NFA's Head on the Defense against Allegations of Nomination "Improprieties"

Senior members at National Futures Association (NFA) have issued a detailed statement assessing certain allegations put forward by a member regarding the board's selection of members.

A complaint was put forward to the CFTC by board members James Koutoulas, CEO at Typhon Capital Management, and Roe Capital Management's John Roe, for accepting members outside of the industry.

Mr. Koutoulas’ concerns are around details of the nomination process for the NFA's public representatives who aren't members of the industry. In addition, the board members raised concerns around the overall professional conduct by NFA staff at issue, as well as the organization's lack of transparency.

"Everyone makes mistakes—mistakes happen, but when your response to a mistake is to falsify documents and make misrepresentations to the board, you need to, one, resign as general counsel and, two, have disciplinary proceedings brought against you under the attorney ethical rules,” Koutoulas said in a webcast, quoted by the "Chicago Business". “Anyway, we've brought that to the CFTC. The CFTC is investigating it.”

"False allegations"

The NFA’s Chairman responded by issuing a statement to its members, saying, “The Executive Committee has authorized me to assure you that these allegations are false and we deny each and every allegation.”

The watchdog’s Chairman, Christopher Hehmeyer, and Executive Committee outlined their views on the allegations, and in conclusion, the committee stated that it regrets that false allegations were made in a public forum.

Mr. Hehmeyer continued to explain the details in defence of the organization opposing views expressed in the complaint.

Mr. Hehmeyer stated that all members, including the complainant, were given written notice on points that were raised in the complaint. In addition, the chairman also stated that an independent ‘Outside Counsel’ was requested to investigate the matter which found that Koutoulas’ findings were incorrect.

The chairman added: “The Executive Committee considers each of the allegations made by Mr. Koutoulas to be wholly without merit. We regret that Mr. Koutoulas has made these false allegations in a public forum.”

Koutoulas, a known fund manager in the US market, became popular after creating an organization, Commodity Customer Coalition, that requested the funds of investors with MF Global to be returned.

The complaint and its response raise questions about the way organizations such as the NFA are governed. The fact that the complaint was raised as opposed to being refused is significant, as organizations responsible for the way financial services firms deal with the public are perceived to have a squeaky-clean reputation.