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With some professions, like medicine and law, it's clear that you need a license to practice. For other things, like sales management, it's pretty clear that you don't. But what about OPM -- Other People's Money? Though you surely don't need a license to manage your own money, you definitely need one to manage other people's.
There are numerous laws and agencies regulating advisers, traders, managers, and even influencers of other people's money. Generally speaking, these individuals must be Registered Investment Advisers (RIAs), which is a license granted by the state, and abide by Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulations.
Also, many states require investment advisers to have a Series 7, Series 63, or Series 65, issued by FINRA. Each state is different, and each type of money management requirement is different. Be sure to know what you need, or you could end up in a legal bind.
Money management licenses are dictated by state security laws, called Blue State laws. If you are caught managing money without a license, in violation of FINRA and your state's Blue Sky laws, the state's Securities Commissioner may come after you. Requirements, laws, and penalties vary greatly by state, and therefore it is highly necessary to be very familiar with the laws in your state.
You may be surprised what constitutes "managing money". The threshold is quite low. For instance, if an insurance salesman tries to convince you to sell some securities you own to buy a life insurance annuity, that is considered managing money. Some leaseback agreements are considered investment contracts, based on something called the Howey Test.
Bottom line, if you think you are operating anywhere near managing other people's money, be keenly aware you may be breaking the law. If you have questions such as whether a particular conversation is considered to be managing money, or if a particular investment must be registered as a security, or even if you are somewhat unclear on your state's securities laws, contact a local securities lawyer. A legal adviser can best help you navigate this somewhat gray, and very confusing, area of the law, and hopefully prevent you from getting into a legal hot mess, instead of trying to get you out of one.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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