Investment club broker

[John Calvert]

Well, it’s over with Interactive Brokers for us. I received an email from them this morning stating “We require investment clubs to have a legal personality, an UTR and LEI. If you don’t have a legal personality, the applicant is going to be rejected.”
This was closely followed by a rejection email.
I guess this is because an Investment Club is a loose association of friends/investors who each take responsibility for their own tax affairs, so does not comply.
So we now have to find another broker, or call it a day. Just a shame it took them three weeks to arrive at this decision.

[Richard Jones]

So sorry to hear that John. It has further confirmed that we made the right decision, sad though it is 🙁

[John Calvert]

Can I throw something else in here. We have now sold all our stocks and moved them into our associated bank account. We will make a decision next week as to whether to wind up, go with one of the stockbrokers mentioned on this forum……or form a limited company.
Has anyone else thought about this approach? Family Investment companies are well established, and apparently you can also form Friendship Investment companies. It is easy and inexpensive to set up a company. Once set up the administration is similar to that for an investment club, but the company bears responsibility for income tax and capital gains tax. There will be some extra administration as annual returns will have to be completed, etc, which I don’t think will be too onerous, having completed many in the past. The other extra administration required would be, that as monthly subscriptions come in, and new shares are issued, companies house records need to be updated. AJ Bell does accept Limited Company Dealing Accounts, with the same charges as for individual accounts, so cost effective.
Your thoughts and comments would be much appreciated.

[Caroline Nelson]

I have been monitoring the comments made on finding a broker for investment clubs, as I also belong to one. One of my fellow members commented after the email posted by John Calvert on the rejection by Interactive Brokers, that maybe investment clubs should describe themselves as a partnership rather than a club. A partnership is a legal entity.

Under HMRC guidance, Section 1 (1) Partnership Act 1890, a partnership is the ‘relationship which subsists between persons carrying on a business in common with a view to profit’
In HMRC Internal Manual (under the Wine Section!) PM120100, updated 21 May 2024 ‘The expression with a view to profit distinguishes partnerships from clubs and societies, which do not have a profit motive and also from arrangements to share expenditure’

In view of the above, are we actually a partnership rather than a club?

I have also established that a partnership can have a UTR.

As a club, we are going to ask Interactive Brokers if we formed a partnership, would this meet their legal personality requirement?

Also it might be interesting to find out Interactive Investors and AJ Bell’s attitude to Partnerships.

Comments please

[Sandy Forbes]

Our Investment Club also gave up on Interactive Brokers IBKR after their less than helpful, confusing and tortuous account application service. We now have an LEI at the cost of £78 from the London Stock Exchange and we are progressing our Investment Club account application with GHC Capital Markets. I’ll update you as and when we hopefully progress.

[John Calvert]

We have today formed a limited company for our investment club. Didn’t take too long and cost just £50 at companies house. Now need to register with HMRC for a UTR, get an LEI and apply to AJ Bell for a dealing account. AJ Bell have confirmed they will support our application. Will report on progress.

[Sandy Forbes]

That’s it our Investment Club have now opened an account and successfully transferred our portfolio from Interactive Investors to GHC Capital Markets. We’re now getting back to the ups, downs and fun of club investment.

[Ian Beaty]

Well our Investment Club has also successfully moved to GHC Capital Markets. We have found them very helpful. We were able to get an LEI number fairly easily through LEI Service. Only annoyance is that trading has to be done by phone. GHC do provided a website page available to all members with details of our holdings and valuations. They allow trading in US$ shares which was a definite requirement for our Club.

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