I'm working on a business that will provide free lessons to day traders and investors as well as paid products such as ebooks and online courses. I'm teaching about my own theories of trading and about basic trading concepts. I'm not a registered financial advisor. My first question is: What do I need to do (or avoid) doing since I'm not registered. I know I can't give specific, personal advice such as "based on your retirement account balance, I think you should do this.." But can I generic stuff in an ebook like "if you want to be profitable long term as a trader, you need to set your stop loss so that you are not risking more than 2% of your capital" ? Is it sufficient to have generic language about how im not register and this is just information not specific advice? The material is no different from what people on CNBC say or what a million people say in newspapers, blogs, etc. about trading/investing. Now, my second questions is: What do I need to do (or not do) to be ok from a false advertising, FTC standpoint? I have no claims about specific amounts of profits whatsoever, but is it ok to say things like "ill show you the steps to becoming a successful trader who can make profits" on a sales page? Where is the line? Do I always need to say "...the steps to HELP you to become..." ? Is it sufficient to have an earnings disclaimer of some sort? Do I need an FTC disclosure of some sort? As much detail as possible would be great. I will add a bonus for significant detail. Thanks!
Hello Joseph,I would be happy to try and assist you if you will please clarify a couple of points:1. Do you hold any sort of professional credentials (i.e. licensure or certification) subject to discipline by any sort of board (i.e. JD, CPA, CFP, etc.)?2. Will you in any capacity be actually handling anyone's monies personally (i.e. holding in escrow, etc.) (I don't think so, but want to check just to be sure)?Once you have a chance to write back, I will gladly post my answer. I will be away some from my computer tomorrow (Thursday), but you have my word I will be sure to check for any updated word from you when I again return to this online venue.Thanks!Ben, J.D.
Hello again Joseph,My name isXXXXX a licensed attorney and am very happy to try and answer your question today. Thanks for taking the time to write back and supply the additional details, which has been helpful to my analysis of your inquiry. I would like to also take this opportunity to wish you the very best in your business pursuits. Your idea sounds both interesting and worthwhile, so I hope your venture proves to be both profitable and personally gratifying to you!Here is how this works. I will try and not ramble on too incessantly, but you know how verbose lawyers can be, so here goes. Let me start with some general remarks and then move on to more specific comments.
First of all, I like the fact that you formed a Delaware business entity. As I am sure you are already aware, Delaware offers exceptionally favorable treatment toward corporations. The whole package -- Court structure, corporate statutes, State agency -- are behind the fact that over half of all United States publicly traded companies are Delaware corporations. Secondly, that you are not planning to monies in trust or escrow is hugely helpful to you. That eliminates just a whole host of issues and concerns that we do not even have to worry about, fortunately.
Alright, having said all of that, let us move on to consider the specifics of your scenario. Yes, you do need to include disclaimer language. So, it is not a matter of saying do not worry about it. And, in my opinion, you need to consider three levels or types of disclaimers, namely: (1) a brief statement to appear on each web page or hard copy page; (2) along with a more comprehensive and lengthy "click through" disclaimer; and (3) a general web site use disclaimer with terms. That all probably sounds complicated, but that need not be the case. I have many years of experience working on business law matters in the online environment, so here is what I envision for your needs. I will consider each of these three components separately and in the order presented above to try and stay organized.
(1) The "short disclaimer" would appear on each item (i.e. at the bottom of each web page and/or hard copy page of material). Here is a workable example, and yours could even be briefer: Short Disclaimer. Your language would be tweaked a bit to indicate that you are providing educational matter and a platform for you and those interested in investing to interact, not an actual investment firm. It may seem redundant, but I like to see this sort of thing on every page of items. Considering worst case scenario (which I do not see as any sort of likely scenario given your model) of a case going to Court. It would be very helpful for you to be able to show a brief disclaimer on each and every item, not just a one time deal.
(2) The "long disclaimer" is the typical "small print" acknowledged only once by a consumer. I would like to see a user of your web site have to click a little "I agree" sort of box when first signing up. When ordering hard copy materials to be delivered, this language could be included on the order page. This will be two or three paragraphs incorporating a bunch of points: disclaiming liability; warning customers that markets fluctuate and they are assuming all risk; explaining that (unlike banks) no federal agency or any other sort of insurer or guarantor will be backing their investments; emphasizing past performance is not an indicator of future returns; and stressing you are not licensed or regulated by any federal or state agency, including the U.S. Securities and Exchange Commission. Here is one from a name I will bet you recognize: Long Disclaimer
Throughout this analysis, I have approached this issue from the perspective of best protecting your interests in the event of a worst case scenario, namely having a lawsuit filed against you. Now, I did so out of an abundance of caution, but here is some good news. Realistically, if you are clear about the nature of your business and stick with it, you will be just fine. I can tell that you are savvy and have no desire to exceed proper boundaries. I see zero red flags or cause for alarm or concern based upon your description. I think you are good to go!
If you have a follow-up question or need clarification, please just say the word by using "reply" to reach me. I will be sure to check back for any further word from you when I am again working online in this forum.I truly hope all works out for you and that the information I have provided proves useful. Thanks so much for using this service!Take care,Ben, J.D.
Hi there Joe,
Great to hear from you again! Thanks for writing back.You pose some excellent logical questions. I will address them in the order presented."Do I need anything in the form of an FTC disclosure, such as this: http://ebenpagan.com/terms/ftc-disclosure/I don't have any testimonials yet, but I will eventually."
Yes. And frankly, I focused in so much on the front end considerations (SEC) that I neglected to mention the back end factors (FTC). So yes, I would indeed include a disclaimer of this type, especially (as you correctly mention) once you have some testimonial to post."How careful do I need to be about the language in the ebooks and such? In my mind, something like this statements is really no different from something Cramer would say on his show: "if you want to be profitable long term as a trader, you need to set your stop loss so that you are not risking more than 2% of your capital"
Yes, I agree with you in substance, although I would modify the approach in three ways, namely when it comes to: (1) "I"; (2) "You"; and (3) being overly specific with numbers. For example, instead of saying (which you are not doing here) something like "I tell you, allocate X percentage to Y investment and you will see Z returns", something more along the lines of "Conventional wisdom" or "One popular approach" is to "allocate X percentage to Y investment and a reasonable typical expect return would be in the neighborhood of Z percentage". So, tweaking your example a bit, we might get: "one who hopes to be profitable long term as a trader, might want to (or should) set their stop loss so that they are not risking more than 2% of their capital". Actually, in this instance, your statement is cautionary, not speculative or risky, so your original language is probably just fine. I am really talking about any time you go out on a limb a bit, that is when to pull back and stay conservative with the wording."How about the wording of marketing materials? Do I need to be careful about definite statements like "ill show you the steps to becoming a successful trader who can make profits". Or is the disclaimer language the key piece?"
The disclaimer language is crucial. Beyond that, the key is to avoidpromises. The focus is education, information, sharing of experience, dialog...as opposed to advice, counsel, instructions, directions. It can be a fine line at times, admittedly, but try to stick with a notion of being a teacher rather than an adviser. So, modifying your statement, we might arrive at: "Join me as we examine methods others have used to become a successful trader who can make profits" or "Learn about how other have successfully and profitably incorporated certain trading principles." Based on our exchanges here, I have no doubt you will do just great with the actual wording. And, again, keep in mind that I am quite probably overly cautious in my approach compared to looking at, for example, Jim Cramer, as we have both mentioned.
"Does providing a money back guarantee and refund policy alleviate the risk of a lawsuit somewhat because I will give their money back if they're not happy?"
Yes. It absolutely does alleviate or mitigate that risk. And very substantially so, without a doubt. Not a 100 percent guarantee it could never possibly happen. Nothing and no one can make that assurance, but it is hugely helpful.
I hope that helps some more, but please feel free to write back as needed. Please rest assured I am always here for you and happy to continue our dialog, even after you rate my answers.
Have a great weekend!
Best regards and thanks again,
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