Q] Hedge Fund



I have a friend who's working as a fund manager, researcher, and computer
programmer for a very small hedge fund. There's only one other person
working there beside my friend, and that's the guy with the money (boss).
Just a brief description of the size of this company.

I once asked him if he needed to get any license. He said no. According to
him, because he's not soliciting anyone, he wouldn't need any license.
Basically, his boss hired him to identify good stocks and bonds to buy, and
to buy them at the right time. Okay, I think that makes sense.

I met with him this evening, and we talked about how things are going and
stuff. This friend of mine used to work for a slightly bigger hedge fund
(in terms of the number of people working), got to know his current boss who
used to have some other type of small investment company upstairs, and ended
up getting scouted by his current boss who recently started his own hedge
fund. That's how my friend got this new job. I guess his boss really liked
my multi-talented friend :)

Since it is a brand new company and my friend had to leave his old job
behind to join this unproven adventure, there was a big incentive; his gets
20% cut of the profit. I thought that was pretty good since my friend
didn't put any of his money in, but still gets 20% of the total return, if
they can make profit of course.

I asked, what if he finds a millionaire and bring his money in. He said he
probably would get some percentage as a commission, and his boss would take
a lot less percentage since it was not his money this time but the
millionaire's. I thought that only made sense, too.

However, now I am wondering, is he even allow to bring someone else's money
in? Wouldn't it require some form of solicitation, and therefore wouldn't
he need some license to do that? If so, what kind of license would he need?
I'm thinking the series seven. Am I right? Or, there's a different
license, if at all, for hedge funds? It looks like they have so much fewer
regulations and restrictions compared to mutual funds.


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