Regulatory Posture

Demostatics intends to advise clients, manage client capital, and trade its own book, while also selling the data underlying all three. Each of those is a regulated activity in most jurisdictions, and the combination carries obligations that none of them carries alone.

This page is not legal advice

Nothing here is a legal opinion, and no item on it should be treated as settled. It is a structured list of questions to put to qualified counsel in every jurisdiction Demostatics operates in or serves clients from. Specific licence names, thresholds, capital requirements and timelines are deliberately not stated, because they vary by jurisdiction and change. Get them from counsel, then record the answers here.

Status

Not built, and not started. No legal entity, no licence application, no compliance function, no counsel engagement, no policies. The only address appearing in any project document is a university department in Gebze, Kocaeli — an academic affiliation, not a company.

This is the longest-lead-time item on the entire roadmap. It is measured in months to years, not weeks, and no amount of engineering shortens it.

Question 1 — which jurisdiction, and which regulator

Everything else depends on this and it is unanswered.

The questions counsel needs:

• Where is the firm incorporated, and where is it managed from?
• Where do the clients live? Serving clients in a jurisdiction generally brings you under its rules regardless of where you are incorporated.
• Which regulator supervises each activity there?

If Türkiye is the base, the capital markets regulator is the SPK (Sermaye Piyasası Kurulu). If clients are in the EU, the MiFID II framework applies through the local regulator. If clients are in the US, the SEC and FINRA regimes apply. Confirm all of this with counsel — do not build against this paragraph.

Marketing to a jurisdiction can be enough

A public website selling investment advice is frequently treated as soliciting in every country that can read it. Geo-restriction and onboarding controls are often part of the answer, which makes this an engineering question as well as a legal one.

Question 2 — one entity or several

Running advisory, discretionary management and proprietary trading inside a single legal entity is possible in some regimes and not in others, and even where it is possible it is often not advisable.

What to ask:

• Does each activity need its own licence, or does one permission cover several?
• Must client assets be held by an independent custodian rather than by the firm?
• Does proprietary trading alongside client business trigger additional capital requirements or separation obligations?
• Does the data business belong in the regulated entity at all, or in a separate one that licenses data to it?

That last one is worth real thought. Keeping the platform in an unregulated subsidiary that sells data to everyone — including the regulated entity — is a common structure, and it keeps the software business from inheriting the compliance burden of the investment business.

Question 3 — conflicts of interest

This is where the combination bites, and it is the part that cannot be solved with a disclosure paragraph. Regulators generally require conflicts to be structurally prevented, not merely disclosed.

The specific conflicts this business model creates:

Conflict	The question it raises	Where it must be answered
Prop desk trades on data also sold to subscribers	Did the firm trade ahead of its own customers?	Publication and order timestamps, enforced ordering rule
Prop desk trades alongside managed client accounts	Whose order was filled first, and at what price?	Order allocation policy, sequencing, audit trail
Advice given to clients the firm also trades against	Is the recommendation in the client’s interest or the firm’s?	Information barriers, personal-account dealing rules
Some subscribers see data before others	Is tiered timing disclosed and consistently applied?	Publication policy, entitlement system
Advisory clients vs discretionary clients	Who gets an idea first?	Allocation and dissemination policy

Standard mechanisms counsel will raise: information barriers between the data, advisory and trading functions; personal account dealing rules for staff; pre-trade allocation policies; best execution obligations; and record-keeping sufficient to reconstruct any decision after the fact.

Every one of these is an engineering requirement

“Information barrier” means access control in the platform. “Allocation policy” means deterministic, logged order sequencing. “Reconstruct any decision” means point-in-time data reconstruction. None of these can be bolted on later, and none of them exist today.

Question 4 — client money and custody

The earlier standing recommendation was never to take custody of client funds. That is now superseded for line 3, but the underlying reasoning has not changed and still shapes how it should be approached.

What to ask:

• Can Demostatics avoid custody entirely by using an independent custodian, holding only the mandate to trade? In most regimes this is materially simpler than holding assets.
• If custody is unavoidable, what safeguarding, segregation, reconciliation and reporting obligations follow?
• What KYC and AML programme is required — onboarding, screening, monitoring, reporting?
• What happens on wind-down: how are client assets returned if the firm fails?

Do not merge a money schema before there is a licence and a custodian

The reason has not changed: a half-designed money schema is a liability the day it merges, not the day it is used. Design it against the real custodian’s real interface and the real regulator’s real reporting requirements. Guessing produces a schema you will migrate away from under time pressure.

Question 5 — what the firm may say in public

Selling data carries almost no marketing constraint. Selling advice carries a great deal.

• What may the marketing site claim about performance, and what disclaimers must accompany it?
• Are past-performance figures permitted, and in what form?
• Do the forum and the editorial layer become regulated communications once the firm is licensed? A staff member answering “should I buy this” in a public forum may be giving advice.
• Who signs off on public content, and is that a named compliance role?

The forum is now a compliance surface

Demostatics runs a public forum where staff are documented as replying to technical questions. Once the firm is licensed, what staff say there may count as regulated communication. The moderation model needs a compliance dimension it does not currently have. See Moderation.

Question 6 — record-keeping

Regulated firms are generally required to retain records sufficient to reconstruct decisions and communications for a defined period, and to produce them on request.

For Demostatics that means at least:

• Every data observation, with source, method, version and both timestamps
• Every revision to a published value, append-only
• Every recommendation issued and to whom
• Every order, its allocation and its execution
• Client communications, potentially including forum posts by staff

The platform’s current schema supports none of this. reports and database_items carry a single date column and no source at all. See Business Model for the schema gap and Data Pipeline for where it belongs.

What to do next, in order

1. Engage counsel in the intended home jurisdiction. Nothing below is answerable without this, and the lead time is the binding constraint on the whole business.
2. Decide the entity structure — particularly whether the platform sits inside or outside the regulated entity.
3. Record the answers on this page. This page is currently questions; it should become answers with dates and the counsel who gave them.
4. Only then design the money layer, the allocation logic and the information barriers.

In parallel and not blocked by any of it: build the data platform. Provenance, time series and point-in-time reconstruction are required under every possible answer above, so that work is never wasted. It is the one thing that can proceed today.

Next

• Business Model — the four lines and what each requires
• Roadmap — sequencing, and what licensing blocks
• Open Questions — the wider decision register