BI > MAY 2006

Introducing Find-A-Club

Mr. Marx probably wouldn't have been interested in this article, but we're guessing a good portion of the BetterInvesting community will want to know about a new program to help investment clubs link up with potential members.

One of the most common issues of investment clubs is how to recruit new members. Meanwhile, we often hear from individual investors who want to join a club.

Recruiting members is tricky because of Securities and Exchange Commission regulations. As the commission says, an announcement that a club is looking for new members might be considered a public offering of securities. And if that's the case, the club might be required to register under the Investment Company Act of 1940 and subject itself to a boatload of paperwork, regulations and expense.

To meet this need, BetterInvesting is launching the Find-A-Club program to refer interested individual investors to clubs. The project is in the pilot stage, and the association's emphasis currently is on building a database of clubs looking for members. These BetterInvesting chapters are participating in the test phase:

Atlanta

DC Regional

Maine

Minneapolis

New Jersey

Puget Sound (western Washington)

Sacramento

San Diego

Southeastern Michigan

Space Coast (central Florida)

Yankee (Connecticut-Rhode Island)

Clubs looking for members in one of these chapters can complete the application and certification forms available at the BetterInvesting website. Clubs not necessarily looking for new members but open to having visitors can also register with the program.

The Process

After a club completes the application and certification forms, it will need to send the forms along with its partnership or limited liability company agreement to headquarters. We'll review the applications and certifications and if a club meets all the required criteria, the club's contact information will be added to a database of clubs open for visitors.

Then when someone contacts us to find a club, we'll search the database for potential contacts. Readers can telephone a member services representative at 877/275-6242, option 7. They can also send an e-mail to findaclub@betterinvesting.org.

Individuals first will need to answer a survey so that we know what they're looking for in a club. For example, they might prefer to be in an all-male or all-female club, or perhaps they're looking for clubs with certain minimum contributions. Then we'll look for clubs that most closely match a person's criteria.

The program is at an early stage, so it might take some time initially for clubs and potential members to link up as headquarters staff builds the database.

Certifying a Club

To become certified, clubs will need to meet a number of criteria, many of them for legal reasons. The major ones include:

• The club is general partnership or a limited liability company that's taxed as a partnership.


• All members of the club actively participate in management and investment decisions.


• The club has periodic meetings for members -- at least two per year.


• All members are dues-paying members of BetterInvesting.

There's also a requirement involving how the club votes on stock transactions. For more information on these criteria, go to the Find-A-Club FAQ document available through the website's page dedicated to the program.

Adam Ritt, Editor, BetterInvesting Magazine.