Isn't a contractual issue? In other words, the customers were warned of the risks in the signed contract?
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MFGlobal & PFG Best, we're rooked without your help
- Thread starter dangerkitty
- Start date
I have sympathy for the forex traders although it seems bizarre to me that any trader would have to reclaim their "segregated funds" using lawsuits!
However, it seems to me that forex currency derivatives is where the gigantic world banking casino is really played and they already have lobbyist and political protection.
One of my favorite comments from starting forex traders is that claim there is no commission. Here is a new theory - perhaps they take all their commission in one lump sum at the end?
I wish good fortune and a fair outcome to all segregated traders.
However, it seems to me that forex currency derivatives is where the gigantic world banking casino is really played and they already have lobbyist and political protection.
One of my favorite comments from starting forex traders is that claim there is no commission. Here is a new theory - perhaps they take all their commission in one lump sum at the end?
I wish good fortune and a fair outcome to all segregated traders.
Chairman Gary Gensler put out a press release today announcing a series of reforms designed to afford customers greater protections in the futures industry. It does not appear retail forex has been included in these reforms but we'll learn more in the days ahead. Here are the highlights:
http://www.cftc.gov/PressRoom/SpeechesTestimony/genslerstatement102312
http://www.cftc.gov/PressRoom/SpeechesTestimony/genslerstatement102312
This customer protection proposal incorporates these NFA rules into the Commissionâs regulations so that the CFTC can directly enforce these important rules. Under this proposal, FCMs would be required to:
⢠Hold sufficient funds in Part 30 secured accounts (funds held for U.S. foreign futures and options customers trading on foreign contract markets) to meet their total obligations to customers trading on foreign markets computed under the net liquidating equity method. FCMs would no longer be allowed to use the alternative method, which had allowed them to hold a lower amount of funds representing the margin on their foreign futures;
⢠Maintain written policies and procedures governing the maintenance of excess funds in customer segregated and Part 30 secured accounts. Withdrawals of 25 percent or more would necessitate pre-approval in writing by senior management and must be reported to the designated SRO and the CFTC; and
⢠Make additional reports available to the SRO and the CFTC, including daily computations of segregated and Part 30 secured amounts.
Beyond the NFA rules, additional reforms in this proposal benefited from the CFTCâs broad outreach and consultation with the SROs and market participants, as well as substantial feedback from CFTC Commissioners. They include:
⢠First, bringing the regulatorsâ view of customer accounts into the 21st century by giving the SROs and the CFTC direct electronic access to FCMsâ bank and custodial accounts for customer funds, without asking the FCMsâ permission. Further, acknowledgement letters and confirmation letters must come directly to regulators from banks and custodians.
⢠Second, increasing disclosures to customers regarding the risks associated with futures trading and using FCMs to invest their funds. Futures customers, if they wish, should have access to information about how their assets are held, similar to that which is available to mutual fund and securities customers. FCMs would be required to provide current and potential customers with specific information about the FCMâs risks.
⢠Third, enhancing controls at FCMs regarding how customer accounts are handled, including policies and procedures on supervision and risk management of customer funds.
⢠Fourth, setting standards for the SROsâ examinations and the annual certified financial statement audits, including raising minimum standards for independent public accountants who audit FCMs.
⢠Fifth, requiring FCMs to ensure they back up segregated customer accounts with funds to cover potential margin deficits.
⢠Sixth, implementing a more effective early warning system for the Commission and the SROs that alerts them to certain problems, including a) when an FCMâs funds are insufficient to meet the targeted residual interest in customer accounts b) when there is a material adverse impact to the FCMâs creditworthiness and c) when there is a material change to the FCMâs clearing or financial arrangements.
⢠And seventh, instituting a liquidity requirement for FCMs, in addition to the existing capital requirement, to better detect FCMs that have become distressed and may put customer funds at risk.
Prior to this proposal, the Commission already made some important improvements to protections for customer funds. They include:
⢠The completed amendments to rule 1.25 regarding the investment of funds that bring customers back to protections they had prior to exemptions the Commission granted between 2000 and 2005. Importantly, this prevents use of customer funds for in-house lending through repurchase agreements;
⢠Clearinghouses will have to collect margin on a gross basis and FCMs will no longer be able to offset one customerâs collateral against another and then send only the net to the clearinghouse;
⢠The so-called âLSOC ruleâ (legal segregation with operational comingling) for swaps ensures customer money is protected individually all the way to the clearinghouse; and
⢠The Commission included customer protection enhancements in the final rule for designated contract markets. These provisions codify into rules staff guidance on minimum requirements for SROs regarding their financial surveillance of FCMs.
The CFTC is expected to formally submit their reform proposals to the federal register, which will once again give customers a chance to make comments. Iâll post a link once it is available. In the meantime, Futures Magazine has published an interesting article on conducting your due diligence:
http://www.futuresmag.com/2012/11/01/spotting-broker-red-flags
The article partly highlights the importance of good auditing and the benefits to traders of being able to look at the many reports that publicly traded companies have to file.
Traders should not have to do go searching for expensive accountants to conduct due diligence. They should be able to easily review a firmâs financial statements at a public website so that they can determine how healthy a firm actually is. This is a far better way to conduct due diligence than the current system which merely relies on the public statements of individuals like Russ Wassendorf. Marketing promises are no substitute for hard data. There is still time to get the CFTC to adopt such safeguards. Email secretary@cftc.gov to make your own recommendations regarding customer insurance, these proposals, or any others.
http://www.futuresmag.com/2012/11/01/spotting-broker-red-flags
The article partly highlights the importance of good auditing and the benefits to traders of being able to look at the many reports that publicly traded companies have to file.
A red flag that has come up in several cases is inadequate auditing. A large futures broker or investment firm should have, if not one of the big four, an institutional level auditor. The Sam Israel Bayou Hedge Fund, Bernie Madoff and PFG scandals all used sole proprietor or inadequate auditors. While the big guys have messed up as well, a large firm managing hundreds of millions of dollars shouldnât be hiring someone working out of his (or her) garage. If they do, it is a blazing red flag.
Publicly traded companies like MF Global have numerous reports they must file with the Securities and Exchange Commission (SEC), and, as a registered FCM, MF Global had to submit monthly segregated account reports to the CFTC. These reports can reveal a lot of information, though many of them, especially SEC filings, can be dense and hard to interpret if you donât know what to look for. Find someone who does.
Traders should not have to do go searching for expensive accountants to conduct due diligence. They should be able to easily review a firmâs financial statements at a public website so that they can determine how healthy a firm actually is. This is a far better way to conduct due diligence than the current system which merely relies on the public statements of individuals like Russ Wassendorf. Marketing promises are no substitute for hard data. There is still time to get the CFTC to adopt such safeguards. Email secretary@cftc.gov to make your own recommendations regarding customer insurance, these proposals, or any others.
The NFA has debuted its new financial reporting section on the BASIC search part of their website:
http://www.futuresmag.com/2012/11/08/nfa-provides-public-online-access-to-fcm-financial
While this is a step in the right direction it still does not provide the kind of hard data that would provide traders (particularly retail forex traders) with the kind of financial numbers one gets to see in a quarterly earnings report from publically traded companies. Such a disclosure would give traders a much better insight into the health of a FCM or RFED then currently exists.
http://www.futuresmag.com/2012/11/08/nfa-provides-public-online-access-to-fcm-financial
Using the new BASIC system, customers will be able to view
- An FCM Capital report, showing the most recent monthâs data on adjusted net capital, required net capitals and excess net capital
- An FCM customer segregated funds report, which will include information including the total funds held in segregated accounts, the funds required to be held in segregated accounts, excess segregated funds and the percentage of segregated funds that are held in cash
- An FCM customer secured amount funds report, which will show the same information as the segregated funds report for an FCMâs secured funds
While this is a step in the right direction it still does not provide the kind of hard data that would provide traders (particularly retail forex traders) with the kind of financial numbers one gets to see in a quarterly earnings report from publically traded companies. Such a disclosure would give traders a much better insight into the health of a FCM or RFED then currently exists.
Last week the CFTC released their latest rule proposal to the public regarding customer funds protection for the futures industry. Once again the CFTC is accepting comments from the public:
http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1291
The comment period is slated to be open until January 14. FXCM continues to encourage forex traders to leave comments with the regulators on this matter. Retail forex has not been included in these reforms despite the thousands of customers at PFG who traded retail forex. In addition to supporting segregation of funds protection and insurance for the industry FXCM is also proposing the following:
Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry
1) Require All FCMâs to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly âNet Capitalâ reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCMâs and RFEDâs to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have.
Furthermore, the published financial statement should include everything (i.e. holding companyâs financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.
Too often, those firms that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those firms that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.
2) Require all FCMâs to Employ a Top Ten Accounting Firm:
There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCMâs. Whether it is top 10 or top 25, the main point is that FCMâs must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCMâs that publicly traded companies must meet.
While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the publicâs due diligence capabilities by bringing greater market transparency and accountability to the world of futures/forex trading.
http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1291
The comment period is slated to be open until January 14. FXCM continues to encourage forex traders to leave comments with the regulators on this matter. Retail forex has not been included in these reforms despite the thousands of customers at PFG who traded retail forex. In addition to supporting segregation of funds protection and insurance for the industry FXCM is also proposing the following:
Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry
1) Require All FCMâs to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly âNet Capitalâ reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCMâs and RFEDâs to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have.
Furthermore, the published financial statement should include everything (i.e. holding companyâs financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.
Too often, those firms that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those firms that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.
2) Require all FCMâs to Employ a Top Ten Accounting Firm:
There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCMâs. Whether it is top 10 or top 25, the main point is that FCMâs must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCMâs that publicly traded companies must meet.
While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the publicâs due diligence capabilities by bringing greater market transparency and accountability to the world of futures/forex trading.
The CFTC has published some early comments regarding their additional customer funds protection proposals. Here is a sampling below:
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1291
· From: Brandon Shoemaker
Comment No: 58945
Date: 11/19/2012
Comment Text:
Here are my recommendations which are a result of a consensus in the trading groups i participate. 1) Require All FCMâs to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly âNet Capitalâ reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCMâs and RFEDâs to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have. Furthermore, the published financial statement should include everything (i.e. holding companyâs financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.
· From: William Allen
Comment No: 58946
Date: 11/19/2012
Comment Text:
Do we really need this regulations for companies to do what they know they should do anyway. Why is it that government regulate everything in our lives. What the hell is wrong with all you people in D.C.. Do you really feel the need to try to control everybody. Why don't we just enforce the laws already on the books and not create more regulation that doesn't do anything but make more rules that nobody understands or knows about. As far as I'm concerned, welcome to the USSA United Socialist States of Americka.
· From: Anthony Ingrassia
Comment No: 58947
Date: 11/19/2012
Comment Text:
Honorable Members of the Commission, As an independent CTA active in the forex markets, I find it unconscionable that forex account holders with FCMs that deal in both futures and forex (such as was the case with PFG Best) are omitted from or considered subordinate to those who hold futures accounts. Neither should RFEDs be exempted from these proposed changes to increase transparency. Thank you for the opportunity to comment.
You can also leave your own comments with CFTC by clicking the following link:
http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1291
http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1291
· From: Brandon Shoemaker
Comment No: 58945
Date: 11/19/2012
Comment Text:
Here are my recommendations which are a result of a consensus in the trading groups i participate. 1) Require All FCMâs to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly âNet Capitalâ reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCMâs and RFEDâs to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have. Furthermore, the published financial statement should include everything (i.e. holding companyâs financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.
· From: William Allen
Comment No: 58946
Date: 11/19/2012
Comment Text:
Do we really need this regulations for companies to do what they know they should do anyway. Why is it that government regulate everything in our lives. What the hell is wrong with all you people in D.C.. Do you really feel the need to try to control everybody. Why don't we just enforce the laws already on the books and not create more regulation that doesn't do anything but make more rules that nobody understands or knows about. As far as I'm concerned, welcome to the USSA United Socialist States of Americka.
· From: Anthony Ingrassia
Comment No: 58947
Date: 11/19/2012
Comment Text:
Honorable Members of the Commission, As an independent CTA active in the forex markets, I find it unconscionable that forex account holders with FCMs that deal in both futures and forex (such as was the case with PFG Best) are omitted from or considered subordinate to those who hold futures accounts. Neither should RFEDs be exempted from these proposed changes to increase transparency. Thank you for the opportunity to comment.
You can also leave your own comments with CFTC by clicking the following link:
http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1291
Isn't this moot anyways?
Without enforcement of the laws, you can print anything in paper laws to increase confidence in government, however, it is not worth the paper it is printed on.
Has anyone been punished for breaking the old laws?
Without enforcement of the laws, you can print anything in paper laws to increase confidence in government, however, it is not worth the paper it is printed on.
Has anyone been punished for breaking the old laws?
Quote from StarDust9182:
Isn't this moot anyways?
Without enforcement of the laws, you can print anything in paper laws to increase confidence in government, however, it is not worth the paper it is printed on.
Has anyone been punished for breaking the old laws?
I share your frustration. In the case of PFG, it was against the law to dip into customer segregated funds. Unfortunately, retail forex doesn't even have that protection. This is why we are urging customers to contact CFTC to include retail fx with this most basic of protections.