SEC/FINRA Officially Issues Warning on Unregistered Broker Dealers

That's not a loophole....thats a legitimate reason to have the Master/Sub relationship. The SEC is not stupid. If it looks like a duck quacks like a duck, then the SEC is going to say its a duck...no matter what they claim they are.

Furthermore, the clearing firms are going to shut these firms down first and ask questions later...they are not going to subject themselves to fines. Penson has had enough fines for one year!


Quote from munnyhunny:

ITrade, props for the info and interpretation. But there is a loophole here that no one has mentioned:
'However, there are other legitimate business arrangements where the identities of the beneficial owners are not disclosed to the firm. For example, FINRA recognizes that an “investment adviser” as defined by the Investment Advisers Act of 1940 and acting in such bona fide capacity (referred to as a “bona fide IA”), may employ sub-accounts for each account it advises without identifying the beneficial owner of each account for which it advises.'
In plain terms what does this mean? The prop firm continues with their "training fee" scam and claims all these subaccounts are actually accounts that are being advised within the framework of the "training" they provide.
I am not justifying the prop firms. I think most of them are out to rip off the unsuspecting trader. But where there is a will (or a smart enough lawyer), there is a way.
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It doesn't mean that they are out to steal your money. But who knows if your money is really there??? People at Tuco were getting paid out on a monthly basis with no issues. They are not regulated like an SEC registered BD is that has to file FOCUS reports on a daily basis to the SEC. All I'm saying is that I wouldn't want to be the last one trying to get my money out when the clearing firm freezes the account.

BTW, the SEC did not initially freeze Tuco's assets. Penson froze trading first, then the SEC stepped in.



Quote from Boff:

aren't there way more unregistered props like cy, epiphany, etc.? so they are all going to be shut down now one by one?
and if they are, why does it have to be that your money will be stolen unless the shop was run by real crooks like valez or tuco ponzi? wouldn't sec make an effort to see that money is returned to account holders?
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Monger
I don't judge "most shops" as dishonest; the facts speak for themselves.
There are at least 50 prop shops out there and the majority cannot be trusted. I am not talking about tier one firms like Bright, but there are others I won't mention who should be shut down regardless of FINRA regs.

Quote from moneymonger:

I have had both good and bad experiences with unregistered prop shops in the past. The search feature on ET is far better
to screen out shady firms than SEC enforcement actions. Best not to prejudge all or most prop shops as being dishonest. There are legit firms out there that are dedicated to excellence.
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Everyone should stop mentioning names. The people mentioning are the ones who are causing problems. If you got robbed by valez or w/e the scam was, don't hate on everyone else. You are going to scream "I told you so," when it was you who are causing problems. Let the sec try to figure out Madoff scams and why no one bothers to report losses anymore. They can leave the small fish alone. There are honest names being dragged into the mud because some people got taken by scams and want to see everyone screwed like they were. Stop crying to the government. This is exactly why we have a 25krule in the first place. Your loss is your loss. Stop acting like you are on a crusade to save people. You aint Mother Teresa, and this isn't helping anything. If there is a bad actor say it. Why call the sec and talk about good names? This is not helping other traders.
 
Illum,

Some people are really trying to help others not make the same mistakes they did. They are telling their stories and encouraging people to be cautious. I think your accusations of their motives are without merit.
 
My reaction after reading the reg was pretty much in accordance with Yellow123's. I think the SEC, FINRA and the clearing BDs all know full well how all these LLCs are doing business and are allowing them to operate in a gray area unless there is malfeasance. Their existence is no secret and their emergence is not recent. To the extent that this reg might tighten things up going forward, it looks to me like all an LLC with a master account might have to do, at worst, is "hide" its subaccount relationships from the clearing BD and handle the subaccounting themselves. Then, again, I'm not a lawyer. And, certainly, the point that others have made about there being a greater "firm risk" and need for due diligence with these outfits is valid.
 
Woudn't it just be nice if we could get get an expert like are real lawyer to post on the subject, I called mine and asked him to look into it, he pretty much laughed and said it was out of his area.
 
Quote from 1765hillwood:

Woudn't it just be nice if we could get get an expert like are real lawyer to post on the subject, I called mine and asked him to look into it, he pretty much laughed and said it was out of his area.
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Why don't you simply call the SEC or FINRA. It's free and they won't laugh. And it happens to be in their area.
 
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