FCM principal barred from NFA

The Appeals Committee of the NFA has announced a decision to bar Robert F. Gray, principal of ex-Futures Commission Merchant (“FCM”) Forex Liquidity, permanently from NFA Membership. The FCM and Forex Dealer Member is currently under receivership in California.

According to the NFA, during a 2007-2008 investigation, Gray allegedly told the Association that Forex Liquidity’s capital rested in a $50 million bond from ABN AMRO, currently held by a registered broker dealer called Malory Investments. He provided account statements to support this claim, and the NFA received confirmation from Malory that it held this bond. However, in late November of 2007, the NFA received word from FINRA that it was investigating Malory after several states brought regulatory actions against the firm. Gray was instructed to move the bond into a U.S. regulated entity, and Gray told the investigators he had moved it to Commonwealth Financial Network. When he produced supporting documents, they were labeled Commonwealth Financial P.M.S., an unaffiliated entity.

FINRA revealed that Commonwealth Financial P.M.S. was an unregistered broker-dealer, at which point Gray was ordered to move the bond into a U.S. bank. Rather than do so, Gray tried to prove that Forex Liquidity could meet its capital requirements without the bond. An NFA review revealed that this was false.

Gray has been barred from membership after an NFA Hearing Panel found that Gray not only failed to cooperate with, but provided false and misleading information to the NFA while the Association investigated Forex Liquidity. Gray also failed to adequately supervise the FCM’s financial health. However, the Panel noted that Gray was unaware that the purported location of the bond was false, but he was “completely inept at running a regulated business.”  The Hearing Panel initially imposed a ten year membership ban on Gray, the the Appeals Committee extended the ban permanently based on the gravity of the principal’s misconduct.

Read more about this NFA disciplinary action.
Creative Commons License photo credit: mugley

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