[TripTrap]

Brian McMahon, the vice president of the company to my surprise did call me back. He apologized for taking so long to get back with me.

He confirmed what Jennifer Sunu from the NFA had told me earlier that money had been coming in but they are still waiting for other monies to come in from overseas. He said they would be able to cover the shortfall and hoped like everyone to get it resolved as quickly as possible. He said they are not going anywhere and restoring their customer's confidence in them was there top priority.

He was not clear if they would have to go through an audit first before money was sent out for withdraws. I told him what Jennifer had said, that the audit would have to come first.

I could not pin him down as to the actual date and time the money would arrive from overseas.

So still a mixed bag. Bad news that they are supposedly still waiting for money to arrive. Good news that they are all still there and that even the vice president of the company is willing to call customers personally.

I told him he better not give up.....

[KasperFX]

That’s nonsense!!!! the only reason we found these bad firms out was because NFA exposed them!!! do you think for one min we are all better off without the NFA, come on. NFA is performing their function be it not perfect they do help a lot.

[Moe]

Originally Posted by KasperFX

That’s nonsense!!!! the only reason we found these bad firms out was because NFA exposed them!!! do you think for one min we are all better off without the NFA, come on. NFA is performing their function be it not perfect they do help a lot.

agree 100%

[forexedge]

Agree 100%, we need a body like NFA, but even with stronger power to verify and to certify, and enforce. Why let things go all the way to bankcruptcy to recover trader money.

Let them raise the minimum to 25mill and reduce number of players.

Originally Posted by Moe

agree 100%

[JFX81]

Originally Posted by KasperFX

That’s nonsense!!!! the only reason we found these bad firms out was because NFA exposed them!!! do you think for one min we are all better off without the NFA, come on. NFA is performing their function be it not perfect they do help a lot.

Precisely, because had these firms not been watched by the NFA it is entirely possible that they could have effectively stolen extremely large sums of money if their operations continued unfettered.

I can't imagine how anyone would think otherwise.

[Moe]

if im not mistaken the last 3 forex broker's the n.f.a. shutdown all there costumer's got there funds back beacsuse they cought them early enough.

[Moe]

just imagine if fxlq wasn't require to show there books to n.f.a. how far this could of went, and you say you want a broker with no regulation, yeah right.

[FXAnalytics]

Originally Posted by BurgerKing

"Wolf in Sheep Skin"

This is what I would say about Broker - NFA relationship.
Broker is the Wolf and NFA is the Sheep Skin.

Traders thought that NFA listed brokers are safe; they put their money there; all non-NFA listed are immediately branded as scam.

Guess what? Refco, UGM, 1World, FXLQ are all proud NFA members certified to be honest. Hell, what if FXOpen decides to get NFA certificate, would you put your money there?

As I already stated, I dont buy the NFA bullshit anymore. Do your own Due Dilligence. Investigate, ask around. It would be a waste that you have the savvy to trade but dont have the savvy to investigate.

This is very hard to do; lets be honest, just short of a firm going public where their books open up like Refco's did (which was their demise), the only real accounting and audits we have access to are the ones the NFA conducts. You can ask around about a broker, which I do agree is a good idea, but all you're really going to get is a sense of their customer service... Nobody you speak to, unless they worked their (disgruntled employee?) is going to know more about the firm than you do, meaning they don't have access to important information either.

It’s becoming clearer that not all NFA member firms are good firms and likely not all non-member firms are crooks; but we're probably dealing with the statistical outliers in the bunch. On the average I would rather expose myself to a company that is willing to undergo audits and scrutiny than one who prefers to avoid regulation and hide in the shadows completely.

Real Due Diligence on a company would require access to sensitive information and that will never be available when you’re dealing with a private firm.

One of the things that has come out of this again, that we saw at Refco and was the catalyst to my clients and my-self loosing our money... No matter what any firm tells you about segregated accounts and safety of money, it simply isn't true. You will be treated as a creditor if a firm is dissolved and if the company has huge hidden debt you're going to lose your ass. The industry risk in this asset class is very, very high...

This is the price we accept for the cheap cost of entry both privately and professionally. You don't see many futures brokers offering to take accounts as low as $300 or $400 dollars; and if I wanted to mange money on the Equity side of the fence and launch a hedge fund, my startup costs and operational over-head go through the roof. It's like trying to grab a 10 pound gold razor blade... yeah you're going to be rich if you can handle it, but if things go wrong it’s going to suck. The suck factor in Forex can be pretty high.

I agree with the Burger Kind that you need to do as much investigation on a firm before you send them you're money, just be realistic with your expectations; there is only so much information you can get access to and it may not be what you really need to know. With that in mind the first thing I would personally look for is that NFA membership; it means someone is looking below the surface and I have to believe that is better than no one looking under the surface.

Again, when it comes to your money, you have to remove yourself from the board mentality a little and sit back and really think about things from the business side... If you know you DON'T know, then spend some time on the NFA and CFTC sites and read some of the Forex Broker cases and see what kind of fraud etc is being conducted and then hit your brokers with questions about how they will avoid that or protect against it... And don't expect accurate answers. When Refco was going under I was personally told by one of the employees at FXCM that if RefcoFX was included in the BK all those accounts would immediately become the property of FXCM... It wasn't true, the problem was, I don't think it was a lie either. Firms don't always know exactly what is going to happen either, and because they have a contingency plan in place doesn't mean the court or the arbitrator will allow it.

So how do you protect yourself from the risk; first off you don't allocate more of your investment assets than is appropriate for alternative asset classes... Now some of that will change depending on what your goals are but I'm guessing if you sit down with your Investment advisor they're going to tell you 5% to 10% of your entire portfolio (Max) should be allocated to alternative asset classes like FX... Now don't start crying if that means you can only put $300 a year into the account and you'll spend an entire year trading for a 20% return, or $60 before taxes. You have to work inside the reality of the market; if you choose to invest more money into this asset class (skewing your portfolio's balance) than you dramatically increase your risk exposure to this market... YOU DID IT.

Ask yourself these questions: What are my goals for trading? Based on my research are they realistic in terms of returns and are those returns going to satisfy my efforts based on the time spent chasing them inside of a properly balanced portfolio? What are my Industry Risks, What are My Model Risks & What are My Quality of Life Risks. Dig into all of it before you just jump on the trader band wagon with no real understanding as to the risks you assume or how this might affect your life personally.

What’s always interesting to me is, as soon as I start to lay this stuff out, people will often say, "I'm not that serious about it", or "I don't want to do this professionally" or "I don't think that amount of work is realistic"... These are the same people who will turn around and say; "I Believe 10% a month is absolutely possible if you're willing to do Whatever it takes to be successful... Part of being successful (making money) is being sure you don't lose too much when things go wrong. That's not just a stop on a trade, it's also having the right goals as a trader and the proper allocation with respect to your income and other holdings. It's also about putting your efforts where they do the most good. If you have no desire to trade professionally and in a properly allocated portfolio with realistic returns, trading full time will only generate a couple grand a year (10 % to 20% on a $10k account); is it worth the time? (only you can answer that - for me the answer would be no)

Keep in mind, MOST of the people who are trading large accounts, made that money somewhere else... Very few large accounts are made inside the account itself.

OMG I soap boxed again... sorry for the rant... I'll be quiet now.

[Yosefx]

Originally Posted by Moe

the bottom line blue pearl, that money should of never been offshore it should of been in some u.s. bank, they was planning something.

I don't think so. Every FCM need cover up position by opening accounts with other liquidity porviders. Those can be anywhere, like Europe where are some large institutions.
Of course having them in a US Bank can make the regulators able to have more control over it, but so far as far as i know there was nothing wrong about it.

In the future instead, with the new financial requirments, it looks like the glitch was found and corrected.

As of 21 Dec for the netcap computation can be considered only funds held at a "regulated" entity
Infact, probably that is the reason why the new financial requirments for FCM's says:

read below:http://www.nfa.futures.org/news/news...ArticleID=1973

"As noted above, the changes eliminate the concentration charge and replace it with restrictions on the types of firms with which an FDM may maintain assets and cover its exposure for purposes of CFTC Regulation 1.17. In particular, an FDM may not include assets held by an unregulated person or an affiliate in its current assets for purposes of determining its adjusted net capital, and it may not use positions entered into with an unregulated person or an affiliate to cover its exposure for purposes of avoiding the haircuts imposed by CFTC Regulation 1.17"


To me also it is a clear invite to use and "supervised and controllable" counterparties on one side, but also to push many foreigner or non afifliate parties to register in order to not loose the business.

I could also think that this move would also probably somehow protect "made in US business"

[KasperFX]

This is crazy so what your saying is it’s fine to use costumer funds to secure prime clearing credit lines (omnibus accounts) at these offshore banks? Isn’t this commingling client’s and operating funds, And age’ the law here in the USA? Shouldn’t costumer and operating funds be held in separated accounts, all major banks have relationships with major offshore banks, should have kept them here in a to USA bank were they belong and had USA bank issue a LOC (letter of credit) witch would have been more then enough to open a omnibus line with any major off shore bank..

What about these forged bonds, held in offshore security firms using out dated registration #..

Candy coat it how ever you like, this is not a safe place to have your moneys, he’s playing to many games and deserves what’s coming.

[Moe]

Originally Posted by KasperFX

This is crazy so what your saying is it’s fine to use costumer funds to secure prime clearing credit lines (omnibus accounts) at these offshore banks? Isn’t this commingling client’s and operating funds, And age’ the law here in the USA? Shouldn’t costumer and operating funds be held in separated accounts, all major banks have relationships with major offshore banks, should have kept them here in a to USA bank were they belong and had USA bank issue a LOC (letter of credit) witch would have been more then enough to open a omnibus line with any major off shore bank..

What about these forged bonds, held in offshore security firms using out dated registration #..

Candy coat it how ever you like, this is not a safe place to have your moneys, he’s playing to many games and deserves what’s coming.

[Yosefx]

Originally Posted by KasperFX

This is crazy so what your saying is it’s fine to use costumer funds to secure prime clearing credit lines (omnibus accounts) at these offshore banks? Isn’t this commingling client’s and operating funds, And age’ the law here in the USA? Shouldn’t costumer and operating funds be held in separated accounts, all major banks have relationships with major offshore banks, should have kept them here in a to USA bank were they belong and had USA bank issue a LOC (letter of credit) witch would have been more then enough to open a omnibus line with any major off shore bank..

What about these forged bonds, held in offshore security firms using out dated registration #..

Candy coat it how ever you like, this is not a safe place to have your moneys, he’s playing to many games and deserves what’s coming.

Kasper, I think you have misunderstood me.
I was simply arguing that most likely many US based FCM dealers may have trading accounts with foreign-non us registered- entities where to dump or hedge your positions.

With the new financial req. they still can keep those funds there if they wish, there but these will not count in the net cap computation. I see an improvement here.... as all the net cap of an FCM will be maintained with a regulated entities, where ( I guess) the regulatories could exercise a better control.

I am not disccussing the FXLQ specific case, taking defence or accusing but simply sharing my studies and what I know..
In the truth the story of the company/customer funds is even much more scary...

From what I understand, with the present situation, an FCM is not even required to keep customers funds in a separate bank account. I think (and hope) that many FCM does that at least for good business practices, but can't read this obligation at all.

So In terms of an FCM customer funds are at the same times assett and liabilities. If you read them on any complaint I saw they refer them as "customers Liabilities". Also couple of firms got fined as from their promotional material was resulting that funds "are given special protection in case of bankrupcy"

So my conclusions is that for a Forex FCM to be in compliance there are 2 sides to look: assets(A) and liabilities(B) only.

A - B should be at any given time be >$1 million dollar (5 after dec 21st), or there will be a situation to deal with.

If A-B is > $0 but <1$M (5 after dec 21st) to me sounds like the company is still fine, customer funds are fine as well, but the FCM is not in compliance with the NFA requirments so will be most likely closed. ( This was the UGMFX case I guess)

If A-B is a negative value, then the company is undercapitalized and should put more money or declare bankrupcy ( was that the CFG case?)

I hope this help.

[forexedge]

Fxlq claims that nfa is reviewing their petition to approve the withdrawal. Which means, along with the petition, they must submit evidence of sufficient funds to cover client fund and liability. NFA will audit this evidence prior to the approval of fund release.

I have put in a call to Jennifer at NFA to see how the audit is going.

Please let it be an early Christmas present.

[TripTrap]

Thanks forexedge for the update.

Please let us know what Jennifer says when she calls you back. The last update I got from her the other day was that FXLQ was still waiting for funds to come in from overseas. Will be very interested to see if she says that is still the case.

[forexedge]

Jennifer called back. She said she hasn't seen any petition! There were wires coming in last week. There was another wire coming on Monday, but nothing to completely cover the short fall of liabilities so far. Customer funds are there, just missing funds to cover FXLQ debt.

FXLQ told her more funds are scheduled to come in, but she hasn't seen any new ones since Monday.

THis lady doesn't sugar coat anything and she always return my calls - which is nice.

We just need to wait it out. NFA is giving them a chance to fix the situation, without any definite timeline, so no CFTC involvement yet.

I imagine the minute FXLQ stops trying, CFTC will take over.

I also called CFTC, lawyers are aware of the situation but cannot talk about it.

Originally Posted by forexedge

Fxlq claims that nfa is reviewing their petition to approve the withdrawal. Which means, along with the petition, they must submit evidence of sufficient funds to cover client fund and liability. NFA will audit this evidence prior to the approval of fund release.

I have put in a call to Jennifer at NFA to see how the audit is going.

Please let it be an early Christmas present.