A lot of investment clubs have what they call active and passive members. The passive members were those who live far from the meeting site, have a business to run during meeting times, did not feel they were good enough to add to the clubs discussions or just lost interest in the club. These are some of the reasons. The clubs would let these people remain members so they could get more money to invest or did not want to hurt their feelings. But the SEC has indicated that if a club had passive members the club could be concidered a security. This would create all kinds of problems for the club. Ellis Traub talked with the SEC and it is his understanding "that so long as a club provided the opportunity for a member to discuss the companies and to vote for it,it was not a requirement that they do so. In other words, an active member can't be construed to become a passive member simply by not joining the discussion or being absent fom the meeting." But my recommendation is that a club not have any members who do not participate in the stock selection and operations of the club. A club does not really want just the money of a member but want the active participation of all members.

This is the time of year that all clubs are getting concerned about the club taxes, and they should be. The NAIC Club Accounting is the best way to prepare your taxes. I do not recommend doing them by hand, even though it can be done this way. If you have any problems with the program then contact ICLUB support for help. Remember this time of year there are a lot of clubs wanting help and you may get put on a waiting list, so be prepared to wait. Another way were you may get help is to contact your local Better Investing Chapter, they usually have a director assigned for the porpose to help clubs with club accounting. Good Luck!

Daniel, the Club Investment Manual gives some guidance in this matter. But basically, a club suggest several stocks from which the departing member selects the ones he would like to own. If he does not like any of these, and the club does not offer any other stocks, then the only option left is to buy the partner out with cash. The partnership agreement and club by-laws should cover this matter, also. If not, I recommend that an update of these documents be done to include this matter.