Q: Can I sell CDs like a traditional bank or brokerage?
I have a pretty long trading history, and I'd say I have a certain level of expertise when it comes to trading.
I recently had the idea of selling CDs (Certificate of Deposit(s)) to potential clients.
How a trade might work out:
A client puts up $10,000, locked in for 12 months.
In return for locking up their capital, I offer a 10% return.
This means that I will owe the client $11,000 at the end of the year. Therefore, any additional profit made would be mine to keep.
I figure the only thing I'd need to make the trade official is: a legally binding contract between the client and I. Are there any other legal barriers keeping me from running this sort of business?
And for Liability, I figure running the contracts through an LLC or S-Corp. Do you believe this would be necessary?
A:
What you are trying to do is illegal in every state I am aware of. And depending on the amounts of money involved this plan could get you some jail time.
I once represented a person who thought he was a very sophisticated investor and decided to issue some home-made "notes" (I hear you can print blanks off the Internet) to strangers--offering to pay them 10 to 15 times the going rate at the local banks in his community. And no matter what I advised him he insisted it was "legal" and persisted in taking in over $2.2 million from greedy people who never learned that if a money deal sounds to good to be true--it is not true.
Bottom line: Do not do anything like you are planning to do--without first obtaining a banking license from California.
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