Reading the story below you may think it’s either a work of fiction or that it happened in a Third World country. Unfortunately it’s neither.
Although the NFA never published anything we managed to glue various bits and pieces and work out what really happened:
For a while now GFT, and several other brokers, calculated their regulatory capital requirements for various global subsidiaries from one pooled corporate capital account. This account was put aside as part of the company’s own capital and was separated from their customer funds account. The practice was known and accepted by the NFA for several years and was (and perhaps still is) practiced by several US forex brokers. It also didn’t violate any rule separately or jointly in any jurisdiction since all the required capital was there, simply pooled in one account and calculated as per each jurisdiction’s requirement.
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During the last week of November the NFA decided that this is no longer acceptable and must immediately change. What does immediate mean you ask?
On around November 29th or 30th the NFA stormed GFT’s offices demanding that the company immediately make the change – that is move the $20+ million + haircuts into a separate US based bank account. The NFA gave GFT less than 48 hours to do so or put clients on liquidation mode. This gave GFT just Friday the 30th to make the required change without any proper preparations and planning. It didn’t come as a huge surprise that GFT wasn’t able to make this on time. This also didn’t leave any time to give GFT’s clients any sufficient notice or prepare a succession plan whereby they’ll be able to prepare for the move to another broker. The result was a delayed market opening on Sunday and the subsequent announcement on GFT’s website that the company is exiting the US market without specifying the reason or why is this happening so suddenly.
Up until now GFT’s clients didn’t know the real story and many of them wrote to us directly and in comments fuming at GFT – however their rage should be directed at someone else.
Gary Tilkin, GFT’s CEO, woke up one day thinking it’s just another day in the office, later that day he was bullied, literally at regulatory gun point, into shutting down his US business, and this without him breaking any rule. This process more than anything harmed the very same customers the NFA is supposed to protect.