What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Irina Clements on
What do your bylaws say? If there is an attendance clause which is not being followed, you have your answer. If not, the answer is more complex.
Be Well. Irina Sent from my iPad
> On Jul 30, 2015, at 1:13 PM, William E Muhlke <weomuhlke@hotmail.com> wrote:
>
> What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Jeanne Tieken on
Is the member making required (monthly?) contributions? Do you permit proxy votes?
On Thu, Jul 30, 2015 at 12:15 PM, Irina Clements <irina39@verizon.net> wrote:
What do your bylaws say? If there is an attendance clause which is not being followed, you have your answer. If not, the answer is more complex.
Be Well. Irina Sent from my iPad
> On Jul 30, 2015, at 1:13 PM, William E Muhlke <weomuhlke@hotmail.com> wrote:
>
> What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Robert Shaw on
Two things:
From a set of bylaws available to me:
Four absences
in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted
by the club inquiring as to the intentions of the partner in regards to the
club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
DAVE NATHANSON on
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences
in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted
by the club inquiring as to the intentions of the partner in regards to the
club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
John Rice on
Dave, I have had it explained to me that even though a member doesn't vote or participate in the club it is different than a mutual fund. You don't have an option to vote on the individual stocks in the mutual fund. Even though the member is not voting or participating it is his/her choice to do so but can at any time. IRS won't mess with the club unless it is obvious that one person or a few are controlling the club and the other members don't have a say in the matters.
John
On Thursday, July 30, 2015 10:39 AM, DAVE NATHANSON <dave.hss@nathanson.org> wrote:
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences
in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted
by the club inquiring as to the intentions of the partner in regards to the
club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Mark Eckman on
I believe Dave is close. While you won't truly be a mutual fund, the SEC might ask the club to prove what sort of entity it is and probably will ask their friends at the IRS to join the party as well. My experience as a CPA says it is unlikely the agencies will target you, but if they look at you for any reason, (say a former member has a return audited,) and an issue appears with the club, you will wish you were doing something less stressful, like swimming with sharks. These agencies have a number of expensive ways to enforce what they want without doing much on their side.
My advice; follow your by-laws. If they say nothing about the situation, time for tough love. You need an intervention with the member to decide on whether or not they wish to remain a member and hold them to that decision.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences
in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted
by the club inquiring as to the intentions of the partner in regards to the
club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
jednotakid on
Mark is there any data showing how many investment clubs have been the target of the SEC?
From: "Mark Eckman" <mark2459@gmail.com> To: "club cafe" <club_cafe@bivio.com> Sent: Thursday, July 30, 2015 5:02:57 PM Subject: Re: [club_cafe] Required Attendance
I believe Dave is close. While you won't truly be a mutual fund, the SEC might ask the club to prove what sort of entity it is and probably will ask their friends at the IRS to join the party as well. My experience as a CPA says it is unlikely the agencies will target you, but if they look at you for any reason, (say a former member has a return audited,) and an issue appears with the club, you will wish you were doing something less stressful, like swimming with sharks. These agencies have a number of expensive ways to enforce what they want without doing much on their side.
My advice; follow your by-laws. If they say nothing about the situation, time for tough love. You need an intervention with the member to decide on whether or not they wish to remain a member and hold them to that decision.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted by the club inquiring as to the intentions of the partner in regards to the club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Mark Eckman on
I have not seen any stats, but I'm sure formal actions taken are publicly available.
Mark is there any data showing how many investment clubs have been the target of the SEC?
From: "Mark Eckman" <mark2459@gmail.com> To: "club cafe" <club_cafe@bivio.com> Sent: Thursday, July 30, 2015 5:02:57 PM Subject: Re: [club_cafe] Required Attendance
I believe Dave is close. While you won't truly be a mutual fund, the SEC might ask the club to prove what sort of entity it is and probably will ask their friends at the IRS to join the party as well. My experience as a CPA says it is unlikely the agencies will target you, but if they look at you for any reason, (say a former member has a return audited,) and an issue appears with the club, you will wish you were doing something less stressful, like swimming with sharks. These agencies have a number of expensive ways to enforce what they want without doing much on their side.
My advice; follow your by-laws. If they say nothing about the situation, time for tough love. You need an intervention with the member to decide on whether or not they wish to remain a member and hold them to that decision.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted by the club inquiring as to the intentions of the partner in regards to the club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
ira smilovitz on
I can't believe that attendance matters could be the subject of any official investigation, as the SEC active participation rules specify that the members have the right to fully participate, not that they exercise that right.
On the other hand, partnership agreement/by-law provisions that limit the right of a member to participate (eg. suspension of voting rights) may be the subject of investigation.
Ira Smilovitz
On Fri, Jul 31, 2015 at 12:16 PM, Mark Eckman <mark2459@gmail.com> wrote:
I have not seen any stats, but I'm sure formal actions taken are publicly available.
Mark is there any data showing how many investment clubs have been the target of the SEC?
From: "Mark Eckman" <mark2459@gmail.com> To: "club cafe" <club_cafe@bivio.com> Sent: Thursday, July 30, 2015 5:02:57 PM Subject: Re: [club_cafe] Required Attendance
I believe Dave is close. While you won't truly be a mutual fund, the SEC might ask the club to prove what sort of entity it is and probably will ask their friends at the IRS to join the party as well. My experience as a CPA says it is unlikely the agencies will target you, but if they look at you for any reason, (say a former member has a return audited,) and an issue appears with the club, you will wish you were doing something less stressful, like swimming with sharks. These agencies have a number of expensive ways to enforce what they want without doing much on their side.
My advice; follow your by-laws. If they say nothing about the situation, time for tough love. You need an intervention with the member to decide on whether or not they wish to remain a member and hold them to that decision.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted by the club inquiring as to the intentions of the partner in regards to the club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Mike Jones on
We amended our by-laws to allow us to request that non-participants withdraw. The situation described isn't really a mutual fund, but the benefit a non-participant receives is similar, i.e. they pay money for someone else to manage a portfolio and then share the benefits with no real effort on their part. That sounds a lot like a mutual fund but not much like a partnership.
Mike Jones
Wall$treet Wannabees
Bloomington, MN
From: DAVE NATHANSON <dave.hss@nathanson.org> To: club_cafe@bivio.com Sent: Thursday, July 30, 2015 12:38 PM Subject: Re: [club_cafe] Required Attendance
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences
in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted
by the club inquiring as to the intentions of the partner in regards to the
club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
John Huff on
Here is a link from the SEC website about investment clubs.
I am not a lawyer nor am I offering any legal advice but based on this website, I think you can draw some conclusions:
1) The government does have an opinion on this topic.
2) They have a test they would use, to determine if you were operating as a club or not, if they had an unhappy club member complain to them.
3) The tone of the information page is non-threatening. They don't seem to be trying to discouraging the existence of clubs. To me that seems to indicate they are not aggressively going after clubs
4) It seems most clubs would pass the test as a club not an investment company or security offered for sale but what you do and how you do it could have an effect on how they classify you.
We amended our by-laws to allow us to request that non-participants withdraw. The situation described isn't really a mutual fund, but the benefit a non-participant receives is similar, i.e. they pay money for someone else to manage a portfolio and then share the benefits with no real effort on their part. That sounds a lot like a mutual fund but not much like a partnership.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences
in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted
by the club inquiring as to the intentions of the partner in regards to the
club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
jednotakid on
Contacted the SEC concerning investigating investment club members attending club meetings.
There answer We cannot confirm or deny any investigations.
Our club members would hope the SEC has more important things to do than investigate to see
if ten member investment clubs are having full attendance at there meetings.
Does the member who has a 1% interest in the club benefiting from the member who has 11%?
Frank
From: "John Huff" <coach@hufftribe.com> To: "club cafe" <club_cafe@bivio.com> Sent: Friday, July 31, 2015 2:46:06 PM Subject: Re: [club_cafe] Required Attendance
Here is a link from the SEC website about investment clubs.
I am not a lawyer nor am I offering any legal advice but based on this website, I think you can draw some conclusions:
1) The government does have an opinion on this topic.
2) They have a test they would use, to determine if you were operating as a club or not, if they had an unhappy club member complain to them.
3) The tone of the information page is non-threatening. They don't seem to be trying to discouraging the existence of clubs. To me that seems to indicate they are not aggressively going after clubs
4) It seems most clubs would pass the test as a club not an investment company or security offered for sale but what you do and how you do it could have an effect on how they classify you.
We amended our by-laws to allow us to request that non-participants withdraw. The situation described isn't really a mutual fund, but the benefit a non-participant receives is similar, i.e. they pay money for someone else to manage a portfolio and then share the benefits with no real effort on their part. That sounds a lot like a mutual fund but not much like a partnership.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted by the club inquiring as to the intentions of the partner in regards to the club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
Mark Eckman on
Maybe go about this from the member side. Your club banded together to learn and earn from sharing the knowledge, work and capital of each other. If you have a member only willing to contribute capital, maybe they need to rethink membership.
I am not a lawyer nor am I offering any legal advice but based on this website, I think you can draw some conclusions:
1) The government does have an opinion on this topic.
2) They have a test they would use, to determine if you were operating as a club or not, if they had an unhappy club member complain to them.
3) The tone of the information page is non-threatening. They don't seem to be trying to discouraging the existence of clubs. To me that seems to indicate they are not aggressively going after clubs
4) It seems most clubs would pass the test as a club not an investment company or security offered for sale but what you do and how you do it could have an effect on how they classify you.
We amended our by-laws to allow us to request that non-participants withdraw. The situation described isn't really a mutual fund, but the benefit a non-participant receives is similar, i.e. they pay money for someone else to manage a portfolio and then share the benefits with no real effort on their part. That sounds a lot like a mutual fund but not much like a partnership.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted by the club inquiring as to the intentions of the partner in regards to the club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?
James Dickerson on
We spent some time on this one. We wanted some leverage in our system to guard against inactive members while not being too prescriptive on attendance. Our stipulation in the Bylaws states that a member can be removed by a 2/3's majority if "deemed to be passive or non-participating as defined by the SEC under the Securities Act of 1933."
Truth is no one ever wants to be expelled. If they aren't showing up ask them politely to withdraw. Failing that, you do have this as a second option (that we've never used).
Maybe go about this from the member side. Your club banded together to learn and earn from sharing the knowledge, work and capital of each other. If you have a member only willing to contribute capital, maybe they need to rethink membership.
I am not a lawyer nor am I offering any legal advice but based on this website, I think you can draw some conclusions:
1) The government does have an opinion on this topic.
2) They have a test they would use, to determine if you were operating as a club or not, if they had an unhappy club member complain to them.
3) The tone of the information page is non-threatening. They don't seem to be trying to discouraging the existence of clubs. To me that seems to indicate they are not aggressively going after clubs
4) It seems most clubs would pass the test as a club not an investment company or security offered for sale but what you do and how you do it could have an effect on how they classify you.
We amended our by-laws to allow us to request that non-participants withdraw. The situation described isn't really a mutual fund, but the benefit a non-participant receives is similar, i.e. they pay money for someone else to manage a portfolio and then share the benefits with no real effort on their part. That sounds a lot like a mutual fund but not much like a partnership.
I believe the problem to avoid is allowing your investment club to be recharacterized as a mutual fund. That would be bad.
One of the important differences is participation. Not attendance, but participation. Be guided by your bylaws, but also wonder if your bylaws cover this well enough.
Four absences in a twelve-month period is cause for removal of a partner. A partner with four absences shall be considered an inactive partner and shall be contacted by the club inquiring as to the intentions of the partner in regards to the club.
If your club is successful you are dong the work and the member is receiving the benefits; that is not fair!
Further, inactive members should be NON-voting members.
We have a provision for temporarily allowing non-attendance.
What action would your club take with an original "Founding" member who no longer attends Investment Club Meetings and has 11% holdings of investments in the club?