Private forex arrangements: what exactly are you agreeing to?

Two arrangements hidden behind one phrase

“I know a trader who will trade for me” can describe two quite different things. In the first, you hold an individual broker account and authorise someone to trade it. In the second, you transfer money into an account, partnership or vehicle shared with other investors. Establish which arrangement is actually proposed before discussing a profit split.

Your account, their trading authority

A separately managed account should have a written mandate identifying the account, the trader’s authority and the restrictions. NFA’s investor guide describes individual managed accounts in which an account manager receives written authority to make trading decisions. That US example is a description, not confirmation of what is permitted in another jurisdiction.

Ask whether the authority includes withdrawal or transfer powers, which instruments and leverage are allowed, and how it can be revoked. Revoking authority and closing positions are separate actions. A limited-power-of-attorney document is not a guarantee against trading losses.

Their account or a shared vehicle

If your money joins other investors’ money, you need to understand your legal interest, who owns the account and who keeps the records. NFA describes a commodity pool as combining participants’ funds for trading specified derivatives, including retail off-exchange forex. A private partnership or investment club is not automatically the same thing as a regulated fund.

Ask for the governing agreement, custody details, valuation method, allocation of losses and withdrawal rules. A spreadsheet or a friendly understanding does not settle ownership if the relationship breaks down.

A profit share does not define the product

The same percentage fee can be charged in a managed account, a copying service or a private pool. It describes payment, not custody or investor rights. Define how losses carry forward, whether fees use a high-water mark and how open profit is treated before accepting a split.

Private does not mean exempt from rules

Eligibility and obligations depend on the actual arrangement and jurisdiction. Investor.gov’s US private-placement bulletin highlights illiquidity and limited disclosure as concerns. It should not be read as a rulebook for every country or as approval of a particular forex offer.

Before agreeing

• Identify the parties, account ownership and money flow in writing.
• Verify any required permissions with the relevant regulator, including the service actually offered.
• Specify trading powers, exposure limits, reporting and fee calculations.
• Define how you stop the mandate, settle open trades and recover your funds.
• Have the agreement reviewed by an appropriately qualified adviser where needed.

The Forex Investor can review a documented private arrangement as a category. This article does not advertise a manager, introduce investors or establish that any private offer is available or suitable.