The U.S. National Futures Association (NFA) has expelled a brokerage from its membership after finding the firm misled customers with deceptive trading results and sales pitches.

Traders Edge Inc., based in New Jersey, must withdraw from NFA membership and cannot reapply, according to a decision released this week. The introducing broker violated multiple compliance rules by showing trading profits without deducting commissions and fees, while failing to properly warn customers about potential losses.

NFA Expels Broker That Hid Trading Costs from Clients

The case started when NFA's Business Conduct Committee filed a complaint against Traders Edge earlier this year. Rather than fight the charges, the firm agreed to a settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term without admitting or denying wrongdoing.

The NFA hearing panel found that Traders Edge's website displayed trading results that looked more profitable than they actually were. The firm showed gross returns without subtracting the costs customers would actually pay, making the performance appear better than reality.

Even worse, when the company talked about potential profits on its website, it didn't give equal attention to the risk of loss that comes with futures trading. This violates basic disclosure rules that protect retail investors from misleading claims.

The violations didn't stop at the website. NFA investigators found that Traders Edge employees made deceptive sales pitches when talking to prospective customers, breaking rules about honest communication in the futures industry.

“Traders Edge agreed to withdraw from NFA membership and, thereafter, not reapply for NFA membership or act as a principal of an NFA Member at any time in the future,” the NFA commented in its decision.

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Fee Disclosure Problems

Beyond the marketing issues, Traders Edge failed to properly tell customers about fees before they started trading. This seemingly basic requirement helps ensure traders understand the true cost of doing business before they commit money.

The firm also couldn't adequately supervise its operations and employees, according to the hearing panel. This supervisory failure meant problems went unchecked and likely contributed to the other violations.

Introducing brokers like Traders Edge serve as intermediaries, connecting customers with larger clearing Clearing Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Clearing is a general term that simply means many different things depending on the subject and related industry. Most commonly, this refers to the reciprocal exchange between banks of checks and drafts, and the settlement of the differences, or the total of claims settled at a clearinghouse. In finance and banking, the word clearing has different meanings depending on the more specific business model. Moving checks from the bank where they were deposited to the bank on which they were drawn. Th Read this Term firms that actually execute trades. While they don't hold customer funds, they still must follow strict rules about how they present trading opportunities.

The NFA has also recently raised concerns about issues on the other side of the equation, specifically, the creation of fraudulent trading accounts that harm futures brokers. Scammers use fake IDs to open multiple accounts, employing high-risk strategies and attempting to withdraw funds quickly if trades turn out to be profitable.