Legal Question in Investment Law in Pennsylvania

Is it illegal to take an investors money, trade or bet with it, pay the investor a small fixed percent or fixed return on their investment....... Not tell or disclose to the investors the actual returns I have achieved using their money, (which could range from 50% - 100%) and in the event a catastrophic loss were to occur not be responsible for their loss. But I keep the returns I have achieved for myself using their money. Is this illegal?

I'm about to open my own online investment program. Investors will be able to deposit money for me to trade/bet with. Risk disclosures, fixed rate of return, investment vehicles (not limited to financial markets) used would all be disclosed on the website. Is this illegal? Or even misleading, do I have to worry about the FTC? Please advise before I go any further.


Asked on 7/12/12, 4:06 pm

1 Answer from Attorneys
Andrew May May Law, PC

Dear Sir or Madam,

Absent the right documents and disclosures, it could subject you to lawsuits from aggrieved investors, regulators and possibly criminal sanctions. I do not view this as the purview of the FTC. Depending upon what you invest in, it is probably a matter for the SEC or CFTC. Generally speaking you must disclose what you plan to do with the money so the potential investor can make informed decisions. You must also disclose the risks, your background/experience and any conflict of interests.

You can contact me offline if you have further questions.

Best regards,

Andrew May, Esq. (847) 675-1052

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Answered on 7/17/12, 7:43 am


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