VIC Stock trading algorithms - does it constitute financial advice?

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voldemort

Active Member
8 February 2021
8
0
31
I have been developing algorithms and custom screeners for trading shares based on Technical Analysis . I am using either TradingView for building strategies and python based discord bots for custom screeners. I have obtained handful of followers and also getting lots of request to develop custom trading algorithms. At present, I am not really entertaining them but thinking of turning this into freelancing + offer the trading strategies I personally use to others based on subscription.

My major questions before starting this are:

1. Does selling these strategies constitute financial advice? TradingView disclaimer says this - Disclaimer. Hence, I believe anything developed and published on TradingView cannot be considered as financial advice.


If I turn this into side business, my intention is to sell this to traders who understand technicalities and not to people who want a blackbox which generate buy and sell signals. I also intend to sell them as software with full description of how they work instead of financial advice. Does adding a meaningful disclaimer in my website makes it clear or do I need to do anything more?

2. I am trading shares as trader and on ABN. Adding a business on this will also help me reduce tax on my trading income as I am not expecting any income to start with. But, I will involve my wife for managing this and can divert some of my share trading income to her as pay. I do not want to form family trust as I want to keep the option to reduce tax from my PAYG income if my sharetrading results in loss in any financial year. This may not happen, but, it is very much possible. Plus, this also enables me to spend more on algo development infrastructure with tax deductions.

Question here is, is it possible to do this on ABN without registering a company but still using a generic business name. Or if we are using business name, we are supposed to register company?

Appreciate any insights into this.

PS: I requested few nearby lawyers to assist in this regard. But, they all said, this is too specific and they don't have expertise.
 
Last edited:

Docupedia

Well-Known Member
7 October 2020
323
43
719
Australia's laws around financial services, which includes giving financial advice, are very different to overseas (such as USA where TradingView is based). Here you would most likely have to comply with Australia's financial licensing regime - which (if it applies) cannot be evaded or disclaimed and requires you to have a licence. Actually figuring out whether you need a licence is a headache in itself. I suggest you may want to start reading here: https://download.asic.gov.au/media/3994496/rg255-published-30-august-2016.pdf as this could fit what you're describing.

This is a specialist area and you should get specialist advice. There are a few firms around Australia that handle this area. It is not something that you want to get wrong, as the regulator (ASIC) can and does prosecute quite aggressively.

In terms of your second question - that's more a taxation question that would be best directed to an accountant.
 

voldemort

Active Member
8 February 2021
8
0
31
Thanks very much for the response. Let me go through the documents.

Problem so far is, none of the lawyers have agreed to help. I got one online quote from someone who said will charge 550 but cannot guarantee any required information. Could not agree for such a quote.
 

voldemort

Active Member
8 February 2021
8
0
31
Tradingview has lots of free scripts - strategies and indicators. So, if an Australian publishing those scripts need AFS license?

From the contents of the link provided, they definitely does not seems to fall under personal advice. But, still unsure whether it falls under generic advice - for which AFS license is required.

For generic advice, the link which you provided says this:
If a communication is a recommendation or a statement of opinion, or a report of either of these things, that is intended to, or can reasonably be regarded as being intended to, influence a client in making a decision about a particular financial product or class of financial product (or an interest in either of these), it is financial product advice: s766B (see RG 244.27).

But, I am not providing any report on particular product. I am providing a program, which can be applied to any instrument which provides details:
* Entry and exit points for trading that instrument. (This may qualify it to be generic advice?)
* Historical performance of using the strategy on the instrument including number of trades, how many of them successful and how many of them are failure etc.

Btw, I also came across this site (this is Australia based) while searching for similar providers.

They seems to be having a disclaimer which says all the information provided are opinion and should not be considered as financial advice. Yet, I have seen them provide recommendation on their facebook group (Every time with disclaimer stating that this is just opinion and not financial advice).
 

NinjaFlyer

Well-Known Member
23 October 2020
21
0
121
Tradingview has lots of free scripts - strategies and indicators. So, if an Australian publishing those scripts need AFS license?

From the contents of the link provided, they definitely does not seems to fall under personal advice. But, still unsure whether it falls under generic advice - for which AFS license is required.

For generic advice, the link which you provided says this:


But, I am not providing any report on particular product. I am providing a program, which can be applied to any instrument which provides details:
* Entry and exit points for trading that instrument. (This may qualify it to be generic advice?)
* Historical performance of using the strategy on the instrument including number of trades, how many of them successful and how many of them are failure etc.

Btw, I also came across this site (this is Australia based) while searching for similar providers.

They seems to be having a disclaimer which says all the information provided are opinion and should not be considered as financial advice. Yet, I have seen them provide recommendation on their facebook group (Every time with disclaimer stating that this is just opinion and not financial advice).

You are not providing "personal financial advice" and furthermore RG255.30 may provide an exemption for you.
 

NinjaFlyer

Well-Known Member
23 October 2020
21
0
121
I have been developing algorithms and custom screeners for trading shares based on Technical Analysis . I am using either TradingView for building strategies and python based discord bots for custom screeners. I have obtained handful of followers and also getting lots of request to develop custom trading algorithms. At present, I am not really entertaining them but thinking of turning this into freelancing + offer the trading strategies I personally use to others based on subscription.

My major questions before starting this are:

1. Does selling these strategies constitute financial advice? TradingView disclaimer says this - Disclaimer. Hence, I believe anything developed and published on TradingView cannot be considered as financial advice.


If I turn this into side business, my intention is to sell this to traders who understand technicalities and not to people who want a blackbox which generate buy and sell signals. I also intend to sell them as software with full description of how they work instead of financial advice. Does adding a meaningful disclaimer in my website makes it clear or do I need to do anything more?

2. I am trading shares as trader and on ABN. Adding a business on this will also help me reduce tax on my trading income as I am not expecting any income to start with. But, I will involve my wife for managing this and can divert some of my share trading income to her as pay. I do not want to form family trust as I want to keep the option to reduce tax from my PAYG income if my sharetrading results in loss in any financial year. This may not happen, but, it is very much possible. Plus, this also enables me to spend more on algo development infrastructure with tax deductions.

Question here is, is it possible to do this on ABN without registering a company but still using a generic business name. Or if we are using business name, we are supposed to register company?

Appreciate any insights into this.

PS: I requested few nearby lawyers to assist in this regard. But, they all said, this is too specific and they don't have expertise.

I'm surprised that ASIC can construe an OPINION as ADVICE...these are clearly two different things. In any case, in order to credibly show a person took your opinion as advice that person would need to produce some kind of documentation, like a time and date stamped trading journal, that clearly attributes their decision to trade based SOLELY on your opinion. I've seen no cases that have been able to prove this up.
 

voldemort

Active Member
8 February 2021
8
0
31
It states, even if you are not providing personal advice, you need to be certified to even provide generic advice or opinion. If someone can sue me or not is different matter. But, whether I can do it or not is the first question.

I checked exemption cases.

ASIC has given relief to providers of generic financial calculators from the requirement to hold an AFS licence with an advice authorisation
This only applies if it is a simple calculators which does not derive any signals or recommendations. But, only used for calculating facts. Hence, I believe I cannot take exemption under this.
You are not considered to be providing financial product advice if your conduct consists only of providing a recommendation or statement of opinion about the allocation of the funds among the general asset types listed in reg 7.1.33A
This case too will not apply for me as far as I understand.

Yeah. Overall, it is pretty tight. I should probably start looking at certification required.
 

Docupedia

Well-Known Member
7 October 2020
323
43
719
I'm surprised that ASIC can construe an OPINION as ADVICE...these are clearly two different things.
Normally yes, but when the opinion is given in a professional context the two are often conflated. The fact that the law is written to protect the consumer means that it has an expansive interpretation as to what is going to be covered.

Jurisprudence aside, section 766B of the Corporations Act (which defines financial advice) expressly states it means “ a recommendation or a statement of opinion, or a report of either of those things...“. It’s not a matter of ASIC construing anything, the law says it in black and white.

And I’d be extremely careful telling someone that what they’re describing does not amount to “personal financial advice” unless you really know this area well - especially when there are other types of advice other than personal advice that you still require a financial services licence for.
 

voldemort

Active Member
8 February 2021
8
0
31
From the document you shared, it is clear that it doesn’t constitute personal advice. To be considered as personal advice, you need to get personal details such as age, capital details etc before expressing opinion or analysis. Hence the algorithm clearly falls under generic advice.

But, it also says that you cannot give generic generic advice unless you have the license.
 

NinjaFlyer

Well-Known Member
23 October 2020
21
0
121
Normally yes, but when the opinion is given in a professional context the two are often conflated. The fact that the law is written to protect the consumer means that it has an expansive interpretation as to what is going to be covered.

Jurisprudence aside, section 766B of the Corporations Act (which defines financial advice) expressly states it means “ a recommendation or a statement of opinion, or a report of either of those things...“. It’s not a matter of ASIC construing anything, the law says it in black and white.

And I’d be extremely careful telling someone that what they’re describing does not amount to “personal financial advice” unless you really know this area well - especially when there are other types of advice other than personal advice that you still require a financial services licence for.
So a guy at the water cooler at work opines that XYZ seems to be a good investment and he needs a license? No. Someone on LinkedIn describes what they are doing with their investments and gives a general opinion of being bullish or bearish on XYZ in their own portfolio and they need a license? No. It all comes down to the framing... if you are describing your own actions you don't need a license so frame it that way.