investment, idea, financeRecently I’ve had an idea for an investments recommendation app. The main idea is to help ordinary people invest, making a very user friendly interface that brings a compilation and analysis of loads of data, assisting the user on deciding where to invest his/her money. I don’t intend to take the person’s money and invest it myself, like other apps do.
I would like to know if the company I intend to found needs to be registered at SEC. I would also like to know if I need to create a strong trust bond with the users, like apps that invest people’s money do, to get them to use the app in a daily basis and to get a lot of people using the app.
Read this article form the SEC. You will need to register as an investment adviser if you provide custom tailored investment advice to an individual and collect a fee for that advice.
You can be excluded if you are a publisher: Publishers are excluded from the Act, but only if a publication: (i) provides only impersonal advice (i.e., advice not tailored to the individual needs of a specific client); (ii) is “bona fide,” (containing disinterested commentary and analysis rather than promotional material disseminated by someone touting particular securities); and (iii) is of general and regular circulation (rather than issued from time to time in response to episodic market activity).
Since you will not actually manage the funds, you can probably claim an exemption. Depending on how much information you take form an individual, you can probably claim that it is impersonal advice and its tailored to a general audience, ie single male in 20s, couple in their 50s, etc and directly to John Doe.
Another part if how you collect your fee. If its free and you earn money from advertising then it should not be an issue. I would avoid charging someone a percent of their assets because that is too close to an investment advidor’s model. If its a one time fee to get access to premium features of an app, then that’s probably not an issue.
You will need long and detailed disclosures about the risks of the investments you describe and recommend.
No matter what, there is a large liability because you will provide advice on what to invest in, and if someone loses money because of that they can sue you or the attorney general in your state could come after you for providing harmful information to the public. Every business has risks like this so make sure you have a corp or llc to shield you.
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