I hope that views of MS accounts are put in ASAP....
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
MFGlobal & PFG Best, we're rooked without your help
- Thread starter dangerkitty
- Start date
Quote from FCM-Reform:
We've been told by the NFA that the instant "view only" bank account access that FCM's must now grant to the NFA is not applicable to Forex Dealers. In short, NFA is not requiring forex dealers provide the same instant bank account access that Futures Commission Merchants provide. This is the clearest sign yet that regulators are not planning to extend any additional customer funds protections to the retail forex community.
The stated reason is that since retail forex funds are not legally required to be "segregated" they are not in the same category as the seg funds that FCM's hold on deposit. This has long been an issue involving the Commodity Exchange Act which grants seg funds to on-exchange contracts but does not have a word to say about retail foreign exchange because nobody was trading forex online in the 1970's when these laws were passed.
This logic will likely be used for additional proposals such as insurance where we can now expect retail forex to be excluded as well. This is why financial disclosure for retail forex firms becomes even more important. With retail forex dealers not being included in the safety of funds discussion currency traders are now solely left to their own due diligence when it comes to picking a broker.
We still encourage you to email secretary@cftc.gov to let regulators know that retail forex should not be excluded. If no one speaks up then regulators can assume that retail forex need not be a priority.
Well, as you note, there are no segregated fund requirements for Forex dealers, so Forex has to be excluded from the requirement to give online access to segregated funds accounts.
They are not required either to maintain anything equivalent to that, other than net capital etc.
I think it is counter-productive and detracts from your credibility to ask for the impossible.
Instead, ask for other forms of disclosure (audited financial statements) or for a new requirement that Forex dealers segregate funds also. But this will be violently opposed by Forex dealers and would likely cause many of them to go out of business.
If you want to see a new segregated funds regime instituted for Forex dealers, this could be a good idea but would totally change the business models of Forex dealers and is not something that could piggyback on a technical change like the present one. Extensive hearings etc. would be needed.
Quote from comintel:
Well, as you note, there are no segregated fund requirements for Forex dealers, so Forex has to be excluded from the requirement to give online access to segregated funds accounts.
They are not required either to maintain anything equivalent to that, other than net capital etc.
I think it is counter-productive and detracts from your credibility to ask for the impossible.
Instead, ask for other forms of disclosure (audited financial statements) or for a new requirement that Forex dealers segregate funds also. But this will be violently opposed by Forex dealers and would likely cause many of them to go out of business.
If you want to see a new segregated funds regime instituted for Forex dealers, this could be a good idea but would totally change the business models of Forex dealers and is not something that could piggyback on a technical change like the present one. Extensive hearings etc. would be needed.
You are correct in stating that "seg funds" is a steep hill for NFA to climb at the moment because of the way the current law is written. My point is not to demand NFA do the impossible. Rather, my fear is that retail forex is being forgotten amidst the collapse of PFG, in which thousands of retail forex customers lost their investment.
We will continue to push for further financial disclosures by brokers and better accounting standards as the process moves along. However, unless retail forex traders contact regulators to implore them to propose better customer protections the industry will largely be forgotten.
I've been asked why retail forex does not have seg funds protection and so I wanted to pass along this brief regulatory history of the retail foreign exchange market:
In 2001 retail online currency trading was regulated for the first time with the passage of the Commodities Futures Modernization Act of 2000 (âCFMAâ). This law provided that any non-bank firm making a market in retail FX transactions could be registered and licensed by the Commodities Futures Trading Commission (âCFTCâ). This law was a step in the right direction but it did not in any way grant customers trading FX with these firms any funds protection in the event of bankruptcy as is common in exchange traded markets such as equities and futures.
In particular, the CFMA did not make any adjustments to the CFTCâs âsegregation rule.â The segregation rule stipulates that all client funds deposited for trading domestic, on exchange futures or options on futuresbe kept segregated from all company funds and that in the event of bankruptcy the customerâs funds are legally segregated from creditors and must be returned to the clients.
In May 2008, Congress amended the Commodity Exchange Act (âCEAâ) and created an entirely new registration category, the Retail Foreign Exchange Dealer (âRFEDâ), for forex dealers operating in the U.S. Neither at that time nor two years later when Congress enacted sweeping financial sector reform legislation with the Dodd-Frank Reform and Consumer Protection Act of 2010 were provisions included that could have provided for RFEDs to segregate funds for the protection of retail FX customers
The CFTC explained the reason for not including segregation of funds for retail FX as follows:
http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2010-21729a.pdf
â⦠Several commenters maintained that the Commission should require segregation of customer funds by counterparties in order to provide some protection in the event of a counterparty insolvency. The Commissionâs segregation requirements with regard to futures flow from Section 4d of the Act which, generally speaking, requires that customer property for trading commodity contracts be kept apart, or segregated, from the FCMâs own funds. However, as noted in the Commissionâs proposing release, a segregated funds regime cannot be replicated in the context of off-exchange retail forex trading. Unlike segregation of customer funds deposited for futures trading, under the relevant provisions of the Bankruptcy Code, such amounts held in connection with retail forex trading would not receive any preferential treatment to unsecured creditors in bankruptcy.â
This hiccup with the bankruptcy code is what is currently holding up everything from seg funds protection to insurance. More in my next post.
In 2001 retail online currency trading was regulated for the first time with the passage of the Commodities Futures Modernization Act of 2000 (âCFMAâ). This law provided that any non-bank firm making a market in retail FX transactions could be registered and licensed by the Commodities Futures Trading Commission (âCFTCâ). This law was a step in the right direction but it did not in any way grant customers trading FX with these firms any funds protection in the event of bankruptcy as is common in exchange traded markets such as equities and futures.
In particular, the CFMA did not make any adjustments to the CFTCâs âsegregation rule.â The segregation rule stipulates that all client funds deposited for trading domestic, on exchange futures or options on futuresbe kept segregated from all company funds and that in the event of bankruptcy the customerâs funds are legally segregated from creditors and must be returned to the clients.
In May 2008, Congress amended the Commodity Exchange Act (âCEAâ) and created an entirely new registration category, the Retail Foreign Exchange Dealer (âRFEDâ), for forex dealers operating in the U.S. Neither at that time nor two years later when Congress enacted sweeping financial sector reform legislation with the Dodd-Frank Reform and Consumer Protection Act of 2010 were provisions included that could have provided for RFEDs to segregate funds for the protection of retail FX customers
The CFTC explained the reason for not including segregation of funds for retail FX as follows:
http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2010-21729a.pdf
â⦠Several commenters maintained that the Commission should require segregation of customer funds by counterparties in order to provide some protection in the event of a counterparty insolvency. The Commissionâs segregation requirements with regard to futures flow from Section 4d of the Act which, generally speaking, requires that customer property for trading commodity contracts be kept apart, or segregated, from the FCMâs own funds. However, as noted in the Commissionâs proposing release, a segregated funds regime cannot be replicated in the context of off-exchange retail forex trading. Unlike segregation of customer funds deposited for futures trading, under the relevant provisions of the Bankruptcy Code, such amounts held in connection with retail forex trading would not receive any preferential treatment to unsecured creditors in bankruptcy.â
This hiccup with the bankruptcy code is what is currently holding up everything from seg funds protection to insurance. More in my next post.
Next Wednesday morning the CFTC will be holding a meeting where they are expected to announce additional post-PFG customer protections. As I discussed in my previous post the absence of any language pertaining to off-exchange, retail forex transactions in the bankruptcy code is the given reason cited by regulators as to why no additional protections for retail forex traders can be put in place. It will likely also be the reason that retail forex will be excluded from any insurance scheme. We shall see on Wednesday.
However, this would not preclude regulators from requiring FCM's/RFED's from disclosing their financials on a quarterly basis or requiring tougher accounting standards. In fact, absent insurance protection or seg funds these may be the only protections that can be offered to the retail forex community. Since customers cannot rely on clear legal language to protect them in the event of bankruptcy it becomes even more imperative that customers be able to see for themselves just how sturdy the retail forex broker they are doing business with is. Comments can still be submitted to CFTC by emailing secretary@cftc.gov
However, this would not preclude regulators from requiring FCM's/RFED's from disclosing their financials on a quarterly basis or requiring tougher accounting standards. In fact, absent insurance protection or seg funds these may be the only protections that can be offered to the retail forex community. Since customers cannot rely on clear legal language to protect them in the event of bankruptcy it becomes even more imperative that customers be able to see for themselves just how sturdy the retail forex broker they are doing business with is. Comments can still be submitted to CFTC by emailing secretary@cftc.gov
Last week the Trustee of PFG's estate announced a series of limited distributions to customers of the bankrupt firm. Of interest to retail forex traders is that the estate is not making any current distributions to PFG customers who were trading off-exchange forex:
http://www.omnimgt.com/CMSVol/CMSDoc...333616_147.pdf
Quote:
âThe Forex Customers and the Metals Customers, however, do not hold claims against the Debtor on account of "commodity contracts" and therefore, are not "customers" under § 761(9) of the Bankruptcy Code and the Part 190 Rules. Accordingly, in accordance with subchapter IV and the Part 190 Rules, the distributions requested under the Motion, discussed below, will apply solely to the Futures Customers. Forex Customers and Metals Customers will not be included in such distributions and their claims will be addressed separately as part of the case."
The way the law is written the trustee is justified in putting futures customers first. This is why it has become urgent that regulators take additional steps to bring transparecy to the futures/forex industry so that customers can have a look at their broker's finances in order to weigh the risks invovled before putting funds on deposit with them. Since the law is not designed to currently protect forex investors, then traders need to protect themselves. This starts with granting traders the ability to conduct greater due diligence. If regulators can mandate that brokers disclose profitability ratios surely they can also mandate greater financial disclosure.
CFTC to announce initial recommendations this week. Contact secretary@cftc.gov with your thoughts.
http://www.omnimgt.com/CMSVol/CMSDoc...333616_147.pdf
Quote:
âThe Forex Customers and the Metals Customers, however, do not hold claims against the Debtor on account of "commodity contracts" and therefore, are not "customers" under § 761(9) of the Bankruptcy Code and the Part 190 Rules. Accordingly, in accordance with subchapter IV and the Part 190 Rules, the distributions requested under the Motion, discussed below, will apply solely to the Futures Customers. Forex Customers and Metals Customers will not be included in such distributions and their claims will be addressed separately as part of the case."
The way the law is written the trustee is justified in putting futures customers first. This is why it has become urgent that regulators take additional steps to bring transparecy to the futures/forex industry so that customers can have a look at their broker's finances in order to weigh the risks invovled before putting funds on deposit with them. Since the law is not designed to currently protect forex investors, then traders need to protect themselves. This starts with granting traders the ability to conduct greater due diligence. If regulators can mandate that brokers disclose profitability ratios surely they can also mandate greater financial disclosure.
CFTC to announce initial recommendations this week. Contact secretary@cftc.gov with your thoughts.
As regulators continue to investigate PFG news is coming out showing that the futures firm had been losing money for years:
http://www.valuewalk.com/2012/09/pfgbest-in-more-trouble-as-liabilities-outweigh-assets/
QUOTE:
"Its financial statement submitted to the court, indicated that the business has been going down since 2010. The company suffered $2.7 million in gross income losses in 2010, $1.2 million in losses in 2011, and $259,000 losses during the six month period of the current fiscal year."
PFG had recorded three straight years of losses. And yet they had just moved into an $18 million glass and steel office complex in Iowa boasting some of the most luxurious office amenities imaginable. But because PFG never had to disclose their losses they were able to give customers the impression that the firm was healthy and growing, when in fact it was sick and contracting. Customers should be aware of this before they open an account. Particularly since there is no insurance for futures or forex.
The CFTC postponed their vote on additional customer protections this week giving traders a little more time to comment.
http://www.valuewalk.com/2012/09/pfgbest-in-more-trouble-as-liabilities-outweigh-assets/
QUOTE:
"Its financial statement submitted to the court, indicated that the business has been going down since 2010. The company suffered $2.7 million in gross income losses in 2010, $1.2 million in losses in 2011, and $259,000 losses during the six month period of the current fiscal year."
PFG had recorded three straight years of losses. And yet they had just moved into an $18 million glass and steel office complex in Iowa boasting some of the most luxurious office amenities imaginable. But because PFG never had to disclose their losses they were able to give customers the impression that the firm was healthy and growing, when in fact it was sick and contracting. Customers should be aware of this before they open an account. Particularly since there is no insurance for futures or forex.
The CFTC postponed their vote on additional customer protections this week giving traders a little more time to comment.
The National Futures Association has added some additional public financial information on their BASIC search function effective September 1:
http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=4109
These actions are a step in the right direction. Clearly, regulators believe that public disclosure of FCM financial accounts are beneficial to customers as they conduct their due diligence. It therefore follows that additional financial disclosures (complete disclosure of a FCM's balance sheet for example) would empower traders to an even greater degree.
http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=4109
At its August meeting, NFA's Board of Directors determined that certain FCM financial data should be made publicly available on NFA's website to assist customers in their due diligence review of an FCM.
The Board determined that the best way to display this information is on an FCM-by-FCM basis through NFA's BASIC system. Therefore, NFA is adding new sections to each FCM's BASIC page to disclose certain financial related information. Specifically, from each FCM's BASIC page, the public will be able to access three separate FCM Reports - FCM Capital Report; FCM Customer Segregated Funds Report; and FCM Customer Secured Funds Report.
These actions are a step in the right direction. Clearly, regulators believe that public disclosure of FCM financial accounts are beneficial to customers as they conduct their due diligence. It therefore follows that additional financial disclosures (complete disclosure of a FCM's balance sheet for example) would empower traders to an even greater degree.
The federal bankruptcy judge in the PFG case authorized a series of initial customer distributions today. http://www.foxbusiness.com/industries/2012/09/20/pfg-best-customers-to-get-money-back/
The fate of PFG's retail forex customers remains in doubt. The CFTC has yet to announce their proposed reforms. Retail forex needs to be a part of these reforms. We're still encouraging traders to contact CFTC at secretary@cftc.gov to voice their concern.
The first wave of payouts will happen by October 8 and a second wave will occur before October 29, Fishman said.
The Commodity Futures Trading Commission initially raised concerns about the trustee's plan because of uncertainty about the integrity of Peregrine's books. The commission warned that some people could get money they were not entitled to without proper vetting of records.
The fate of PFG's retail forex customers remains in doubt. The CFTC has yet to announce their proposed reforms. Retail forex needs to be a part of these reforms. We're still encouraging traders to contact CFTC at secretary@cftc.gov to voice their concern.
The Commodity Futures Trading Commission initially raised concerns about the trustee's plan because of uncertainty about the integrity of Peregrine's books. The commission warned that some people could get money they were not entitled to without proper vetting of records.
That's rich, like the same concern about Mr. W. getting our money that didn't belong to him. Thanks for looking alive for us. 30% in the first payout and that's the biggest bulk of it, you know where we stand, ouch.
MFG still has 20% and after payout, PFG will have 70%, yeah the double whammy for me, sure make's me feel 100% good that the CFTC is on top of it. [sarcasm]