FXCM would like to inform anyone who has an account with CFG Trader (aka Forefront Investments Corporation) of the following press release.
FXCM Makes Offer to Rescue 3,800 Forex Trading Accounts of CFG Trader:
NFA and CFTC Currently Reviewing Offer
March 26, 2007
â¢ [*]CFG Trader, a Richmond, VA foreign exchange trading company, was forced to liquidate all open trading positions by the NFA on March 21 of this year, because it failed to meet NFAâs capital requirements;
â¢ [*]Forex Capital Markets LLC (FXCM) has agreed to accept the CFG Trader accounts â representing approximately 3,800 individual traders, pending regulatory approval. CFTC and NFA approval are required in order for the agreement reached between CFG Trader and FXCM to be consummated;
â¢ [*]FXCM is prepared to contribute approximately $1 million dollars to make up the difference between the assets of CFG Trader and the funds owed to CFG clients due to under-capitalization, should the CFTC and NFA approve the transaction;
â¢ [*]Under the proposed agreement between CFG Trader and FXCM, no CFG client will lose money due to the under-capitalization of CFG Trader. If the NFA and CFTC do not approve the agreement, there is no certainty that CFG clients will receive 100% of their funds.
These announcements were made by Drew Niv, CEO of Forex Capital Markets, the global currency trading firm.
âAfter the NFA decided to suspend CFG Trader operations, we received several requests to protect their clients against loss,â said Niv.
âFXCM is prepared to provide one million dollars in order to make the CFG clients whole. If the transfer goes through, all the account holders will have their funds intact,â said Niv.
FXCM Calls For Higher Standards
âOur strong balance sheet, which greatly exceeds NFA requirements, is enabling FXCM to put on the table an offer which may keep the 3,800 CFG traders from losing money. We hope the NFA and CFTC will enable us to protect these clients from substantial losses,â said Niv.
âThis incident points to the fact that there are still some companies in the forex industry that are inadequately capitalized. We think it is vitally important that all currency trading clients have full information regarding the financial strength of forex trading firms.â
âWe at FXCM have taken the major step of making our balance sheet public,â said Niv. âWe challenge other firms in the industry to follow our lead.â
FXCM recently released its financial details: The FXCM Group as of January 31, 2007, held over $120,660,927 In Capital (Assets Minus Liabilities) and $98, 657,018 In Operating Cash (Excludes Client Funds.) For more details on FXCMâs balance sheet, visit http://www.fxcm.com/company-profile.jsp.)
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â¢ [*]Forex Capital Markets LLC is the Largest Forex Dealer Member*
â¢ [*]More than 85,000 live accounts are traded via the FXCM platform
â¢ [*]Over $200 billion in notional volume is traded each month on the FXCM platform
Registered with the CFTC as a Futures Commission Merchant, FXCM (Forex Capital Markets LLC) has received numerous awards from the investment community, including Best Currency Broker from Shares, Best Retail Foreign Exchange Platform from FX Week and Best Foreign Exchange Specialist from Technical Analysis of Stocks & Commodities. In addition to currency trading, FXCM offers educational courses on forex trading, and provides research through DailyFX.com.
*As of September 2006, FXCM held in excess of $215 million in customer funds out of a total of over $770 million held by Forex Dealer Members. While there are approximately 31 active Forex Dealer Members with liabilities to customers of approximately $795 million, FXCM holds approximately 1 out of every 3 dollars of customer funds held by Forex Dealer Members.
(FXCM is the FDM referenced in this NFA document as holding in excess of $215 million in customer funds.)
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Leveraged foreign exchange trading carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.
NEW YORK (Dow Jones)--A retail foreign exchange trading company has had its
assets frozen after failing to meet minimum net capital requirements, and its
3,800 day-trader customers might have trouble getting their money back.
The action by a U.S. District Court judge comes came after it was discovered
that Forefront Investments Corporation, which also goes by the name CFG Trader,
had liabilities of $8 million but assets of just $6.8 million. Rules require
such firms to maintain assets of $1 million more than their liabilities.
The Commodity Futures Trading Commission, a government watchdog, said Tuesday
it filed an official complaint against the Richmond, Va.-based company,
charging it with "undercapitalization by more than $2.2 million and
The complaint seeks a "permanent injunction against the defendant, monetary
penalties and other relief," said the CFTC, which monitors futures trading and
retail forex markets and market participants.
The U.S. District Court judge who froze Forefront's assets March 21 also
prohibited it from destroying documents or denying CFTC staff access to books and records, the CFTC said in a statement.
Paul Hayeck, associate director of enforcement at the CFTC, said about 3,800
retail forex customers have accounts with Forefront. The CFTC is hoping that by
freezing Forefront's assets, customers' investments may be protected, he said.
Working alongside the CFTC on the case is the National Futures Association, a
self-regulatory agency that also serves as a watchdog for U.S. futures trading.
Larry Dyekman, the NFA's director of communications and Education, said that
during the past month it repeatedly sought to reconcile the problems with
Forefront, but without success.
A document from the NFA posted on Forefront's Web site details those efforts,
which began with an audit on March 5.
According to the eight-page document, Forefront's accounting consultant,
Richard Lani, said at one point that it would be "a fair statement to say that
the firm does not know (its) financial status."
Dyekman said the case highlights the dangers lurking for individual investors
who decide to participate in retail foreign exchange trading.
"It's a perfect example of what we've been telling people ... their funds (in
spot retail forex trading) are not protected," Dyekman said.
It wasn't clear how much of Forefront's $8 million in liabilities were owed
directly to customers.
No one was immediately available for comment at Forefront, which began
operations in 2003. But a notice on the company's Web site Thursday said: "In
the next 24 hours, CFG Trader (Forefront's retail name) will be making an
announcement regarding the status" of clients' accounts.
The number of retail foreign exchange firms has exploded to about 37 firms
from three five years ago, the NFA's Dyekman said. The NFA is considering
bumping up the minimal capital requirements to provide more protection to
customers, but Dykeman urged investors to do their homework on forex trading
companies before placing any investments.
The NFA official said he could recall other instances of retail firms not
meeting net capital requirements for a few days - the NFA performs weekly
checks - but he said: "This is the first major case of a company being
seriously undercapitalized" over an extended period of time.
The NFA had ordered Forefront to liquidate all its open positions by March