NFA Dead Forex Firms Walking

[forex scholar]

Update on Swiss Regulation

It appears that the winds of change are blowing in Switzerland according to FX Street:
http://weblog.fxstreet.com/2007/06/wind-of-importa.html

Hi Everybody

As you may probably already know, SFBC (Swiss Federal Banking Commission) is decided to regulate the Foreign Exchange business in Switzerland . This process already started a couple of months ago and some important brokerages are already going through the process of getting SFBC’s approval.

One of my sources in Switzerland told me this morning that SFBC is implementing big changes in the way Swiss brokers use to work...

The restrictions that SFBC will require to brokers to implement to get their approval will probably force those not strong enough to disappear and this process could be faster than we think and could take place before the end of the year.

I’ll keep you posted about all this very interesting process.
Under my point of view, the fact that SFBC puts order in the Swiss Foreign Exchange business should be considered as a very good news for all the community, but we must remain alert over the whole process.
Francesc

So it could be that by the end of the year Switzerland will have instituted forex regulation at the retail level and the industry will not have to suffer any more Tradex Swiss AG style shenanigans.

 

[forex scholar]

PFG Buys ANTC

The great consolidation has begun. A few days ago PFG purchased Dead Pool Member American National Trading Corporation. Expect more of these types of purchases in the months ahead as the FX world contintues to evolve in light of the proposed capital requirement increase:

August 23, 2007
Peregrine Financial Group, Inc. (PFG) today announced it is purchasing the assets of American National Trading Corporation (ANTC), which is headquartered in Los Angeles, CA. ANTC is a successful FCM which conducts business in futures, foreign exchange, and managed accounts.

PFG will transfer ANTC customer accounts as quickly as possible.

"PFG and ANTC are joining forces to better serve ANTC’s customers," said PFG Chairman and Chief Executive Officer Russell R. Wasendorf, Sr. "There are so many synergies, and we believe there will be significant benefits to ANTC customers including:


Ability to utilize PFG’s proprietary online trading system, BEST Direct™
The opportunity to use multiple electronic trading platforms
Unique and additional suite of managed futures and forex product offerings
Auto trading systems and other exclusive electronic capabilities for clients."
PFG, one of the largest non-clearing U.S. FCMs, was registered in 1990 and has headquarters in Chicago, IL with customers, affiliates and brokerage offices in more than 80 countries. It has experienced rapid expansion in the past several years through organic growth as well as through strategic acquisitions.

ANTC was founded in 1988. It is led by Chairman Don Varden and President Guy Zummo in Los Angeles, CA.

 

[PeterPG]

How will this swiss regulation affect brokers? I used to have an account with dukascopy.com. I know they are swiss.

 

[forex scholar]

How will this swiss regulation affect brokers? I used to have an account with dukascopy.com. I know they are swiss.

That's a good question Peter. I would guess that DukasCopy would have to get a license from the SBC. But it isn't clear right now.

 

[forex scholar]

Breaking News: RFXT about to Merge?

Well it's clear that the NFA proposal is having an impact in the industry already. For the second time in a week a smaller firm in the Dead Pool has announced merger plans. They wouldn't be doing this if they had the capital to stay in business on their own. This shows you how serious an issue this is. The pressure is being wratched up and the time is fast approaching when those firms below $5 million will have to either join the borg, or die.

Royal Forex Trading LLC. Future Plans

Dear Valued Client,

I am pleased to announce that there has been a very big development for Royal Forex Trading. Before that, I wish to bring to your attention the minimum adjusted net capital requirement proposed by the National Futures Association (NFA). The NFA recently circulated a proposal calling all the FCM's to adjust their minimum net capital requirement from $1 million to $5 million to avoid risks to the customers.

Royal Forex Trading fielded many inquiries for several days and we addressed the issue in our last corporate newsletter. We believe the NFA is taking appropriate measures if they decide to increase the net capital limit for FCMs. Bottom line; this eliminates many inexperienced brokers.

RFXT’s management has been in the industry for many years and we believe we have adequate resources as well as a full fledged backup plan.

In the midst of all this, we have been approached by several companies inviting us to form a partnership. After further due diligence, we are very close to striking a deal with a company whose name cannot be mentioned at this juncture. This entity has an 8 year track record and does not hold a single complaint with the NFA. Their net capital is well over $5 million and they are licensed to do business in many continents.

In the past few weeks, we have been holding several conferences and meetings to finalize the deal. Upon completion of the deal, the following will occur:

Ø Royal Forex Trading will join as a division of a much larger entity.

Ø Royal Forex Trading will officially re-locate to Wall Street, the Hub of major financial institutions.

Ø Royal Forex Trading will retain its Service Desk.

Ø Royal Forex Trading will in the very near future be providing various other products like including Crude, Gold and Silver CFD’s, Currency Options as well as many other new and exciting products.

Ø Royal Forex Trading will be opening branches around the world.

Ø Royal Forex Trading will continue to provide superior execution and excellent customer support.

Ø Royal Forex Trading will be developing an Institutional Desk.

In the end, you as a client will benefit immensely from this merger and that is what we have always wanted; world class service for our clients.

I thank you from the bottom of my heart for all the trust you have put in us and I appreciate the excellent feedbacks we received during this "critical" phase. As we promised, our main goal and mission is and will always be to satisfy our clients beyond expectation.

Thank you
--

Rayan Elannan

President & Co-founder

Royal Forex Trading LLC

 

[forex scholar]

FXCM Comments on NFA Proposal

Meanwhile...

The rest of the industry is moving on to address the capital requirement issue. It's been commented on in the media, it's been commented on by numerous firms, it has spurred two mergers already. This issue is not going away and I'm glad to see a lot of the major FX firms going on the record as supporting this proposal. And this statement by FXCM is the strongest of any firm to date: http://www.forexfactory.com/news.php?do=news&id=44513#post1563220

Dear Client,

The Forex industry could be in for a major structural change — soon.

This change has the potential to benefit Forex Capital Markets, LLC (“FXCM”); however, we believe many forex brokers may not survive.

Our industry’s regulating agency, the National Futures Association (“NFA”), has proposed new financial requirements for every Forex Dealer Member (“FDM”). Spelled out in their “Request for Comments on Forex Proposals,” dated June 19, 2007, the NFA’s proposed requirements call for the following:

• All FDMs must maintain at all times a net worth of $5 million;

• Larger FDMs, particularly those that have a dealing desk, could potentially face net excess capital requirements significantly higher than the minimum under the proposed new rules;

• Where appropriate, the NFA may require an FDM’s annual financial statement to be certified by an independent public accountant.
FXCM’s current financial situation well exceeds NFA’s proposed requirements.

As of June 30, 2007, FXCM has over $44 million in adjusted net capital, and for the last six years we have had our financial statements audited by an independent, certified public accounting firm.

We believe the NFA is proposing these requirements because of the troubling number of insolvencies and near-insolvencies that have recently plagued the forex industry. According to the NFA:

• In 2003, a Forex Dealer Member misappropriated almost $2 million in customer funds, driving the company into bankruptcy. (The CFTC is currently attempting to salvage some of the customers' funds.)

• Since March of this year, eight different FDMs have fallen under the “early warning” requirement of $1.5 million.

• More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million.

Industry-wide, there is now concern that some Forex Dealer Members may be unable to meet their financial obligations to customers in the event the increased capital requirements take effect. A review of the current net capital positions of the 43 Forex Dealer Members available on the following CFTC web page clearly demonstrates that this concern is justified. View CFTC Web Page

As you can see from the financial data compiled by the CFTC, FXCM reports an adjusted net capital of over $44 million—far greater than the proposed financial requirement. Based on the most current available CFTC financial data, at least 22 FDMs would not be able to meet the new $5 million minimum net capital requirement. These firms are currently reporting net capital levels below $5 million. If the new capital level is imposed, these firms will either have to obtain more capital or close down. Because larger brokers may also face higher capital requirements, FXCM believes that several of these larger firms may also be unable to meet the new requirements, even though they presently have in excess of $5 million in adjusted net capital.

In the event that some of these firms close down—or worse, are shut down by the NFA—we are concerned that customer funds, or at least their timely and orderly repayment, could be jeopardized.

We realize that many forex traders have accounts with multiple forex brokers. That is why we advise you to make sure all your trading accounts are held at firms that are adequately capitalized.

If you have an account with a possibly endangered firm, we believe, depending on when the NFA proposal takes effect, that the time may be fast approaching to consider moving those funds while the opportunity still exists.

Our industry is changing, and the new proposed regulations are intended to put every FDM, and the industry itself, on a more secure financial footing. We welcome the NFA’s proposed changes because the effect will ultimately lead to clients trading through regulated brokers that are better capitalized or have access to greater financial resources.

Please contact us if you have any questions regarding these changes.

We look forward to serving you.

Best regards,
Sales & Client Services
Forex Capital Markets, LLC
Financial Square
32 Old Slip, 10th Floor
New York , NY 10005
1-888-50-FOREX (36739)
[email protected]
www.fxcm.com

 

[forex scholar]

Is Your Forex Dealer going to go out of Business?

That is the title of an article by John Jagerson over at PFXglobal:
http://www.pfxglobal.com/index.php?o...9&Item id=116

The retail forex business is young and relatively unregulated but that won't last. I was surprised that the regulators have not moved faster in the U.S. when the Refco disaster occurred a few years ago but we are starting to see some action. What's coming down the pipeline might affect your dealer so do your homework and check them out.

Because many forex dealers are headquartered in the U.S. they are subject to the NFA and the CFTC. Although registration requirements for FCMs (Futures Commission Merchants) have been loose in the past, they are tightening fast. There are two big changes coming down the pipe. The one I think retail traders should be aware of is the change to the net capitalization requirement. There is a minimum amount of cash (outside of customer accounts) that an FCM has to have to stay in business. That minimum used to be $250,000 then was recently raised to $1,000,000 and it is now going to be raised to $5,000,000 in the very near term. Did you know that if you are working with a dealer in the U.S. you can find out how much net capital they have? Just go the the CFTC's website and look up their financial data for FCMs. In fact, if you google "CFTC" it will give you a link right to the spreadsheet you want to look at. There is a bunch of other interesting goodies in that spreadsheet as well.

The bottom line is that you should know whether your dealer can meet those requirements because if they can't your account could be tied up while they shut down their operations or raise capital. I realize most of us are working with large dealers but smaller boutique firms have a certain appeal and service levels that attracts a lot of traders. Just make sure you are not working with someone that is too small.

Couldn't have said it better myself...

 

[forex scholar]

Vindication

Many forum users have been asking for a specific link to the National Futures Association website so that they can read the proposal for themselves and hear it from the regulators themselves. Well, here it is:

http://www.nfa.futures.org/news/newsRuleSubLetter.asp?ArticleID=1942

As you can see the National Futures Association has spelled out clearly why they wish to raise the minimum capital requirement to $5 million. They apparently mailed out the formal proposal to the CFTC by Federal Express on August 17, 2007. So it looks like the NFA has fully signed off on the proposal. Now all that is required is the CFTC's approval.

I would strongly encourage everyone to read through the NFA's reasoning for increasing the minimum capital requirement at this link here:
http://www.nfa.futures.org/news/newsProposedRule.asp?ArticleID=1941

Everyone will have their own quotes they will highlight. Here are the ones I found most interesting:

"NFA received sixteen comments regarding the proposal. Eight commenters supported the increased capital requirement and eight opposed it."

"The comment letters that opposed the proposal noted that it will likely eliminate a number of the smaller FDMs. These smaller FDMs will be, obviously, those with less capital. The comment letters in opposition also noted that more capital does not necessarily mean that an FDM is better able to support and properly operate its forex activities. While more capital does not necessarily correlate to "better" FDMs, more capital does mean that they will have, at a minimum, a greater financial stake in running their forex businesses."

"One comment letter also noted that an FDM's risk-management and operational internal controls are more important than the amount of capital an FDM has. NFA agrees that an FDM's internal controls are important and, under separate cover, NFA is submitting for Commission approval a new rule to ensure that FDMs have proper internal controls."

"Several FDMs pointed to the recent MRAs and receivership proceedings as evidence that the current regulations are working. Regulating solely by enforcement proceedings is not the best way to protect customers, however. One of these FDMs claims that staff was unfair in its characterization of the problem with FDMs and forex. Specifically, this FDM pointed out that the number of bankruptcies involving traditional FCMs and FDMs is the same, with two of each.5 What this FDM does not recognize, however, is that the two traditional FCM bankruptcies occurred over a seventeen-year history of regulation, while those for FDMs has occurred in only a little more than seven years. Moreover, the traditional FCM population has average around 250 while the FDM population has averaged around 40."

All those critics who've been saying how "alarmist and irresponsible" my postings are now owe me an apology. The NFA itself is saying that the smaller firms opposed to the measure were telling the NFA the proposal could possibly eliminate themselves! That's right, some of the smaller firms in the Dead Pool we're telling regulators "you know this proposal could put us out of business." Yet when I say the same thing to the trading public the call goes out I'm "scare mongering." I'd love to know which firms opposed the rule and why they did. Wouldn't it be amusing to know which firms are right now telling their customers "nothing to worry about this rule won't have any effect on us" while they are pleading with regulators "please don't pass this or we could be forced to go out of business!"

In any case the NFA has apparently brushed aside the dissenters. They have officially put the rule on the table and all it will now take is the CFTC's signature. Apologies will be accepted in the order they are received

 

[ampro]

All those critics who've been saying how "alarmist and irresponsible" my postings are now owe me an apology.

Apologies will be accepted in the order they are received

You're a real funny guy.

Newcomers to trading in general & Foreign Exchange specifically, might have been forgiven for assuming that the nitty gritty of all your many posts on this subject, were aimed primarily at account protection. Ensuring that the firm you handed your dollars to, were capable & sufficiently (financially) fit enough to operate & offer a consistently satisfactory service. In other words, affording confidence to trade with a degree of safety.

The first post on this (& all the other million outlets you’ve cut & pasted to) forum threw up a list of 2 categories. The first highlighted a bunch of supposed adequately capitalized shops under the title: Healthy Forex Firms, the other a whole sack of poor creatures lining up waiting for the abattoir.

Now I realize you’re directing your stories at those firms operating in the loosely regulated spot market, but would you be so kind as to point me to the post(s) on here in which you also mentioned the alternative of exploring & trading via the Currency Futures Exchange? I don’t think I need point out the features & benefits etc, as most folks have got a handle on that.

I mean, you obviously enjoy tapping your fingers against little square keys & all, so I guess it wouldn’t have added too much time to your schedule to maybe include a link or two in there someplace, directing folks to the relevant web pages? Just so they could run thru the numbers & compare notes.

It just appears to those fresh into the business, who maybe don’t have a handle on the whole picture, that there were 2 choices, & 2 choices only?

I note you kept everyone duly informed of events across the trading fraternity, yet (according a couple colleagues) you refrained from updating those good folks on Phil Davis forum over at NDD.

http://nondealingdesk.com/

Why was that? Those guy’s not worthy of receiving your regular bullets?

I also hear that when you began taking a little heat on a couple forums, you called in the cavalry (David Waring?)

Strange isn’t it, that the largest muscle in your “Healthy Forex Firms” list should send one of it’s head honcho’s out, armed with his shield to add back up? Hmmmm, very strange indeed! Their e-mail to all concerned couldn’t possibly be interpreted as a completely coincidental, but crude recruitment campaign could it? Nah, surely not!

Funny how certain events always appear to slot nicely into place though huh?

Keep up the stellar work!

 

[ampro]

Oh, and while you’re busy high tailing it around the cyber world preaching all your well intentioned psalms, how bout standing still for a second or two & getting a handle on some perspective regards all this noise.

All those shops you got listed on the first post of this thread, the good guys as well as the bad guys, are nothing more than ‘hobby clubs’.

Instead of shelling out on fishing equipment, auto racing or maybe taking up flying or something, folks open up a forex account & dump a few g’s in it to enjoy their hobby.

Or at least they should be (only depositing sufficient to work their hobby), wouldn’t you agree? So, all in all, it’s not really the end of civilization as we know it, if one or two of these hobby shops slip off their pedestal. Folks aren't gonna have to get out their begging bowls & go sit on the street, right?

Over time, if the hobby happens to eventually turn a profit & folks get a feel & flair for this game, then maybe things begin to take on a more serious slant. That would be the time to begin exploring alternative (& professional) means of operating this hobby cum secondary income stream, yeah?

But essentially, these firms are a feeder facility for accessing this pleasure. Cheap, plain, relatively uncomplicated vehicles for accommodating the desire.

As with any hobby, the dollars outlaid aren’t really given a second thought. They’re funds, which have been allocated for that sole purpose, & most hobbies are black holes. They don’t often return your dollars to you – that’s why they’re deemed as hobbies!

You seem to imply that folks are emptying their pockets & hocking their houses into these shops with the sole intention of earning a regular wage?! If you are, then you gotta be kidding me right?

I mean, no one in their right minds will use these turkey pens as a serious conduit for regular income stream. That would be too ludicrous to imagine.

And if they are, then they definitely deserve all that’s coming to them, given the plethora of available information circulating out there.

So what’s all the fuss about?

Professionals don’t give a s*** what’s going on with these guy’s, & the hobbyists are maybe considering whether they ought to pass their accounts across to another shop or maybe jump ship & go play at the CME.

But whichever choice materializes, it shouldn’t really be stressing anyone out, apart from those insane enough to kid themselves that any of those 3rd & 4th grade hobby shops are their routes to a regular business/income stream.

Get a grip man! Chill out & go drink some beer!

 

[forex scholar]

Get a grip man! Chill out & go drink some beer!

That about sums up the seriousness of your two posts.

 

[ampro]

Regardless of whether you think my comments are serious or not, this whole hullabaloo is comical.

Most folks who have browsed the appropriate threads across the trading bb network during the past few yrs will know the score regards these retail con artists.

And those possessing more than half a brain cell will not be conducting business with them at all, or at the very least, be treating them as a springboard to alternative opportunities.

Sure, $2,000 or $3,000 of play money in order to test out one or two strategies or systems, whilst gaining a little front-end psychological experience by placing hard money on the line is about all they’re fit for.

Those who (like I said prev) begin to experience a degree of success & nurture a positive track record, will gradually extract their profits from these merchants & put the funds back in their savings accounts until they’re playing 100% with the broker’s money.

Those guy’s definitely aren’t going to be unduly concerned with all this tub-thumping. And I seriously doubt those said same players with more than half a brain cell, would deposit one sold cent with any of the jokers on your “threatened list”

The few who actually migrate to taking their initial hobby more seriously & maybe set themselves up to give this business a real go, will be long gone from the likes of FXCM, Gain, Oanda & the rest of the low league rabble.

And believe it or not, there actually are decent alternatives out there to set your stall by. Plus they’re available without breaking the bank!

This storm, which is being kicked up out there, is generating wonderful free advertising for those jerks over at FXCM & the rest. They must be doubling up with stomach cramps with all the chuckling & guffawing going on in the various boardrooms.

And really, aren’t the only folks crapping their pants & mopping their brows on the back of all your missives, those who would very, very quickly become devoured by the savvy players anyway?

I’m not suggesting the retail spot environment isn’t long overdue a financial health check, but dumping a few under-capped sharp operators in the trash-can doesn’t mean those remaining are worthy of praise either!

 

[forex scholar]

On Tap for the Next Two Weeks

With the NFA officially hiking the minimum capital requirement to $5 million (http://www.nfa.futures.org/news/new...?ArticleID=1942) all eyes are now on the CFTC. Look for two things:

1) Some kind of formal statement by either the CFTC or the NFA in which CFTC signs off on the NFA proposal (or the unlikely prospect of the CFTC rejecting it.)
2) The new updated CFTC Adjusted Net Capital Report which will be published here: http://www.cftc.gov/marketreports/financialdataforfcms/index.htm

The next updated adjusted net capital report will be particularly revealing. All the firms on this report will have had several months since the proposal was issued to start increasing their reported net capital. While no firm is required to hike their capital yet it will be very telling to see which firms have begun to prepare for the inevitable and which firms continue to hold their cards close to their vest. At this point any firm that isn’t ponying up the dough to capitalize themselves on these reports is really begging the question: is this firm destined to be strapped into the forex dealer electric chair? Or will they get a stay of execution?

My advice to the firms in the Dead Pool is simple: put up the money now and save everyone the trouble of guessing whether or not you will be here a few months from now. If your company capital is tied up and not available at the moment, well, tell the public what it is tied up in and specifically why you are not reporting it. Customers who open accounts with forex brokers are required to detail their own private financial holdings. In light of the seriousness of the capitalization issue, I think forex brokers should be held to the same standard.

 

[forex scholar]

Currency Firms in Crisis

In the last few weeks I have reported on two poorly capitalized/unregulated forex broker dealers who are currently holding customer funds hostage. Well, both firms appear to be in complete chaos judging from what’s going around on various bulletin boards.

We’ll start with NFA regulated One World Capital. Their troubles started earlier this year when the NFA inspected their books and discovered they were not meeting their financial requirements. The NFA said at the time, “One World lacked an understanding of, or was inattentive to, regulatory requirements and was ill prepared to accept customer business as either an FDM or an FCM. The firm had not established adequate systems to enable it to handle customer funds or comply with customer reporting requirements."
http://www.nfa.futures.org/basicnet/...17&contrib=NFA

Since then One World has been losing staff and appears to be experiencing a severe cash crunch which has resulted in the halting of customer withdrawals, as detailed here:
http://www.goldenmoneytree.com/foru...r=asc&start=100

At the same time that my Inbox has been piling up with messages from distraught One World Capital customers now a report has come out at Forex Factory that One World is revoking a whole series of rollover interest payments on GBP/JPY trades as well:
http://www.forexfactory.com/showthr...700#post1576700

It came to my attention that 1World has resorted to dirty tactics in withholding profits/money from clients.

Sometime ago, 1World gave $40 or so per day in Swaps for LONG GBPJPY. Traders who made money on this have their profits and money withheld (indefinitely?). I also noticed about 6 weeks ago that swap rate for GBPCHF was zero for both long and short. This was already reported at StrategyBuilderFX forum. Was these swap rate an error or a deliberate Trap? After reading the horror stories, I suspect its a trap meant to screw traders.

How does this become a dirty ploy?

Assume you traded GBPJPY, made money in the process with 1World. Later they come to you saying, "Hey Mr Trader, you made money from a wrong swap rates and we are disqualifying them all". This includes the swaps you collected as well as the PIPS you made and to include ALL OTHER TRADES made after these trades; if these GBPJPY trades were not made, you wont have money to make further trades.". Remember, GBPJPY was soaring in June/July and these traders made money from it by going Long GBPJPY..

There are two possibilities being played here:
1. 1World did not hedge your trades with an upper tier broker (1World traded vs you); you made money and they now rescind those trades.
2. 1World hedged your trades with an upper tier broker. However, 1world now claims YOUR profits.
You dont earn swaps. you dont earn Pips. End of Story.
The trap is for traders to make positions on those pairs; if you did and after further trading (even with other pairs) made money, they will go to your account and "cancel" your profits claiming, these could not take place so there is no profit made.

Meanwhile, in Switzerland…

Tradex Swiss Ag is still at war with itself apparently. The SFBC is fighting with the Tradex office in Boston over who has the right to talk to the customers of Tradex Swiss AG. Meanwhile the customers, who just want their money back, have no choice but to watch this farce from the sidelines. I have posted the two dueling press releases below. UN-BELIEVALBLE:

From: Craig Karlis
Service address: 100 Franklin Street
Boston
Massachusetts
02110

To: All clients of Tradex Swiss AG

Date: 29 August 2007

Dear Clients

Re: "Hostile take-over" of Tradex Swiss AG (Boston office)

As most of you may be aware by now, Tradex Swiss AG is currently being investigated by the Swiss Federal Banking Commission (SFBC). This is not a criminal investigation but was ordered to determine whether Tradex Swiss AG needs a banking license in Switzerland to operate their business and structured products (please see the attached documents from the investigating trustees from Switzerland).

As a precautionary measure, your funds in the Bank of America account of Tradex were frozen on 3 July 2007, by the Swiss authorities in an effort to protect your interests. If protecting your money constitutes a "hostile take-over" as described in the e-mail from the Swiss Management, headed by Mr Nic M Jansen van Rensburg before the Swiss authorities took control of the company, then we are guilty. Since the "freeze" of your money the former management of the Boston office has initiated a suit in a Massachusetts court and obtained an injunction to protect your money - resulting in an injunction that prevents your funds being moved to Switzerland, as well as preventing Bank of America from dispensing any funds without the knowledge of all the parties involved. All legal expenses are solely financed by the previous management of the Boston office while the management in Switzerland has not paid its employees or other operating expenses (infra-structure) of the Boston office since June.

There was no "hostile take-over" by anyone in Boston and there are absolutely no direct or indirect relationship between Tradex Swiss AG and Boston Trading and Research LLC. The Swiss trustees were the ones who originally froze the account. I and the rest of the Boston management took the actions in court solely because they refused to inform any one in Boston as to the status of the accounts, and in fact would not communicate with us in any way. We have taken steps at our expense, to protect your interests and resolve your inconvenience, by getting your funds released and wired to you without delay.

To satisfy yourself about the true facts of the situation, you may consider obtaining concrete evidence/proof of the following from the Swiss Management:
• their efforts since 5 July 2007 to secure and get your money released,
• their response to your withdrawal request;
• the identity of their traders participating in their "capital guaranteed program";
• the opinion of the Swiss Federal Banking Commissions and other regulatory bodies about any guarantee of client funds, especially if it pertains to spot forex transactions (part of why the investigation was sanctioned);
• payroll details for the Boston office employees for July and August;

From myself and the former management of the Boston office of Tradex we can assure you of one thing only: We are doing everything within our power and the law to secure your funds in Bank of America and make sure it gets wired directly to you in terms of the Anti-money laundering regulations as soon as unfortunate matter is resolved. We have the "disadvantage" that we all live in Boston and have to make a living here.

From the attached documents it is clear that the Swiss trustees, appointed by the SFBC, are currently in control of Tradex Swiss AG for the duration of their investigation. If you have any queries feel free to contact any of the Swiss trustees at http://www.lawyerlutz.ch/english/kontakt/index.html or call them at Tel +41 44 560 8080 or Fax +41 44 560 8090 or e-mail to Peter Lutz [email protected] ; Romeo Da Rugna [email protected] ; Michael Bopp [email protected] .

Please accept our most sincere apology for the inconvenience cau sed by the continued transgressions of the SFBC prescriptions by the Swiss Management. In our opinion the best course of action would be to let the legal process, set in motion by myself and the Boston management, continue uninterrupted. I undertake to keep you up to date of any new developments or progress concerning our legal process against the Bank of America and Tradex Swiss AG.
Yours Sincerely
Craig Karlis

The SFBC responded in kind:

Memorandum

Mandate: SFBC / Tradex and Swiss Garant
Subject: Further information to clients of Tradex Swiss AG
to: Clients of Tradex Swiss AG / file
from: Dr Peter Lutz and Romeo Da Rugna
Date: 3 September 2007

Dear Madam, dear Sir,
we have informed earlier that the Swiss Federal Banking Commission (SFBC) has opened an investigation on Tradex Swiss AG ("Tradex"). The purpose of such investigation is to verify, whether the company has been conducting financial activities without the necessary homecountry licence. The SFBC terminated the signatory power of the former signatories of Tradex and appointed the undersigned Dr Peter Lutz and Romeo Da Rugna to carry out the investigation on behalf of the SFBC. The SFBC granted Dr Peter Lutz and Romeo Da Rugna the exclusive authority, with sole signatory power, to represent and act on behalf of Tradex.

Further to our former information we can give you the following update about the pending investigation: We are at the moment not in a position to complete our investigation since part of the management of Tradex refuses to cooperate with the undersigned and do not deliver requested information and documents in a complete and timely manner.

A part of the management of Tradex even filed a complaint against Tradex in Boston USA. Tradex therefore had to employ US counsel in order to defend this complaint which is seriously obstructing and delaying the pending investigation.

Without the complete information and documentation about all assets and liabilities of Tradex, we are not able to determine which clients and/or creditors have legitimate claims towards Tradex. Therefore, lacking this information and documentation, we can not find out, and we consequently can not exclude, whether there is any risk of preferential treatment of creditors if now payments are made to individual clients and/or creditors.

Until we do not have a complete overview on all of Tradex' assets and liabilities, we are therefore not in a position to make any transfer to clients and/or creditors of Tradex.

We finally would like to inform that none of the messages which have been sent since 3 July 2007 by the management of Tradex have been authorised by the undersigned. Such messages and information therefore do not reflect the opinion of the undersigned. As soon as the investigation will be completed, you will receive further information.

Yours sincerely
DR PETER LUTZ AND ROMEO DA RUGNA
Investigators appointed by the Swiss Federal Banking Commission

If it is any consolation to the traders stuck in these two firms both the NFA and SFBC are making big changes to try and keep these kinds of things from happening again (NFA by raising capital requirements and SFBC by regulating forex in CHF.) As for everyone else, please conduct your due diligence and avoid poorly capitalized and/or unregulated firms for this is what can happen if you don’t.

 

[atomm]

Just wonder the problem of capitalization did occur at the prime brokers at the institutional level at its infancy stage, as what happens at the retail forex market today. If it did, then the possible consequences can be assumed on the capitalization issue on the retail forex brokers. This may make sense. Otherwise just wait and see what will happen down the road as new regulation comes into enforcement ( if it really happen).

Of course a threshold level of capitalization is good for a solid business ( rule of thumb : the higher the better ), the business practice of a retail forex broker, just like other businesses, shall not be underestimated... At least this is my own concern as a client ( not just a costumer ) of a forex broker.

 

[forex scholar]

CFTC Prosecutes Nations

In July I put out an alert to the FX Community about Dead Pool Member Nations Investments, LLC. Well, shortly there after the NFA went in and closed them down. Now it appears the CFTC has stepped in to collect their pound of flesh. Nations was hauled into court by the scruff of their neck by the Feds and a court receiver has now taken over the defunct firm. Have customers lost money? I'll keep everyone informed.
http://www.cftc.gov/newsroom/enforcementpressreleases/2007/pr5380-07.html

U.S. Commodity Futures Trading Commission Files Action Against Futures Commission Merchant Nations Investments, LLC, for Failure to Maintain the Minimum Amount of Net Capital Required by Federal Law

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of a complaint in the U.S. District Court for the Southern District of Florida against Nations Investments, LLC (Nations) of Fort Lauderdale, Florida, a futures commission merchant (FCM) registered with the CFTC.

The complaint alleges violations of the minimum net capital requirements of the Commodity Exchange Act and Commission regulations. More specifically, according to the CFTC complaint, as of July 21, 2007, and perhaps earlier, Nations’ net capitalization was below the adjusted net capital required by the Act and a Commission regulation. As of July 20, 2007, the complaint charges, Nations’ adjusted net capitalization remained below the required adjusted net capital with Nations’ total liabilities equaling $5 million while its assets were less than $2 million.

On July 30, 2007, the Honorable Marcia G. Cooke, U.S. District Court Judge, issued a restraining order freezing the assets of Nations and prohibiting the defendant from destroying documents or denying CFTC staff access to books and records. The Court also froze the assets of relief defendants Sulaiman “Sal” Husain, a Director, Chief Financial Officer, and principal of Nations, and Sammy Joe Goldman, an owner and former principal of Nations. Husain and Goldman allegedly contributed to the undercapitalization—which ultimately rose to approximately $4.5 million—by withdrawing a total of $1 million from Nations’ accounts.

On August 7, 2007, the court approved the appointing a receiver to marshal the assets of Nations. In the ongoing action, the CFTC seeks an order of permanent injunction against the defendant, monetary penalties, and other relief.

 

[forex scholar]

FX Street Reports - You Decide

FX Street has put together a very comprehensive review of the NFA Capital Requirement Proposal providing a number of links to magazine articles, current net capital numbers and other tidbits. Worth a look here:

http://www.fxstreet.com/fundamental/analysis-reports/special-coverage/2007-08-30.html

 

[forex scholar]

Beware Swiss Brokers

I came across this excellent post about the lack of regulation in Switzerland, as confirmed by Swiss Regulators themselves. Be very wary of doing business with a broker in Switzerland until the market gets regulated over there.

Originally Posted by minter
I requested info regarding a FX Brokerage firm in SWITZERLAND.

The first reply is from SBFC (Swiss Federal Banking Commission) and the second reply is from MLCA (Money Laundering Controlling Authority) .I personally do not feel the SWISS regulators are not as proactive as the US side .What about UK 's FSA ? I will try to find out .

Dear Sir ,

For the time being, financial intermediaries providing foreign exchange trading are not subject to licensing by the SFBC, provided that they exclusively deal in foreign exchange on the spot market. It is however intended to amend the law to the effect that foreign exchange trading becomes a privilege of authorised banks.

Foreign Exchange dealers fall under the scope of the Anti-Money Laundering Act (AMLA). As such, they may be subject - unless they are a member of a recognised self regulatory body - to direct supervision by the AML Control Authority (Anti-Money Laundering Control Authority AMLCA) at the Swiss Federal Finance Administration, Christoffelgasse 5, 3003 Berne, phone +41 31 323 39 94, fax +41 31 323 52 61, www.gwg.admin.ch/e/index.htm. You may check this authority concerning forex brokers in Switzerland.

We hope that we were able to help you further.

Yours sincerely


Secretariat of the
SWISS FEDERAL BANKING COMMISSION


sig. Christina Bürgi sig. Simone Flach
Communication&Media Communication&Media

Schwanengasse 12
P.O. Box
CH-3001 Berne
Phone +41 31 322 60 69
Fax +41 31 322 69 26
mailto:[email protected]
http://www.ebk.admin.ch




CH-3003 Bern, FFA, AMLCA, bdu
By email

[email protected]

Sir ,
Our reference: 10-9/VER2007/wj

Bern, 31 August 2007

Re: List of regulated forex brokers in Switzerland

Dear Sir,

We acknowledge receipt of your inquiry of 30 August 2007 and have to inform you that we cannot supply you with the requested list. Forex companies are not under prudential supervision. No security for deposited funds is therefore given and no supervision of the quality of the services provided takes place.

Yours faithfully,

Anti-Money Laundering Control Authority
Brigitte Dumont Judith Wyss
Adm. Assistant Adm. assistant

 

[forex scholar]

NorthFinance Alert

While I'm on the subject of unregulated foreign firms I think it important that traders be aware of a firm called NorthFinance, which is not in any way regulated. And judging by the embarrassing grammatical errors prominently displayed on their website I'm guessing this is one rinky dink operation: http://www.northfinance.com/eng/forex-broker/

We have been trading on the foreign currency exchange market since 2001, going from strength to strength. North Finance is registered in Belize. Its operate within the financial market in accordance with The Memorandum of Association and Articles of Association, which was given to the company by Belize International Business Companies Act. Our success is attributed to the value we place in our customers and the trust they place in us in return. Foreign currency trading with us is simple, safe and open to every trader and investor. Opening an account is fast and ready to activate within ten minutes from any continent. Open a FOREX account with us today to enjoy the benefits so many have already experienced.

Northfinance is apparently registered in Belize and does its operations out of Cyprus? This bizarre choice of geographic jurisdictions alone should dissuade anyone from seriously considering opening an account with these guys. But if you need something more here are two statements from two government bodies from the two respective jurisdictions Northfinance calls home:

Statement One: From the International Financial Services Commission of Belize
http://www.ifsc.gov.bz/notices.html
International Financial Services Commission,
New Administration Building,
Belmopan,
Belize, C.A.
4 August 2006
WARNING NOTICE
NORTH FINANCE COMPANY LTD
It is notified for general information that NORTH FINANCE COMPANY LTD is not licensed by any competent authority in Belize to engage in foreign exchange transactions, or to engage in any other international financial services.
All persons are asked to take note and exercise caution.

GIAN C. GANDHI
DIRECTOR GENERAL
International Financial Services Commission

Statement Two: from SEC of Cyprus
http://www.naftemporiki.gr/news/story.asp?id=1405795
http://www.forexfactory.com/showpost.php?p=1587012&postcount=1 (Translation of Greek News Story)

With an announcement today, the SEC of Cyprus informed the investing public that North Finance Ltd:

-Has no License from the committee to provide investing services.
-Is not a bank registered in Cyprus, with a license from the Central Bank of Cyprus, permitting to provide investment or similar services.
-Is not established in Cyprus or provide services according to the Articles 24-30 of the law for Investment services companies."


When a government agency warns the trading public “to take note and exercise caution” about a firm it has singled out for being unregulated the trading public should indeed "take note and exercise caution." And while you're at it you should probably double check your neighborhood to see if NorthFinance has opened a new branch office in a van down by the river (

) now that the firm has been called out in Belize, Cyprus and who knows where next...

 

[forex scholar]

Forex Dealer Dead Pool (Version 4.0)

The CFTC has just released the latest Adjusted Net Capital Numbers.
http://www.cftc.gov/marketreports/fi...fcms/index.htm

Now that the NFA has officially raised the minimum capital requirement to $5 million (http://www.nfa.futures.org/news/news...ticleID=194 2) these numbers are more important than ever so pay close attention everyone.

Poorly Capitalized Firms
Advanced Markets ($1,042,000)
American National Trading Corp (Merged with PFG)
Bacera Corporation (Shutdown!)
Cal Financial Corporation (Shutdown!)
Direct Forex ($1,117,000)
Easy Forex ($4,731,000)
E FX Options ($3,342,000)
Forex Club ($3,715,000)
FiniFX (Not Accepting New Customers)
Forward Forex (Shutdown!)
FX Option1 Inc (Shutdown!)
GFS Futures & Forex ($3,259,000)
Hamilton Williams ($1,004,000)
MB Trading ($2,393,000)
Nations Investments (Shutdown!)
One World Capital ($1,078,000)
Performance Capital International (Vanished)
Royal Forex Trading (Merged with IKON)
SNC Investments ($1,130,000)
Solid Gold Financial ($1,955,000)
Spencer Financial (Shutdown!)
Trend Commodities (Shutdown!)
United Global Markets (Shutdown!)
Worldwide Clearing (Shutdown!)
Wall Street Derivatives ($1,220,000)

Unregulated Firms (Buyer Beware)
FXDD (?)
GCI (?)
WestCapFX (?)
ACM (?)
MIG (?)
DukasCopy (?)
GFX Group (Forex.CH) (?)
Crown Forex (?)
Krusty's Currency Trading (?)
Tradex Swiss AG (Shutdown!)
NorthFinance (?)

We have just about reached the time for choosing. The brokers in the Dead Pool have known about the NFA’s plans to increase capital requirements for some time now. And yet most have not made much of an effort to increase their reported adjusted net capital (with the exception of Money Garden who just raised the reported capital to $5 million. As a result they have been removed from the pool.)

That’s a major red flag in my book. As such I will continue my dispatches on the Dead Pool and warn traders to avoid these firms until they show they can meet the new capital requirement passed by the NFA and awaiting approval by the CFTC.

One final note, I have included Swiss brokers in the “Unregulated Firms Buyer Beware” list. I have two words for anyone considering opening an account with an unregulated Swiss broker “Tradex Swiss.” Don’t make the same mistake the poor traders at Tradex Swiss AG made and trade with an unlicensed broker that is unaccountable to anyone because should the firm get into trouble NO ONE is going to help you get your money back.