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Overview of the Safety of SureTrader


Day traders in the United States who want to buy and sell securities on an intra-day basis must maintain a minimum balance of $25,000 under FINRA regulations. One broker that has found a way around this rule is SureTrader. Because it is headquartered in the Bahamas, it remains outside of the U.S. regulatory environment and its mandates. Some investors might be concerned about the safety and legitimacy of this firm, so let’s take a detailed look at it.


Regulations Governing SureTrader


SureTrader is owned by Swiss America Securities, Ltd., which was established in the Bahamas in 2008. Because the company is headquartered outside the United States, it is not subject to SEC or FINRA oversight. It is, however, regulated by the Securities Commission of the Bahamas, the primary watchdog of the investment industry in that country. Its website is located at www.scb.gov.bs. The agency was established in 1995. By comparison, the SEC was set up in 1934.

The Commission’s website has a lot of detailed information on its role in the securities industry in the Bahamas, and which firms it regulates. Swiss America Securities shows up in a search for these brokers. Many links provide important information for investors about enforcement, licensing, and registration.


Private Insurance


SureTrader has an insurance policy with American Home Assurance Company, an AIG affiliate that is legally authorized to conduct business in the Caribbean nation. The policy provides $1,000,000 of insurance for each client.


Account Details


A citizen of any country can open a brokerage account with SureTrader, although the broker says that it does not “solicit U.S. residents directly or indirectly as clients.” The SEC prohibits broker-dealers outside the United States from soliciting American residents, and the regulator interprets a website as being the same as a phone call to a client. U.S. citizens need to reside outside the United States in order to trade either U.S. or foreign securities at SureTrader.

U.S. citizens who do open a SureTrader account will be subject to the Foreign Account Tax Compliance Act (FATCA). This American statute does not provide any brokerage guarantees or regulation, but it does impose certain tax reporting requirements for both the client and the firm. Americans must submit various forms to both SureTrader and the IRS.

There is a $500 minimum deposit requirement to open a SureTrader account. Unlike American brokerage firms, there are no pattern day trading rules at SureTrader, and $500 is enough to day trade. Currently, the broker only offers options and equities. OTCBB, penny stocks, and the pink sheets are all available. SureTrader uses multiple clearing firms.


Issues Unique to SureTrader


Because the broker is located in the Bahamas, calling from the United States is long distance. SureTrader does not have a toll-free number. The fax number is also a foreign number. Calling from the United States will result in long-distance charges. SureTrader does offer an on-line chat function, although some clients have expressed disappointment with how long it takes an agent to respond. The broker has a Skype ID, an e-mail address, and a VoIP number.

SureTrader assesses a $40 fee for ACH withdrawals. It does allow deposits via credit and debit cards, but withdrawing funds this way incurs a 3.5% fee. The broker will not honor withdrawal requests lower than $100. Wire transfers and e-wallet transfers also cost $40 each. A $50 inactivity fee is assessed against any account that does not perform at least 15 trades within the first three months of account opening.

SureTrader states that it takes up to 3 business days to process a withdrawal request, and it may take an additional 5 days for the funds to show up in the receiving bank. Some customers have complained about the company’s funds withdrawal policies.

The SureTrader account application requires one financial reference and two professional references. It also asks about past securities and banking activities.


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Alternatives


Under FINRA guidelines, a pattern day trader is any investor who performs 4 or more day trades within 5 business days, given that the number of day trades accounts for more than 6% of the customer’s total trades in the margin account during that same 5 business day period. There are obviously ways around this policy. Placing only three day trades per week would classify the account as a non-pattern day trading account. Having large mutual fund positions in the day trading account would also prevent the day trades from making up more than 6% of the account’s value. Taking these steps would circumvent FINRA’s $25,000 requirement, in which case there would be no need to open a SureTrader account.


Advantages of SureTrader


SureTrader offers a paper-trading demo of its sophisticated desktop platform. Most brokers don’t have a simulated trading system. SureTrader offers Level II quotes and direct access trading. The broker received 4 stars out of 5 from Barron’s for usability. It provides mobile trading with Apple devices. There is also a mobile site.

SureTrader also charges just 1¢ per share, with a $4.95 minimum. Options are 50¢ each, with the $4.95 base. The broker offers 6:1 intra-day leverage and 2:1 overnight leverage on marginable securities priced higher than $3.


Recap


SureTrader offers a great service to people who want to day trade, but don’t have the necessary $25,000 that is required under U.S. guidelines. The flip side of this is that the U.S. regulatory framework is not available, and the broker’s operations are located in the Caribbean. The securities regulator in the Bahamas is relatively young, being founded just over 20 years ago. While the SEC is much older, it has had recent failures. What SureTrader has going for it is a low $500 minimum, which might make the broker worth the risk.


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Updated on 9/29/2017.




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