Sample Investment Club Operating Procedures

Here is a sample of Operating Procedures for a typical investment club which uses bivio for their accounting. Next to each topic is a link to a page which discusses considerations you might make when incorporating it into your own. Your operating procedures will establish how you will run your club. Feel free to add as much detail as you think will be necessary to provide a structure your members will feel comfortable with. You can find a copy that you can easily edit for your own use here.

This set of operating procedures is meant to be used in conjunction with the Sample Partnership agreement which you can find here.

The topics covered represent commonly recommended best practices for operating your club. If you have any doubts about any of these conditions, follow the advice of a lawyer and/or accountant who is familiar with your particular circumstances and the laws of your state.

Operating Procedures
[EFFECTIVE DATE, Revision Number]

Club Officers things to consider

The club officers will consist of a President, Vice-President, Secretary and Treasurer whose responsibilities are outlined below:

  1. President
    • Shall preside at all regular and special meetings of the Partnership and oversee all Partnership activities.
    • Shall ensure that all resolutions passed by the Partnership are carried out.
    • Shall appoint members to the Audit Committee.
    • Shall coordinate the research activities of the Partnership of which all partners are part.
    • Shall sign some checks issued against the Partnership checking account.
    • Shall be authorized to make trades in the Partnership brokerage account.
  2. Vice President
    • Shall take the place of the President when the President is absent or incapacitated.
    • Shall coordinate the portfolio management function of the Partnership for which all partners are responsible.
    • Shall keep a file of all stock selection reports made by the partners.
    • Shall coordinate the education program of the Partnership.
    • Shall sign some checks issued against the Partnership checking account.
  3. Secretary
    • Shall keep minutes of all regular and special Partnership meetings.
    • Shall notify partners of regular and special meetings.
    • Shall keep a record of attendance for regular and special Partnership meetings.
    • Shall prepare agenda for regular and special Partnership meetings as directed by the President.
  4. Treasurer
    • Shall maintain a complete set of books.
    • Shall prepare and present a valuation statement to be used whenever necessary to conduct club business.
    • Shall prepare and file any necessary annual Partnership federal and state tax returns and distribute the appropriate copy of such forms to each member.
    • Shall reconcile partnership accounting records against partnership financial account statements monthly and report to the partnership.
    • Shall deposit member contributions into the partnership financial accounts in a timely manner.
    • Shall sign/countersign some checks issued against the Partnership checking account.
    • Shall act as Agent, placing all buy and sell orders authorized by the partners at regular or special Partnership meetings.

Duties Of Members things to consider

In addition to any officer duties, each member of the club has the following responsibilities to the club.

  • Shall set up automatic bill pay from their personal bank account to make their monthly contributions on the 15th of the month directly to the club brokerage account.
  • Shall attend Partnership meetings on a regular basis.
  • Shall, from time to time, serve on the Partnership Audit Committee.
  • Shall participate in the stock selection and portfolio maintenance functions of the Partnership.
  • Shall participate in the Partnership education and research activities.
  • Shall agree to take on an officer position on a regular basis.
  • Shall agree to complete training necessary to understand the club investing methodology.
  • Shall have access to and the ability to use a computer and the Internet. Members who plan to attend online must have a high speed Internet connection and a headset. Preferably one with a USB connection.
  • Club communications will be via email. Members must have a working email address and regularly check their email.
  • Be aware and agree to the fact that, upon agreement of a majority of the members, meetings may be open to guests for observation.
  • Agree to abide by all items in the Partnership Agreement and Operating Procedures.

Meetings things to consider

  • Regular meetings of the Partnership shall be held at [TIME] on [DATE] at [PLACE]. Members may attend in person or using GoTo Meeting.
  • In the month of April, the annual meeting shall be held in conjunction with the regular business meeting. At this meeting new officers will be elected and a full and complete annual accounting of the financial condition of the Partnership shall be made to the partners.
  • Special meetings may be called at any time by the President. Also, any three (3) partners may request a special meeting through the President, in writing. In all cases, special meetings shall be limited to the stated purpose. This must be communicated in advance to all partners.

Elections things to consider

  • Elections for President, Vice President, Secretary and Treasurer will be held at the annual meeting in April each year.
  • Nominations for officer positions will be taken at the March meeting each year.
  • After election, the President may appoint an Assistant Secretary, Assistant Treasurer, a Portfolio Manager and an assistant Portfolio Manager.

Attendance things to consider

All members should consider it a priority to attend all meetings. Any member who is unable to attend 3 consecutive meetings or misses more than three meetings during a calendar year is subject to review and removal subject to the terms in the Partnership agreement.

Member Contributions things to consider

  • Member contributions must be made on a monthly basis by electronic payment directly to the brokerage such that they are received on the 15th of the month.
  • Contributions are due whether or not the member can attend a meeting.
  • The monthly investment amount received from each partner shall be a minimum of [MINIMUM AMOUNT] and a maximum of [MAXIMUM AMOUNT} with the amount chosen at the discretion of each partner.
  • Each partner will be assigned a different number of cents to add to his deposit to identify it.
  • Any fees assessed by the broker for deposits that are rejected due to insufficient funds will be paid by the member who the payment belonged to.

Voting things to consider

Voting may be by roll call or secret ballot.

Club Size things to consider

The size of the club will be limited to [NUMBER] members at one time. The secretary will maintain a waiting list of potential members.

Annual Accounting things to consider

  • The annual accounting shall take place in April at the annual meeting, for the preceding year.
  • All financial transactions shall be reviewed by a Partnership Audit Committee yearly in the month of January.

New Partners things to consider

Prospective new members must agree to the terms of the partnership agreement and operating procedures and meet the requirements listed below prior to being considered for membership.

  • Attend at least three meetings as a non-voting guest before being considered for membership. Three is the minimum number of meetings. More can be attended as a guest, if the prospective member needs more time to become comfortable with the club investing methodology.
  • At the third (or subsequent) meeting that the prospective candidate attends as a guest, the candidate will present a stock study.
  • After a successful stock study presentation, the guest may apply for full membership to the club. Membership must be requested in writing and may be submitted no earlier than at the third meeting that the candidate attends as an observer. At the end of the meeting at which a membership request is submitted, the regular members will vote on the membership request.
  • A unanimous vote of the membership present in a quorum shall be required for admittance of a new partner. The new partner will be notified after the vote whether they were accepted into the partnership or not.
  • The initial contribution from a new member will be a minimum of $50 and no more than an amount calculated as the total club assets divided by the total number of members. For purposes of this calculation, the assets will be valued as of the day before the meeting where the initial contribution is made. For example, if the club has eight (8) members, including the new member, the new member'ss initial contribution may be no greater than 1/8 of the total club assets.
  • Any member who wishes to invite a prospective new member to a meeting shall notify the club prior to the candidate's first attendance as an observer.

Investment Methodology things to consider

The club will select investments using the guidelines of the [METHODOLOGY].

  • Criteria for Purchasing Stocks-Our goal is to create a portfolio of high quality stocks. While there may be many criteria used in the final determination of a purchase, factors such as the following will be considered.

    1. The company has been thoroughly researched and we understand it's business activities, business plan, competitors and reasons we believe it will grow in the future.
    2. The company has a minimum of 5 years of financial history available.
    3. Company earnings are growing at or better than the rate of sales growth.
    4. The projected annual return for the company enhances the projected annual return for our portfolio.
  • Criteria for Selling Stocks-There may be many reasons for selling a stock. The following criteria may be reasons for discussing a sale:

    1. Change in management.
    2. Declining profit margins
    3. Deteriorating financial condition
    4. New competition
    5. Reliance on a single product
    6. To balance or improve overall portfolio projected return
    7. To balance our portfolio by holding size, industry or projected growth rate.