CFTC sues 11 more firms for accepting US retail forex clients
After suing 12 forex firms early this year CFTC has now sued 11 more firms for accepting or soliciting US
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.
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Too bad the NFA was never able to get their act together to clean this industry up when they were in charge. Very clear now that the NFA is just a lapdog to the real regulator, the CFTC. Technically that has always been the case, but through the late 2000’s the NFA had been tasked with regulating the industry (hence the term “Designated Self Regulating Organization” or “DSRO”). The NFA was generally confused and in over their heads when trying to understand the nature of the firms they were regulating. Goes to show that accountants and lawyers can’t keep up… Read more »
Iqval the regulatory environment has changed in so far as brokers and market participants need to have some sort of responsibility when dealing in margin fx, before u could throw a million down and get regulated in bvi or cyprus no issues. FX trading is a new phenomenon and has blossomed not only because it is easy to use but because of the growth of the internet. Regulators under their red tape have a lot of channels before they can take action. plus fx industry as a whole has a huge cycle of participants from software vendors, compliance consultants, lawyers,… Read more »
Iqval, the NFA only monitors and regulates its member firms. It cant go after non NFA members, this is the CFTC jurisdiction. Cftc is doing a good job but it didnt have the right to go after these unregulated firms until the dodd frank unless there was some fraud going on with the firm and it had to do with US residents. It would be nice if the regulators in all the other countries would do the same thing and wipe out these unregulated or improperly regulated firms. This would be more beneficial to the forex traders. People really need… Read more »
Stefan good point, actually you will find the FSA regularly monitors unregulated brokerages as well those under its regulations, there is an extensive list of ‘boiler room’ operations who the fsa discourages clients to deal with. what else can be done to strengthen the environment, as well as blacklisting and giving out fines people still are committing fraud and deception. i think advanced countries like UK, USA should implement a system in real time where there investments are centrally managed under the eyes of the regulator.
Official Response from Trading Point of Financial Instruments Ltd. Trading Point of Financial instruments is aware of the September 8th complaint by CFTC for failure to register according to the new legislation. The complaint has yet to be officially served to Trading Point, however the management and legal team of the company are fully aware of the issue and will be in communication with the CFTC staff to speedily resolve the matter. Trading Point of Financial Instruments is a European regulated company licensed by CYSEC and in strict compliance with the Markets in Financial Instruments Directive 2004/39/EC (known as “MiFID”).… Read more »
this is what they ask for but they always settle for much less, especially with foreign brokers whom they can’t really reach
Adil and Stefan make valid points that the NFA can only go after member firms. And that validates my point and re-affirms the validity of my question from the first post. The NFA can only go after firms that choose to register with the NFA. And anyone with the right capital can open up under the NFA. And the NFA is a “passive” regulator who can only prosecute firms that have proven to be acting outside the rules. But the CFTC can pro-actively go after anyone or any firm. So who is the real power here? Rather than being a… Read more »
From what I understand the evidence the CTFC have is only speculative for Vantage FX. It is based on forum reviews from that show as “From USA” and that Vantage have the US listed as a country in their application form. Hardly evidence that they have been accepting US clients. I think CTFC are just rattling the cage as warning. Thoughts?
So do you guys in the USA feel any safer? If someone is truly serious about opening an account overseas, they should obtain non-us residency. The “multi-flag planting” strategy is more important now than ever. Unless of course you are comfortable with the safety and security the USA gov’t is providing to its residents 🙂 But establishing foreign residency is not as a difficult or expensive as one might think. But it does require letting go of your fears and doing some light traveling. People do live outside of the USA and they can get along just fine with their… Read more »