not sure of cy structure but people should due their homework with any firm they choose registered or not people like to badmouth any firm registered or not on here anyway
I warned everyone about Epiphany for over a year and then they were finally shut down and a lot of traders lost all their money. Paramount was shut down as well: http://www.elitetrader.com/vb/showthread.php?s=&threadid=195882 Just because CY hasn't been shut down yet doesn't mean anything. They are located in the US, take traders money as deposits and charge a commission. Those are functions of a BD and by SEC rules and laws they must register as a BD....they are not. It's that simple. Send them money at your own risk, I could care less....just letting everyone know the FACTS.
Team Trading recruited over 500 independent traders over three years as an unregistered firm, marked up commissions, and eventually closed shop without returning approximately $2 million dollars of trader deposits. So the basic questions a trader should ask if they wish to do business with the firm are simple: 1. Do you require traders to deposit capital? 2. Do you mark up commissions? 3. Are you a registered broker-dealer? If they say "yes" to numbers 1 and 2, and "no" to #3, then simply ask "how do you avoid the registration requirements of a broker under Section 3(a)(4)(A) of the Securities and Exchange Act of 1934?" As rmorse suggested, there are other ways to properly structure the model. Also, firms located outside of the U.S. may be subject to different jurisdictions, and therefore may not be registered with SEC. Conducting simple due diligence now will save time and energy later if you end up fighting for the return of your capital.
Team Trading and all Oliver Valez and Charles Vacarro's scams are slightly different. He charges for "training", and then let's you trade "his money". If this is challenged by the SEC it would not pass the "stink" test. Also, last I checked the SEC was investigating his entities based on traders complaints. Also, rumor has it that once you started trading with Team Trading you were always on a demo platform even though you were told it was a live platform. That way when you lost money "his" money you weren't really losing anything, but they pocketed all the money. But like ScalperJoe said...always do your DD!
I totally agree. Also, many groups operate under the umbrella of a broker-dealer such as the WTS firms mentioned earlier. Structuring a firm this way is completely legal and you are required to register, but you should ask if the group themselves is the broker-dealer & if not, who is the broker-dealer you are required to register with. You can also ask if the group is license (series 7 reps, manager with series 24)
You're right, paying for "training" when you're actually getting an account where they mark up commissions seems like a convulted workaround of SEC broker-dealer rules. Although many complaints were filed against Team Trading with both the SEC and the NY Attorney General, it was mostly due to the firm's failure to uphold terms stipulated in a contract with its traders who funded independent trading accounts, not for the training programs. Also, sworn testimony in court documents and other sources revealed over the years would lead any of their former traders to conclude that the rumors of demo trades were unfounded. Regardless of what actually happened to all the money, the traders who have not yet been compensated for their remaining capital deposits will hopefully receive justice in due course.
Hey Joe...how are you? Can you provide a link to that testimony since I have heard from a very good source that they have ALWAYS traded that way. And knowing the type of operation they run that shouldn't surprise anyone. There was a reason they only allow you to trade in a handful of liquid stocks...so you could never test if your order really went to the market in an illiquid stock. In a liquid stock there are prints going off every second.
The trading platform was Orbis. The broker was Solaris Securities, and the clearing firm was Penson. Most of the trades routed through Direct Edge, and trade blotters were prepared by Prop Reports. Court documents revealed many wire transfers to Penson. If they were faking the trades, there is no counterparty risk, and therefore no reason to send funds to the clearing firm. It would be the scam of century if the trades were all in sim, but it's like you said, "rumor."