Isn't a contractual issue? In other words, the customers were warned of the risks in the signed contract?
All customers must sign a risk disclosure form. But that certainly doesn't give a Futures Commission Merchant a license to commit fraud.
I have sympathy for the forex traders although it seems bizarre to me that any trader would have to reclaim their "segregated funds" using lawsuits! However, it seems to me that forex currency derivatives is where the gigantic world banking casino is really played and they already have lobbyist and political protection. One of my favorite comments from starting forex traders is that claim there is no commission. Here is a new theory - perhaps they take all their commission in one lump sum at the end? I wish good fortune and a fair outcome to all segregated traders.
Chairman Gary Gensler put out a press release today announcing a series of reforms designed to afford customers greater protections in the futures industry. It does not appear retail forex has been included in these reforms but we'll learn more in the days ahead. Here are the highlights: http://www.cftc.gov/PressRoom/SpeechesTestimony/genslerstatement102312
The CFTC is expected to formally submit their reform proposals to the federal register, which will once again give customers a chance to make comments. Iâll post a link once it is available. In the meantime, Futures Magazine has published an interesting article on conducting your due diligence: http://www.futuresmag.com/2012/11/01/spotting-broker-red-flags The article partly highlights the importance of good auditing and the benefits to traders of being able to look at the many reports that publicly traded companies have to file. Traders should not have to do go searching for expensive accountants to conduct due diligence. They should be able to easily review a firmâs financial statements at a public website so that they can determine how healthy a firm actually is. This is a far better way to conduct due diligence than the current system which merely relies on the public statements of individuals like Russ Wassendorf. Marketing promises are no substitute for hard data. There is still time to get the CFTC to adopt such safeguards. Email secretary@cftc.gov to make your own recommendations regarding customer insurance, these proposals, or any others.
The NFA has debuted its new financial reporting section on the BASIC search part of their website: http://www.futuresmag.com/2012/11/08/nfa-provides-public-online-access-to-fcm-financial While this is a step in the right direction it still does not provide the kind of hard data that would provide traders (particularly retail forex traders) with the kind of financial numbers one gets to see in a quarterly earnings report from publically traded companies. Such a disclosure would give traders a much better insight into the health of a FCM or RFED then currently exists.
Last week the CFTC released their latest rule proposal to the public regarding customer funds protection for the futures industry. Once again the CFTC is accepting comments from the public: http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1291 The comment period is slated to be open until January 14. FXCM continues to encourage forex traders to leave comments with the regulators on this matter. Retail forex has not been included in these reforms despite the thousands of customers at PFG who traded retail forex. In addition to supporting segregation of funds protection and insurance for the industry FXCM is also proposing the following: Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry 1) Require All FCMâs to Publicly Publish Their Financials Once a Quarter: Currently, the CFTC publishes monthly âNet Capitalâ reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCMâs and RFEDâs to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have. Furthermore, the published financial statement should include everything (i.e. holding companyâs financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence. Too often, those firms that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those firms that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match. 2) Require all FCMâs to Employ a Top Ten Accounting Firm: There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCMâs. Whether it is top 10 or top 25, the main point is that FCMâs must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCMâs that publicly traded companies must meet. While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the publicâs due diligence capabilities by bringing greater market transparency and accountability to the world of futures/forex trading.
The CFTC has published some early comments regarding their additional customer funds protection proposals. Here is a sampling below: http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1291 · From: Brandon Shoemaker Comment No: 58945 Date: 11/19/2012 Comment Text: Here are my recommendations which are a result of a consensus in the trading groups i participate. 1) Require All FCMâs to Publicly Publish Their Financials Once a Quarter: Currently, the CFTC publishes monthly âNet Capitalâ reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCMâs and RFEDâs to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that these firms have. Furthermore, the published financial statement should include everything (i.e. holding companyâs financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM/RFED. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence. · From: William Allen Comment No: 58946 Date: 11/19/2012 Comment Text: Do we really need this regulations for companies to do what they know they should do anyway. Why is it that government regulate everything in our lives. What the hell is wrong with all you people in D.C.. Do you really feel the need to try to control everybody. Why don't we just enforce the laws already on the books and not create more regulation that doesn't do anything but make more rules that nobody understands or knows about. As far as I'm concerned, welcome to the USSA United Socialist States of Americka. · From: Anthony Ingrassia Comment No: 58947 Date: 11/19/2012 Comment Text: Honorable Members of the Commission, As an independent CTA active in the forex markets, I find it unconscionable that forex account holders with FCMs that deal in both futures and forex (such as was the case with PFG Best) are omitted from or considered subordinate to those who hold futures accounts. Neither should RFEDs be exempted from these proposed changes to increase transparency. Thank you for the opportunity to comment. You can also leave your own comments with CFTC by clicking the following link: http://comments.cftc.gov/PublicComments/CommentForm.aspx?id=1291
Isn't this moot anyways? Without enforcement of the laws, you can print anything in paper laws to increase confidence in government, however, it is not worth the paper it is printed on. Has anyone been punished for breaking the old laws?
I share your frustration. In the case of PFG, it was against the law to dip into customer segregated funds. Unfortunately, retail forex doesn't even have that protection. This is why we are urging customers to contact CFTC to include retail fx with this most basic of protections.