AI bot pitches and managed accounts

An 'AI bot' or 'we trade for you' offer often means someone else will trade with your money at their own discretion. In law, that is a managed service needing a licence for discretionary management. A promised return from a bot is a pitch, not a disclosure.

What the law calls a managed service

When someone trades with a client's money at their own discretion, the law calls that discretionary management. The person or firm making the trades needs a licence category that allows discretionary management. An FSP number for advice is not enough.

If the offer says the bot will trade for you, or that the provider will manage your account, that is discretionary management. Ask for the licence category. If the provider cannot show a discretionary licence, it is not authorised to do what it offers.

A promised return is a pitch, not a disclosure

A bot that promises a return is making a pitch. It is not a disclosure of what the bot did in the past, and it is not a guarantee. Past performance, even if real, does not predict future results. A promised return is a marketing claim, not a fact.

A licensed provider must give you a written disclosure of risks. A bot pitch often skips that step. If the pitch promises a return, ask for the risk disclosure. If there is none, walk away.

What to ask for: the FSP number, the category and a written mandate

Ask the person or firm for their FSP number. Check it on the FSCA register. Look at the licence categories. You need a category for discretionary management, not just advice. If the provider will trade for you, you need a written mandate that sets out what they may do.

The written mandate must say what assets they may trade, what risk they may take, and what fees they charge. Without a written mandate, you have no proof of what was agreed. A verbal promise is not enough.

The 'AI' label does not change the law

Calling a bot 'AI' does not change the legal analysis. If the bot trades your money at its own discretion, the provider is offering discretionary management. The technology does not matter; the activity does. A bot is not a legal person; the person behind the bot is responsible.

The same rules apply whether the offer is on a website, in a WhatsApp group, or in a Telegram channel. The medium does not change the requirement for a licence. If the provider says the bot is 'just software', ask who is responsible for the trades.

Why a screenshot of profits is not a record

A screenshot of profits is not a record. It is an image that can be edited, or taken from another account, or from a demo account. It does not show the losses, the fees, or the risk. A real record is a statement from a licensed provider, showing all trades and all costs.

Ask for a statement from the provider's own system, not a screenshot. A licensed provider must keep records. If the provider cannot give you a statement, that is a red flag.

What to have in hand before deciding

Before you put money into a bot or a managed account, have the provider's FSP number, the licence category, and a written mandate. Read the risk disclosure. Ask about fees: how much, when, and on what basis. Ask what happens if the bot loses money.

Ask who holds your money. If the provider holds it, they need a separate authorisation or a custody arrangement. If the money goes to an offshore account, exchange control applies. Check all of these before you deposit.

A written mandate can turn a tool into a managed service

An AI bot that merely sends signals does not by itself create a managed account. The moment a provider asks for a written mandate to trade on the reader's behalf, the legal character changes. A mandate is the line between advice and discretion. Without it, the provider is only telling the reader what to do; with it, the provider is doing the trading.

The FSCA does not care what the technology is called. A bot, an algorithm, a copy-trade feed, a 'we trade for you' dashboard: all are assessed by whether the client has given discretion. Discretion means the provider can decide what to buy, when to sell, and how much to stake, without asking the client each time. That requires a discretionary licence category on the FSP register.

Readers should look at the document they are asked to sign. If it grants power of attorney over a trading account, or authorises the provider to place orders, the service is discretionary. A provider who asks for such a mandate but shows only an advice licence is offering something the licence does not allow. The written mandate is the evidence to keep.

An unlicensed discretionary provider cannot hold client money

A discretionary licence is not only about trading authority. It also governs what happens to the client's funds once they are handed over. A provider who trades on a client's behalf usually needs to hold those funds, or have control over them, in an account the provider operates. That is a separate power from giving advice, and it is not covered by an intermediary or advice category.

If a provider lacks a discretionary licence, it has no lawful basis to hold client money for trading. The reader may then find that the money sits in an account the provider controls, but which the regulator has never approved. When the provider fails, the reader has no direct claim to the funds, because the provider was never allowed to hold them in the first place.

The practical test is simple: ask where the money will be held and in whose name. If the answer is 'with our partner' or 'in a pooled account', the reader should ask for the FSP number of the entity that will hold the money. A licensed provider can still fail, but the licence at least brings the holding arrangement under the FSCA's conduct rules.

Copy trading is a managed service even if the client clicks the button

Some platforms describe copy trading as self-directed because the client clicks 'copy' for each trade. The FSCA's approach is to look at who makes the investment decision after that click. If the client's account automatically mirrors the trades of another account, the decision is no longer the client's. The provider's system is making the decision, and the client has given standing authority for that to happen.

A discretionary licence is required when the provider exercises judgement over the composition of the client's portfolio. Copy trading does exactly that: the client does not choose which assets to buy, the provider's selected trader does. The client only chooses which trader to follow. That choice is not the same as choosing each asset, and the regulator treats the follow as a mandate.

Readers should not be misled by the interface. A button that says 'copy' does not make the service advice; it makes it execution. The provider may argue that the client retains control because they can stop copying at any time. But the power to stop is not the power to direct. While the copy is active, the provider is trading on the client's behalf.

Promised returns are a separate warning signal, not a licence check

A promised return, whether fixed or 'guaranteed', is not itself a licence category. But it changes how the reader should read the licence record. A discretionary licence allows a provider to manage money; it does not allow the provider to promise an outcome. The FSCA's conduct standards prohibit misleading statements about future performance, and a promised return is often the first sign that the provider is not following those standards.

The promise matters because it tells the reader what the provider thinks the licence is for. A provider who promises a return is treating the licence as a marketing tool, not as a framework for managing risk. The reader should then ask whether the promised return is in writing and whether the provider's own disclosures include the risk that the return will not be achieved. If the promise is only in a WhatsApp message, it is not a disclosure.

A licensed discretionary provider can still make a promise it cannot keep. The licence does not stop a firm from being wrong. But the combination of a promised return and a missing discretionary licence is a pattern the reader should treat as a red flag. The licence check and the promise check are two separate steps, and both must fail for the offer to be credible.

The client's bank account is not a safe harbour for a managed service

Some providers structure a managed service so that the client's money stays in the client's own bank account, and the provider only has trading access through a linked broker. This is sometimes presented as safer because the provider never holds the money. But the legal question is different: does the provider have authority to trade the account? If yes, the service is discretionary regardless of where the money sits.

The danger is that the client's bank account is not protected from the provider's trading decisions. If the provider has a power of attorney over the account, or if the client has given the provider login credentials, the provider can move funds to a broker and lose them. The client's name on the account does not change the fact that the provider is making the investment decisions.

A discretionary licence is required even when the money never passes through the provider's own books. The licence is about the authority to manage, not the custody of funds. Readers should not accept a provider's claim that because the money stays in the client's account, no licence is needed. The FSCA's definition of a discretionary service does not depend on where the money is held.

A licence for a legal entity does not cover a natural person giving the same service

The FSCA register lists legal entities and, in some cases, their key individuals. A reader may be dealing with a natural person who claims to be 'backed by' or 'using the licence of' a registered firm. That is not how a discretionary licence works. The licence belongs to the entity named on the register, and only that entity may provide the service. A natural person cannot borrow a firm's licence.

When a bot or managed account is promoted by an individual, the reader should ask for the FSP number of the entity that will actually trade. If the individual gives a number, the reader should check that the individual is listed as a representative of that entity on the FSCA's register. A representative is a natural person who acts under the entity's supervision and is recorded by the FSCA. An individual who is not a recorded representative is not covered by the entity's licence.

The risk is that the reader signs a mandate with an individual, but the money goes to the individual's personal account. The licensed entity may know nothing about it. The reader then has no claim against the licensed entity, because the entity never provided the service. The licence check must be against the exact entity that will be the counterparty to the mandate, not against any name the promoter mentions.