After suing 12 forex firms early this year CFTC has now sued 11 more firms for accepting or soliciting US retail forex clients (acting as an RFED without being registered as one). Amazingly amongst many unknown firms in this list there are two very known and established firms: City Credit Capital and Enfinium. This is extremely surprising as both of the companies are regulated (FSA and ASIC respectively) and I didn’t expect them to take this risk.
According to CFTC Director of Enforcement David Meister: “These actions reflect the CFTC’s continued resolve to make the forex market safer for investors by strictly enforcing the CFTC’s new forex regulations, which became effective in October 2010. These new regulations require entities that wish to participate in the forex market to register with the CFTC and abide by regulations that are intended to protect the public from potentially fraudulent operations.”
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The following companies were sued by the CFTC as part of this sweep:
- 1st Investment Management, LLC, a Wyoming LLC;
- City Credit Capital, (UK) Ltd., a United Kingdom company;
- Enfinium Pty Ltd., an Australian company;
- GBFX, LLC, a New York LLC;
- Gold & Bennett, LLC, a New York LLC;
- InterForex, Inc., a British Virgin Islands company;
- Lucid Financial, Inc., a Utah corporation;
- MF Financial, Ltd., a Belize company with offices in New York City;
- O.C.M. Online Capital Markets Limited, a British Virgin Islands company;
- Trading Point of Financial Instruments Ltd. a Cyprus company;
- Windsor Brokers, Ltd., a Cyprus company;
In the forex market, Retail Foreign Exchange Dealers (RFEDs) and Futures Commission Merchants (FCMs) act as the counter-party to their customers’ purchase and sale of forex. Under the Commodity Exchange Act (CEA) and CFTC Regulations, an entity acting as an RFED or FCM must register with the CFTC. Further, with a few exceptions, such an entity also must be registered with the CFTC if it solicits or accepts orders from U.S. investors in connection with forex transactions conducted at an RFED or FCM.
In all but two of the complaints, the CFTC alleges that a defendant acted as an RFED; that is it offered to take or took the opposite side of a customer’s forex transaction, without being registered. In the remaining two complaints against GBFX, LLC/Gold & Bennett, LLC and Lucid Financial, Inc., the CFTC alleges that the defendant solicited customers to place forex trades at an RFED without being registered as an Introducing Broker. Further, in every complaint, the CFTC alleges that the defendant solicited or accepted orders from U.S. investors to enter into forex transactions in violation of the CEA.