I do this first for my benefit but also if being successful then to include family members, but I can also go down the copier road if I like as well as an option.

Depends on whether I am really just looking after myself and family or going down the commercial side.

HAHA think I just answered my question.

Bluboy

There are countries that may not have stringent requirements when setting up a trading business, Panama for instance, but then you would really need to have a good amount of capital

you can get CAR Licence from ASIC licence holders , cost Au$5000/month + 10% the revenue ,
you have to show your trading history and investment commitment , honestly it's not for beginners, i have moved out side Australia to start my MAM account , may be once i have build 2 Million portfolio i might move back :)

you could get CAR licence from ASIC Licence holder , you may approach your broker for information, its very costly

1. car Licence cost $5000 / month + 10% of the revenue
2. you have to show Investment commitment from from your initial investors

it's very hard for beginners, you need at least $2 Million investment to cover the cost i have just move out of Australia to start my MAM account , i will mive back to Australia once i hit minimum target.

PS: small investors Like Big return rate and big investors scared of big return rate, one of my investor shocked and turned away when i said i can give 40% pa :)

> Providing a signal or signals for educational purposes
> Providing educational services

What you cannot do is:

> Advise on placing or closing particular trades

Hey Enigma, this seems like a pretty dangerous grey area ... isn't providing a signal providing advice on opening/closing trades by definition?

RG146 defines financial advice in a pretty wide manner ie giving your 'opinion' on any asset to a retail client where there's a reasonable assumption that the client would act on said opinion (that's from memory - I'd have to get my books out for an exact quote)