Proposed NFA Capital Requirement - page 16
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MSNBC Reports on Tradex
The Mainstream Media is starting to pick up on the Tradex Swiss AG debacle that I have been covering the last few weeks. Let this be a warning to anyone trading with an unregulated Swiss Firm what can potentially happen to you.
The Following Swiss Forex Brokers are unregulated just like Tradex Swiss AG
WestCapFX
ACM
MIG
DukasCopy
GFX Group (Forex.CH)
Crown Forex
Currency Trading Firm at Center of Controversy
Currency trading firm at center of controversy - Top Stories - MSNBC.com
A Swiss-owned currency trading shop that was operating out of downtown Boston had its assets frozen by investigators from its home country and also is being investigated by Massachusetts authorities, according to court documents and multiple sources.
Tradex Group LLC was managing at least $5 million for its clients, some of whom have gone to court in a bid to prevent any transfer of funds out of a Bank of America account based in a Boston branch.
Tradex faces problems on both sides of the Atlantic.
While the scope of the Massachusetts investigation is unclear, it is clear from public documents that the operation was running without having registered with the state, according to a spokesman for Secretary of State William F. Galvin.
While failing to register as a securities business, Tradex did file articles of incorporation with the state in 2004. Also in the U.S., the National Futures Association, whose members trade futures including foreign currency, banned Tradex from taking part in trading on behalf of American clients in January.
The NFA alleged in a complaint posted on the group's Web site that Tradex erred by soliciting investments for its Swiss parent company, which was not registered to do business on behalf of U.S. clients.
Additionally, the Swiss Federal Banking Commission, which froze Tradex's assets in July, attributed the action to "licensing issues," according to people close to the situation. Representatives of the association declined to comment for this story.
But court filings by other parties indicate that Tradex's parent and a sister company were not properly registered in Europe.
Officials at Tradex's parent have been quick to distance themselves from the matter. In an e-mail to the Boston Business Journal, Tradex Swiss AG CEO Nicolaas Jansen van Rensburg said the Boston group's problems rest solely on the shoulders of its local employees.
"I wish to point out that Tradex Group LLC is not our company. Tradex Swiss AG was a shareholder in the company," wrote van Rensburg. "Tradex Swiss AG was NOT involved in the running of the business."
Meanwhile, the legal fight over the status of the frozen $5 million is underway.
The former manager of the Boston office, Craig Karlis of Hopkinton, and three investors filed suit last month trying to block any transfer of the money. Karlis said he's owed unspecified back wages.
"Craig Karlis and the other employees took it upon themselves to hire an attorney in an attempt to ensure that their clients' money is protected throughout the Swiss investigation," said Liam Floyd, the attorney representing Karlis and investor George Popescu.
Joshua Cook, attorney for Wei Zheng and Pei Zhen Xin, the other investors involved in the suit, said his clients deposited $200,000 into the account after it was frozen by the Swiss investigators.
He added that he has received inquiries from about another 100 concerned investors.
Cook said his clients sued out of fear that their money will be used to satisfy other creditors' claims.
Cook alleged that many currency traders "fail to adequately disclose the risks" associated with their businesses, but he did not link the broad statement to his clients' case.
A Tradex officer said in an affidavit that "the trading agreements make clear (that) commodities investments are highly risky and highly speculative."
According to court filings, the Swiss investigators argued it was necessary to freeze the Bank of America account to ensure that Tradex's assets are not improperly disbursed. The Swiss regulators said they plan to pay employees back wages once the investigation is complete.
Attorney Evan Fray-Witzer, who is representing the Swiss investigators and Tradex Swiss, did not return calls seeking comment.
On Aug. 16, Judge Alan van Gestel of the business litigation session in Suffolk Superior Court ruled that as the proceedings continue, the Swiss authorities can access all but $500,000 of the money in the now-frozen Bank of America account.
Members of secretary Galvin's staff declined to say what the next step for his office will be.
A spokeswoman from the National Futures Association said any allegations of illegal futures trading would be referred to the U.S. Commodity Futures Trading Commission for investigation.
The commission neither confirms nor denies the existence of investigations on specific firms, agency spokesman Dennis Holden said. He did say the agency has been working to warn potential investors about the dangers of foreign currency futures trading, or "forex," in general.
NFA Bounces the Rubble
The National Futures Association appears to be chucking a couple final spears into the bloated carcasses of two former dead pool brokers (Trend Commodities Limited Partnership and the Bacera Corporation.)
Trend Commodities has been permanently shut down and banned from NFA membership (BASIC Case Summary) while the Bacera Corporation was fined $50,000.
Of interest in the Bacera case was this statement, "The Committee found that Bacera failed to maintain required adjusted net capital, failed to give required notice of being below its minimum net capital requirement, and failed to take required capital charges and maintain accurate records." (National Futures Association | News Center)
Again, it's all about capitalization. Firms that have adequate capital don't run into these kinds of problems. Firms that are poorly capitalized continually run into these kinds of problems and often times go out of business, in some cases taking customers down to the bottom of the ocean with them. It's that simple.
does E FX Options ($3,342,000) = EFX Group - FOREX Trading ??
does E FX Options ($3,342,000) = EFX Group - FOREX Trading ??
I think so.. I think they are an IB for MBTrading.com but I'm not certain.
I think so.. I think they are an IB for MBTrading.com but I'm not certain.
sound funny that their fund is larger than their clearing firm
Closure for RefcoFX
Closure for RefcoFX
At last the customers of RefcoFX are getting their money back. Reports coming in over the wires indicate that customers are getting back roughly 40 cents on the dollar of their original investment. While that's still a very heavy loss to take at least the customers are getting something after two years of watching creditors loot their accounts. Phil Bennett and the rest of the board at Refco should know that there are some rather toasty seats in hell waiting for them upon their arrival.
The end of the RefcoFX nightmare brings with it a clear lesson to always trade with a regulated firm. If a firm isn't licensed, then stay away from it. Far, far away from it. And also be sure the firm you are trading with is well capitalized. The case of Nations, which was an undercapitalized broker on the dead pool is further evidence of that. And sadly enough, now Nations begins the journey that RefcoFX just ended.
Closure for RefcoFX
At last the customers of RefcoFX are getting their money back. Reports coming in over the wires indicate that customers are getting back roughly 40 cents on the dollar of their original investment. While that's still a very heavy loss to take at least the customers are getting something after two years of watching creditors loot their accounts. Phil Bennett and the rest of the board at Refco should know that there are some rather toasty seats in hell waiting for them upon their arrival.
The end of the RefcoFX nightmare brings with it a clear lesson to always trade with a regulated firm. If a firm isn't licensed, then stay away from it. Far, far away from it. And also be sure the firm you are trading with is well capitalized. The case of Nations, which was an undercapitalized broker on the dead pool is further evidence of that. And sadly enough, now Nations begins the journey that RefcoFX just ended.A big loss... but better than nothing I guess.. I totally agree with you on regulation.. I prefer UK Regulated brokers, rather than the US..
NFA Drops $20 Million Bombshell
The President of the National Futures Association, Dan Roth, dropped a 50 megaton bomb on the forex industry yesterday. In testimony before the Congress the NFA CEO requested that the Government increase capital requirements to TWENTY MILLION DOLLARS.
Here is what he is said in his testimony:
National Futures Association | News Center
The second trait that marks the problem firms in retail forex is that most, though not all, have been thinly capitalized. Congress long ago recognized that acting as a dealer involves greater risk than acting as an agent in futures trading, the way a traditional FCM does. That is why Congress in 1978 imposed a $5 million net worth requirement for firms granting dealer options and why the CFTC created a $2.5 million capital requirement for leverage transaction merchants in 1984. Congress should amend Section 2(c) of the Act to require FCMs acting as counterparties to retail forex transactions to maintain minimum capital of at least $20 million. NFA has raised the capital requirements for forex dealers several times but this congressional action could ensure that firms can meet their obligations to their customers and have a significant financial stake in their business.
Wow. If you thought it would be hard for poorly capitalized firms to raise a couple million dollars just wait until they have to raise $20 million. There is simply no way most of these little firms are going to be able to do that. In fact, medium sized firms are going to be hard pressed to do that.
It is starting to become crystal clear that the only firms that are going to survive the coming NFA purge are the biggest, most well capitalized firms in the business. That is why Oanda went out and got $100 million in funding and Interbank got $30 million. The serious industry players know what's going on. So should the trading public. If ever there were a time to beware investing in poorly capitalized firms now is the time.
After all, if the NFA has no confidence in the stability of "thinly capitalized" firms why should the trading public?