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CTA receives NFA BCC complaint

Felix Shipkevich — Wed, 19 Oct 2011 20:39:39 +0000

The NFA’s Business Conduct Committee has issued a complaint against Commodity Trading Advisor (“CTA”) Golden Forex. According to the NFA, Golden Forex submitted misleading information to the Association about its listed Associated Person (“AP”), Kathie Bui.

Golden Forex is a California based CTA, and a member of the NFA since May 2009. The company is owned by Linh Ngoc Nguyen, and Nguyen is listed as the firm’s principal, but not its AP. The only person ever listed as the firm’s AP is Kathie Bui. The complaint alleges that in June 2009, Bui left Golden Forex, and requested that Nguyen remove her listing as the AP in NFA records. Nguyen, as the only person with access to the company’s NFA Online Registration System account, was responsible for doing so. After repeated requests, Nguyen indicated to Bui that her name had been removed from the CTA’s AP list.

However, the NFA claims that in June 2011 Bui learned that she was in fact listed listed as Golden Forex’s AP. She again contacted Nguyen, who told her the firm would have to withdraw from the NFA if she was removed, and offered to pay her if she would remain registered. Bui refused, and contacted the NFA. The NFA then conducted an audit, which confirmed Bui’s story.

Golden Forex withdrew its NFA membership in September 2011. Nguyen has the opportunity to submit an answer to the complaint. If the committee finds against Nguyen, the defendant may be censured, fined, or permanently barred from NFA membership. So far, no other allegations have been made against the CTA.

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NFA hits North Carolina CTAs with enforcement action

Elan Mendel — Wed, 22 Jun 2011 21:29:28 +0000

NFA hits North Carolina CTAs with enforcement action

The NFA announced today that is has taken emergency enforcement action against D2W Capital Management LLC (D2W), Prestige Capital Advisors LLC (Prestige), as well as their principal, Toby Hunter. The North Carolina-based CTAs and Hunter allegedly mislead customers, used similarly false and misleading information to solicit new customers, and did not provide customers with NFA disclosure documents.

During a routine NFA exam of the CTAs, Hunter was unwilling or unable to provide current books and records to prove that the Prestige Fund had the three accounts, nor to account for large withdrawals from the Fund’s brokerage account. The NFA notice notes that “even worse than the fund’s significant loss of assets, however, is the fact the NFA believes Prestige is lying to fund participants regarding the value of their investments, and that participants have no indication the fund is nearly exhausted.” Allegedly, D2W’s accounts are similarly haphazard.

The Member Responsibility Action(“MRA”) and Associate Responsibility Action (“ARA”) prevents the defendants from soliciting or accepting funds from customers, investors, managed accounts, pools, or other vehicles, or placing any trades. They are also prohibited from disbursing or transferring any funds without NFA approval. The actions will remain in place until the CTAs and Hunter can prove they are in compliance with NFA regulations.

NFA to CPOs: Don’t forget assessment fees

Felix Shipkevich — Wed, 22 Jun 2011 00:41:35 +0000

NFA to CPOs: Don’t forget assessment fees

The NFA issued a notice today reminding member Commodity Pool Operators, or CPOs, that they are still responsible for paying NFA assessment fees. In the course of routine examinations, NFA staff found that exchange-member CPOs were failing to properly remit these fees. Though initially only for non-exchange members, in August 2004, the NFA board adopted an amendment extending that fee to NFA member CPOs.

The NFA adopted this amendment in recognition of the “significant amount of resources” expended to regulate exchange-member CPOs as the NFA decided it was unfair to place the entirety of the financial burden on non-exchange member CPOs.

NFA orders California Introducing Broker barred from registration permanently

Elan Mendel — Fri, 17 Jun 2011 22:27:50 +0000

NFA orders California Introducing Broker barred from registration permanently

The NFA announced today that is has issued a Business Conduct Committee, or BCC, action permanently barring Roslex Corporation, an introducing broker, or IB, from ever registering with the Association again. Additionally, one of the firm’s principles, Gabriel A. Robles, is barred from membership for four years, and must pay a hefty fine if he ever elects to rejoin. The California-based IB allegedly engaged in abusive trading practices. Roslex and Robles elected to settle out of court. They have neither confirmed nor denied the charges.

On May 11, the NFA filed a compliant against Introducing Broker Roslex, Robles, and three others (Julio C. Aquino, Erick E. Ware, and Philp A. Day). The brief claimed that the Introducing Broker, its princpals (Robles and Aquino), and its APs (Ware and Day) were using exploitative trading methods. Specifically, on the designated accounts that they had power of attorney (POA) over, the four would make excessive numbers of trades in order to maximize their commissions. Often, these trades were not only unnecessary but unwise, causing some account-holders to lose their entire initial investment. The brief also contends that record-keeping standards were inadequate, and that it failed to maintain sufficient capital in 2010. Even so, Robles withdrew capital from the IB to pay his personal credit card. For all of this this, the defendants were accused of failing to “uphold just and equitable principles of trade” and “observe high standards of commercial honor.”

As an Introducing Broker, Roslex is liable for the actions of its employees, especially its association persons. Roslex and Robles (the owner as well as a principle) have already address the complaint by settling. However, Aquino, Ware, and Day have yet to make a statement or give any other indication of how they intent to respond to the NFA’s brief.

CFTC finalizes new CPO exemptions, delegates to NFA

Felix Shipkevich — Wed, 18 May 2011 19:59:11 +0000

CFTC finalizes new CPO exemptions, delegates to NFA

The CFTC published a final rule on compliance relief from certain recordkeeping and reporting requirements for specific types of commodity pool operators (CPOs). Similar exemptions were previously made on a case-by-case basis by the CFTC. The new rule exempts CPOs that are listed and traded on national securities exchanges (i.e. Commodity Exchange Traded Funds or ETFs) from Disclosure Document delivery and acknowledgement, and Account Statement delivery. They are also not required to keep books and records at their main business address. Furthermore, independent directors or trustees of Commodity ETFs are exempt from registration as long as they are only serving as a part of the audit committee required for actively-managed public companies under Sarbanes-Oxley (and therefore under SEC regulation). The CFTC has also issued a notice authorizing the NFA to process these exemptions. To obtain relief, Commodity ETFs must file specific notices with the NFA.

To read the proposed rule, click here. To read the authorization, click here.

NFA takes enforcement action against Paron Capital Management, LLC

Elan Mendel — Fri, 01 Apr 2011 17:26:33 +0000

NFA takes enforcement action against Paron Capital Management, LLC

Update: The NFA has withdrawn its notice of intent to revoke registration of Paron Capital after Timothy D. Lyons was withdrawn as a principal. Crombie, who neither confirms nor denies the allegations, has also reached a settlement with the NFA.

National Futures Association (NFA) announced today that it has taken an emergency enforcement action against Paron Capital Management, LLC (Paron Capital Management) and its principal, James D. Crombie. Paron Capital Management is a Commodity Trading Advisor located in Tiburon, California. Based on NFA’s investigation, it appears that Paron Capital Management and Crombie solicited customers using promotional material that contained false and misleading performance information, and gave counterfeit brokerage statements to NFA as support for the performance information in the firm’s promotional material. Additionally, it appears that Paron Capital Management and Crombie provided NFA with false and misleading information about loans they have received and lawsuits filed against them.

Effective immediately, the Member Responsibility Action (MRA) and the Associated Responsibility Action (ARA) prohibit Paron Capital Management and Crombie from soliciting or accepting any funds from customers or investors, soliciting investments for any commodity pools or other investment vehicles, or placing any trades on behalf of customers or commodity pools. Paron Capital Management and Crombie are also prohibited from disbursing or transferring of any funds of customers, investors or commodity pools and from any bank accounts or brokerage accounts for which they exercise control without prior NFA approval.

NFA proposes amendments to the Interpretive Notice regarding Forex Transactions

Felix Shipkevich — Fri, 04 Dec 2009 02:09:09 +0000

NFA proposes amendments to the Interpretive Notice regarding Forex Transactions

NFA Bylaw 1301(e) requires Forex Dealer Members to pay annual dues that are
graduated according to the firm’s gross annual revenue from customers (e.g.,
commissions, mark-ups, mark-downs) for its forex activities. Profits and losses
from proprietary trades are not to be included. To calculate dues:
• Start with the FCM dues imposed by NFA Bylaw 1301(b)(ii);
• Add $44,375 if the Forex Dealer Member’s gross annual revenue from
forex transactions is $500,000 or less;
• Add $69,375 if the Forex Dealer Member’s gross annual revenue from
forex transactions is more than $500,000, but not more than $2,000,000;
• Add $94,375 if the Forex Dealer Member’s gross annual revenue from
forex transactions is more than $2,000,000, but not more than $5,000,000;
or
• Add $119,375 if the Forex Dealer Member’s gross annual revenue from
these activities is more than $5,000,000.

These dues apply when the Forex Dealer Member offers to be a counterparty to
a forex transaction or accepts a forex trade (whichever is earlier), and NFA will
send the Member an invoice for the minimum dues ($50,000 or $45,875) minus
any amount already paid for that membership year. Thereafter, the dues will be
assessed on the firm’s membership renewal date and will be based on the Forex
Dealer Member’s latest certified financial statement.

(proposed amendment)
The only exception to the dues set forth above is a situation in which NFA does
not serve as the DSRO for a Forex Dealer Member and the DSRO has agreed to
examine the Forex Dealer Member’s forex activities. In this case, the surcharge
paid by the Forex Dealer Member, regardless of gross annual revenue, is
$12,000. Accordingly, for such a Forex Dealer Member the dues to be assessed
at the time it offers to be a counterparty to a forex transaction or accepts a forex
trade (whichever is earlier), and on its membership renewal date thereafter, will
be $13,500.

NFA proposes amendments to Financial Requirements Section 15 regarding FDM internal financial controls

Felix Shipkevich — Fri, 04 Dec 2009 01:59:19 +0000

NFA proposes amendments to Financial Requirements Section 15 regarding FDM internal financial controls

Financial Requirements Section 15 currently requires firms to provide NFA with an internal control report prior to acting as an FDM. This report must be prepared by an independent public accountant registered with the Public Company Accounting Oversight Board and must include representations by the accountant that the FDM’s internal financial controls have no material weaknesses. NFA adopted this rule after taking a number of Member Responsibility Actions against FDMs with inadequate internal financial controls.
Additionally, reputable public accounting firms have informed NFA that AICPA auditing standards require accountants to test live transactions before making representations about the adequacy of internal controls, and they cannot do this testing for firms that have not yet begun business. Therefore, the amendments to Section 15 eliminate the specific requirement for an internal control report prior to acting as an FDM and replace it with a more general requirement that the Member must demonstrate that it has adequate internal financial controls. This requirement will continue to put the burden on the Member but will provide more flexibility. Section 15 will continue to authorize NFA to require any FDM to provide an internal control report if NFA believes that the Member’s controls are inadequate:

-If NFA believes that a Member’s internal controls are inadequate at any time, NFA’s Compliance Director may require it to provide to NFA an internal control report that is prepared and certified by an independent public accountant who is registered under Section 102 of the Sarbanes-Oxley Act. -

Members must retain a registered Principal over whom NFA has jurisdiction

Felix Shipkevich — Tue, 09 Jun 2009 15:52:35 +0000

Members must retain a registered Principal over whom NFA has jurisdiction

Failure to retain at least one Principal registered as an “associated person” will henceforth be regarded by the NFA as a request to withdraw from NFA membership, unless membership is in the contract market category. This amends NFA bylaw 301 (a)(iii), which now reads:

No person, unless eligible for membership in the contract market category, shall be eligible to become or remain a Member unless at least one of its principals is registered as an “associated person” under the Act and Commission Rules.

(1) If any Member fails to have at least one principal that is registered as an “associated person” NFA shall deem that Member’s failure to be a request to withdraw from NFA membership and shall notify that Member accordingly.

Prohibition of loans by commodity pools to CPOs and affiliates

Felix Shipkevich — Wed, 27 May 2009 13:38:39 +0000

Prohibition of loans by commodity pools to CPOs and affiliates

NFA Compliance Rule 2-45 prohibits direct or indirect loans or any advance of pool assets between a pool and its CPO or any other affiliated person or entity, though participants, including a CPO’s principal, may barrow against their equity interests in a pool. Exemptions are to be handled on a case by case basis.