NFA Lawsuit against AMP??

Discussion in 'Retail Brokers' started by hrhyrn, Jul 25, 2015.

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  1. hrhyrn


  2. Brighton


    Technically, it's a complaint, not a lawsuit, but AMP customers should read it and keep up with the monthly CFTC Excess Net Capital reports if they have concerns.

    I skimmed the complaint and it looks like the NFA believes there are deficiencies in two areas:
    1. Compliance and record keeping, especially for prospective and actual customers from "troubled" countries (I forget the correct term).
    2. Insufficient detail and perhaps speed when notifying customers of a margin call.

    I did not see anything about segregation of customer funds or inadequate capital. It should be noted that AMP is a small firm, and while their ratios might be fine, the absolute amount of their excess net capital is not large.

    This is not my area of expertise, but it's the internet so I'll take a guess: AMP will be required to put in place a corrective action plan, they will be subject to extra scrutiny for a while, perhaps they'll have to pay a fine, and life will go on.
  3. very good explanation. another operation mis-step.
  4. prc117f


    why risk it. any hints of trouble I would be bailing out, or end up a creditor in the back of the line like the MFGlobal people etc..
    volpunter likes this.
  5. InfoTech


    Perhaps more than a mis-step. From the complaint:

    "13. Amp's chief compliance officer (CCO) is responsible for developing and administering appropriate policies and procedures to ensure Amp's compliance with all applicable NFA and Commodity Futures Trading Commission (CFTC) rules and regulations. ln June 2014, Amp hired an individual as its new CCO, at an annual salary of $33,000, who - prior to assuming the role of Amp's CCO - had no compliance experience and previously worked as an administrative assistant at another FCM.

    14. During NFA's examination, the new CCO was unable to answer very basic questions or provide the exam team with requested documents. Instead, Culp responded to most of NFA's inquiries and produced documents requested by NFA.
    volpunter likes this.
  6. garachen


    AMP is really really small in terms of assets. There is somewhat of a mismatch in that you are legally able to operate and clear customer business but it can be impractical to staff all the positions the regulators expect of you. The amount of paperwork and record tracking is quite a burden for firms 5-10x their size so of course they are going to cut corners somewhere. From the outside, it looks like they are trying to build their core business quickly - perhaps at times favoring practicality over regulation - with the intention of shoring up the paperwork down the road. A qualified CCO would cost >200k and then expect to have staff costing another 200k. That's a lot of money to burn that's generating no revenue when you are small. Regulators frown on outsourcing that function - having a part time CCO - too. It's a pretty untenable situation.
    Speculate and TraDaToR like this.
  7. ktm


    It strikes me as odd that an organization with 13,000 accounts and structured as an FCM would have such little actual infrastructure.

    If you want to get a CPA/CPO/RIA and run a bootstrap operation, that's doable. But the FCM world is far more onerous in terms of regulation, paperwork, compliance and structure needed to not only run the business properly but keep the regulators happy. There is a reason there are so few of them.
  8. xandman


    Seems like worrying about a small FCM is like worrying about your checking account with the smallest Money Center Bank.
  9. EPrado


    Like others said on here, it seems like operational issues. Not saying these things shouldn't be taken care of, but it looks like some things that other brokers go through. IB has had 6 different regulatory actions against them over the years. People see that AMP is very small as far as assets. Well sure. They cater towards the smaller trader so they aren't going to have the assets that Goldman Sachs has.
  10. J.P.


    Good questions, but will we hear from AMP?
    #10     Jul 28, 2015
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