NFA announces effective date for increased minimum net capital requirements for Forex Dealer Members
Beginning on December 21, 2007, NFA Forex Dealer Members (FDMs) will be required to maintain a minimum net capital requirement of $5 million. The increase also raises to $10 million the amount of capital required for a security deposit exemption under NFA Financial Requirements Section 12(b). The amendments to NFA Financial Requirements Section 11 and the Interpretive Notice entitled "Forex Transactions" were approved by the Commodity Futures Trading Commission (CFTC) in late September.
"We have taken these steps because a Forex Dealer Member's activities create greater financial risks than the type of transactions involved in traditional exchange-traded futures and options," says NFA General Counsel Tom Sexton. "The increased capital requirement will result in greater customer protection."
FDM capital requirements have been a great cause of concern recently. During the past ten years, NFA has issued 11 emergency enforcement actions against FDMs for failing to demonstrate compliance with NFA financial requirements. In addition, since March 2007, nine different FDMs have fallen under the early warning requirement of $1.5 million.
"Customers trading off-exchange forex do not receive a priority under the Bankruptcy Code in the event of a firm's insolvency," says Sexton, "so it's crucial that FDMs have adequate capital."
NFA is closely monitoring its FDMs to ensure that those firms that wish to continue operating past December 21 will take the necessary steps to meet their new financial requirements.
Quote from forexsavior:
NFA Speaks on Cap Requirement
The NFA made another announcement about the coming increase in Capital Requirements stated below:
The following firms, according to the latest CFTC Report, do not meet the coming $5 million requirement:
Hamilton Williams ($1,100,000)
IG Financial Markets ($1,014,000)
One World Capital ($1,170,000)
Wall Street Derivatives ($1,237,000)
SNC Investments ($1,247,000)
Advanced Markets ($1,269,000)
Direct Forex ($1,406,000)
Solid Gold Financial ($2,010,000)
CMC Markets ($2,806,000)
E FX Options ($3,055,000)
Forex Club ($3,308,000)
GFS Futures & Forex ($3,403,000)
MB Trading ($4,452,000)
Easy Forex ($4,628,000)
A Forex Dealer Member must have $5 million in adjusted net capital as of December 21, 2007. This increase also raises to $10 million the amount of capital required for a security deposit exemption under NFA Financial Requirements Section 12(b). Since this is a significant change to the qualifications for the exemption, Members that are currently operating under Section 12(b) should notify NFA's Compliance Department whether they intend to continue using the exemption.
Quote from BigGun:
Wow still no response, this guy must be a hired bloger ..
WHY NO RESPONCE?
Quote from rcanfiel:
You are like a blind hunting dog - you are proudly retrieving one of the decoys, instead of the duck.
You've got to be kidding, but he does have a point. Forexsavior said eariler that he did this for FX traders, to warn us for the evil small brokers. But he never mentions the big crooks. He does have a point, I dont see why YOU have to be so offensive
Quote from forexsavior:
As I continue to update the dead forex firms walking list I'm amazed how many people think fraud and undercapitalization are completely separate issues. Often times they are not. The reason is quite simple: firms that are committing fraud are not known for having legible books. And Vice versa. Firms that have a hard time maintaining their capital requirements will often cut corners and commit fraud to keep their firms from going under. Finally, smaller firms simply don't have the money to maintain the kind of large legal and compliance staffs necessary to keep up with the battery of regulations being issued by the NFA and CFTC. And of course some firms are just plain incompetent. All these factors have come to a head with Forex Dealer Dead Pool Member One World Capital, who is now in serious trouble with regulators.
To see the full report on One World's misdeeds you can click on the NFA's report yourself: http://www.nfa.futures.org/BasicNet/CaseDocument.aspx?seqnum=1190
I have highlighted some of the worst allegations below. After reading through them I think you'll understand why One World is on the dead firm's walking list and why that should be serious cause for concern for anyone who has an account with them or any firm like them.
"One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."
"The firm was unable to properly account for its liabilities to its forex customers." (Insert appropriate jaw dropping sound. This is the text book definition of a firm destined to go bankrupt.)
"In addition, NFA's audit found that One World and Walsh [Principal] provided false and misleading information to NFA auditors concerning an individual names Charles Martin and his role at One World. Walsh said Martin had no involvement in the firm. However, NFA subsequently learned that Walsh's claim was untrue and that Martin was, in fact, heavily involved in the operations of One World and solicited customers on its behalf." (Who is Charles Martin you ask? The NFA states Martin was turned down to be a principal before because of a "felony drug conviction and a misdemeanor theft conviction.")
It goes on and on, misleading promotional materials, outright lies to regulators, failure to report capital and maintain any semblance of book keeping standards. In short, One World is a classic Dead Forex Firm walking. Firms like One World are the reason the NFA is going to raise capital requirements. And when they do, does anyone honestly believe the One World's of the world will survive?