Refco Fallout

[jimrockford]

Quote from man:

jim

do you actually think the CFTC is saying: well yes, there is a public offering and this company is clearing member of the exchange and a third of the world's most professional operations deal with them, BUT please do not trust anyone, go straight into their office, look the CEO, at least the CFO, straight into the eye and record the answers to your questionnaire on to some lying detector? and do they say this: we fined them ten years ago for a percentage fraction of their profits (which was way too little for what they actually did), but, buddy, between us, who says they are not still doing IT?

***

and what will you do? spend day and night for six months checking out your current broker by private investigators (let's face it: whom to trust after anderson, enron, worldcom, parmalat, Refco)?

Three questions, three answers.

(1) No, the CFTC is not saying you must eyeball the FCM's CEO, use a lie detector, etc. They are saying that you must exercise reasonable care. It's very simple. Don't trust an embezzler, as confirmed by the CFTC enforcement history, to be your futures clearing broker.

(2) Yes, the CFTC is saying they fined Refco $1.25 million ten years ago, but Refco might still be doing it or might do it again or might be doing something else even worse, and you need to make a reasonable decision about whether to do business with them, in spite of the fact that CFTC has not shut them down. Yes, this is what CFTC is saying. The CFTC knows that they lack the legal authority, the resources, and the ability to relieve market participants of their duty to perform due diligence in selecting an FCM. They freely admit it. Listen to them. http://www.cftc.gov/opa/brochures/opafutures.htm:

(3) Will I spend day and night checking out FCMs and hiring private investigators, etc.? No, that would be unreasonable. But if I were choosing an FCM, I would make a reasonable effort to protect myself, and also my clients, if any. I would spend a little bit of time checking the regulatory history and the risk control practices. I wouldn't spend 6 months day and night, but I would spend a reasonable little bit of time.

 

[Apex Capital]

Quote from jimrockford:

nkhoi, see the thread entitled "Refco Account Security". It is a very long thread. Read the whole thread. See how that 'guy', Apex Capital, threatened me with lawsuits, and pressured Baron to close the thread.

Quote from jimrockford:

Everything I said, in the other threads, was based on postings by Apex Capital himself. Baron assured me that his reasons for closing the thread were not as Apex Capital represents them.

How ironic.
At first you state that I pressured Baron into closing a thread on REFCO, and now you say . . . that I am putting words into your mouth?

You stated that I had client funds clearing thru REFCO.
This is absolutely FALSE.

I asked you to retract your unsubstantiated claims, and yet you did not.
I reminded you that your unsubstantiated claims and false accusations infering that I was somehow negligent in not doing my fiduciary duty for my clients - - - was libelous, which it was.

Yet, you made this assumption and supposition all by yourself, with no direct statement by me implying otherwise. I never once stated that I had CLIENT funds clearing REFCO. And I dare you to find the alleged quote where I said that I did.

Must I remind you again of what you said and claimed on several occasions?
You appear to have fallen back into some rather convenient revisionist history so I will provide you with several of YOUR following baseless claims:

Quote from jimrockford:

So it is pretty obvious that Apex Capital did not and could not have performed due diligence in selecting a clearing futures broker for his clients, because if he had performed that due diligence, then he would have known that segregated customer funds are not guaranteed, by exchanges or by any other party, against broker bankruptcy or embezzlement.

I think he has recklessly breached that duty by entrusting their funds to a futures broker with a history of embezzling customer funds, while remaining totally oblivious to the absence of deposit insurance and to the corresponding risk of loss.

In the end, it is clear that your highly fragile ego cannot admit that you are wrong in making baseless claims and unsubstantiated accusations. In the end, when you have been shown that your twisted sense of logic and lack of attention to detail and obsessive axe to grind have been totally inaccurate regarding my fiduciary duty, you then chalk it up to an innocent misunderstanding . . .

Quote from jimrockford

Well, it looks like there was an innocent misunderstanding, as to whether or not Apex cleared other people’s money thru Refco. But do I owe Apex an apology? I mean, after all, I think the misunderstanding was his fault, because his own posting did give the impression that he did clear other people’s money thru Refco.

Did I libel Apex? I’m quite sure I didn’t, because innocent misunderstandings are never libel. Libel only applies to maliciously false factual statements, but my statement was not maliciously false, regardless of who was to blame for the misunderstanding.

How convenient for you.
Your weak character and fragile ego get to hide behind an innocent misunderstanding.

 

[globalfxtrainer]

Quote from jimrockford:

Three questions, three answers.

(1) No, the CFTC is not saying you must eyeball the FCM's CEO, use a lie detector, etc. They are saying that you must exercise reasonable care. It's very simple. Don't trust an embezzler, as confirmed by the CFTC enforcement history, to be your futures clearing broker.

(2) Yes, the CFTC is saying they fined Refco $1.25 million ten years ago, but Refco might still be doing it or might do it again or might be doing something else even worse, and you need to make a reasonable decision about whether to do business with them, in spite of the fact that CFTC has not shut them down. Yes, this is what CFTC is saying. The CFTC knows that they lack the legal authority, the resources, and the ability to relieve market participants of their duty to perform due diligence in selecting an FCM. They freely admit it. Listen to them. http://www.cftc.gov/opa/brochures/opafutures.htm:

(3) Will I spend day and night checking out FCMs and hiring private investigators, etc.? No, that would be unreasonable. But if I were choosing an FCM, I would make a reasonable effort to protect myself, and also my clients, if any. I would spend a little bit of time checking the regulatory history and the risk control practices. I wouldn't spend 6 months day and night, but I would spend a reasonable little bit of time.

It seems that this Canadian Investor Protection Fund also would provide a good level of additional protection in the event the dealer/broker runs into trouble in spite of thorough due diligence. Unless there are some other negatives that I am unaware of, i.e., heightened tax compliance issues, etc. for an American to do business with a Canadian brokerage, etc., it would seem a good added level of protection (1 million Canadian insurance coverage per account in the event of broker/dealer banruptcy) See http://www.cipf.ca

 

[jimrockford]

Quote from globalfxtrainer:

It seems that this Canadian Investor Protection Fund also would provide a good level of additional protection in the event the dealer/broker runs into trouble in spite of thorough due diligence. Unless there are some other negatives that I am unaware of, i.e., heightened tax compliance issues, etc. for an American to do business with a Canadian brokerage, etc., it would seem a good added level of protection (1 million Canadian insurance coverage per account in the event of broker/dealer banruptcy) See http://www.cipf.ca

I think this is an excellent point, globalfxtrainer. I don't know what the possible downsides might be, but it seems like due diligence should include a thorough examination of them, and also the benefits, of relying on Canadian deposit insurance to protect futures trading accounts. If enough U.S. traders vote with their feet, to do business with Canadian FCMs, then perhaps this would motivate U.S. FCMs to provide some sort of private sector insurance coverage, or motivate U.S. regulators to push for some sort of SIPC-like deposit insurance, so that U.S. FCMs can remain competitive with Canadian FCMs.

 

[globalfxtrainer]

Quote from jimrockford:

I think this is an excellent point, globalfxtrainer. I don't know what the possible downsides might be, but it seems like due diligence should include a thorough examination of them, and also the benefits, of relying on Canadian deposit insurance to protect futures trading accounts. If enough U.S. traders vote with their feet, to do business with Canadian FCMs, then perhaps this would motivate U.S. FCMs to provide some sort of private sector insurance coverage, or motivate U.S. regulators to push for some sort of SIPC-like deposit insurance, so that U.S. FCMs can remain competitive with Canadian FCMs.

It seems to me that unless there is some clear negative with tax compliance there is no downside for an American when making the comparison of a Canadian account and an American account, especially if it is at the same firm (the American version would have no coverage the Canadian version, if it is a member of the Independent Dealer Association would have 1 Million CAD in Coverage). Since there is no coverage (bankruptcy insurance) of any kind for American firms this seemingly makes this choice simple. Add to that the amount of coverage at 1 million Canadian and it seems to really be very attractive unless again there is something that is not obvious like heightened complexity of tax compliance or some other burden that is not immediately obvious.

 

[jimrockford]

Quote from Apex Capital:



blah blah blah ...

I proved, in another thread, that Apex Capital, a registered CTA, had no idea what he was talking about, when he asserted that futures accounts are insured or guaranteed against broker bankruptcy. His accusations against me are a retaliatory bunch of unprofessional, psychotic B.S., which I already disproved in my two posts dated 18 Oct 2005 in the thread entitled "Refco Account Security". Baron closed that thread because Apex Capital's disgraceful, pro-Refco campaign, of personal attacks, false accusations, and litigation threats, took that other thread off-topic. Apex Capital is now jeopardizing this thread, by injecting it with the same poison. Apex pressured Baron to delete some of my own words from that other thread, and Apex has now re-posted that same deleted text in this thread. I have complained to the moderator, using the complain button at the bottom right of Apex Capital's posting in this thread, and I would encourage others to do so as well. I believe that if Apex Capital persists in trying to undermine our constructive and gentlemanly discussion of credit risks in post-Refco futures trading, in this thread, he should be banned from EliteTrader.

 

[9th Gate]

Quote from jimrockford:

.....in trying to undermine our constructive and gentlemanly discussion of credit risks in post-Refco futures trading

I 2nd this. When people go back and search information they should find true facts, not opinions or statements based on what people think will happen.

I almost opened a FX account with Refco and I would have been potentially out of my $ like some other FX traders. There is only 1 Refco company regardless of how many divisions they set up to protect themselves.

 

[2cents]

Quote from jimrockford:

Baron to delete some of my own words from that other thread, ....

its true there has been some manipulation of post contents 'ex-post' in that other thread and thats rather disturbing... baron sir, care to chip in and throw a bucket of ice cold water on all this, and on this whole dispute in particular, that'd be nice!

 

[Baron]

Quote from 2cents:

its true there has been some manipulation of post contents 'ex-post' in that other thread and thats rather disturbing... baron sir, care to chip in and throw a bucket of ice cold water on all this, and on this whole dispute in particular, that'd be nice!

Yeah, I have one comment: I view arguments between Jim Rockford and Apex Capital to be OFF-TOPIC, and any further discussion between them regarding what due diligence Apex may or may not have done is completely irrelevant. Any past posts between these two individuals that were deleted in other threads were deleted for the same reason: THEY ARE OFF TOPIC.

 

[2cents]

thanks - much appreciated! (i wonder how u can put up with all that stuff sometimes...)

back to the topic, agree with mind/man we have a major crisis:
http://www.businessweek.com/magazine/content/05_45/b3958095.htm (a bit longish, sorry)
http://www.startribune.com/stories/1069/5694012.html

and separately with (from the biz. week article):
[ The Refco trauma may lead to calls for tougher SEC oversight, but "almost no amount of regulation would have cured or caught" a CEO determined to fudge the numbers, says David B.H. Martin, former director of the SEC's division of corporate finance.]

except:
- perhaps some additional measure / extension of the AML (Anti-Money Laundering) type framework & oversight to even whiter-than-white collar type people & institutions could help catch such 'upscale' window-dressing type schemes
- regulation only, ok, of course you can't stop people, but how about more and wider repression as a strong deterrent? not sure ebbers, koslowski, bennett and some of their willing or simply lax but de-facto 'accomplices' fully appreciated the reality of the risk of ending up in jail for one, not sure ex-arthur andersen fully appreciated the risk that 2 or 3 of their partners cld cause the whole firm to collapse, etc etc...

not to say i don't sympathize with the auditors tho' (mind u, i am ex-C&L...), reality on the ground is, if a smart CFO really wants to pull the wool over u, there is nothing u can do... nothing...