Investment Clubs Manual042 - 36 October 2008 PART TWO...

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Unformatted text preview: 36 October 2008 PART TWO: RUNNING A CLUB Investment Clubs and the law How many members? Legally, most Investment clubs are organised as partnerships and this seems to suit the situation very well. Simply by adopting the rules and constitution of the club, the members are effectively forming a partnership between themselves. It avoids the expense of forming a limited company and eliminates the potential problems of Corporation Tax which would otherwise be applicable. For practical reasons PIC recommends that clubs should consider carefully before having more than 20, or at the most 25 members. The authorities require that investment clubs are run democratically. and that means each member must have the opportunity to express an opinion and vote on every investment decision taken by the club. Time considerations mean that club meetings cannot be more than two or three hours long and if everyone is to have their say the number of members must be kept to a reasonable level. In addition, the constraints of the venue — the number of people the meeting room can comfortably accommodate — dictates the maximum attendance at a club meeting. It is Important to get members to participate and the larger the club the less the chances are of everyone getting their chance to have a say. The Financial Services and Markets Act 2000 This act is wide ranging and covers many areas of investment business. There are severe penalties for breaching the rules and regulations of the Act and they apply equally to individuals and bodies such as Investment clubs. The following highlights only a few of the provisions of the Act of which investment clubs should be aware and, if members are in doubt, independent legal advice should be sought on all aspects of the Act's application to the club. The Act regulates a number of investment activities. These are: dealing in investments of any kind; arranging transactions in investments; managing or advising on investments; and acting in relation to collective investment schemes. These activities appear to encompass some of the roles played by investment clubs. ProShare Investment Club THE MANUAL ...
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