US broker PFGBest freezes funds after founder's suicide attempt

This is just the begining, the NFA would now beam their searchlight on a whole lot of other bigger Nfa registered brokers and believe me, in just days other US brokers would be publicly revealed to be in the red cause i dont believe PFGbest was alone in this scam.

So much for flashing the NFA REGULATED badge as an added broker advantage.

why don't these regulators ask the broker bank how much money the broker have instead of asking the broker

look like SR is going to prison, he should of finish the job http://www.pic4ever.com/images/minzdr.gif

did you guys notice it's always future and forex brokers that get in trouble, big stock brokers like etrade and other stock broker dont go thru stuff like this

i know what you mean, but most traders on this forum are trading with very small accounts, under 5k

Beats be PT. Right now im pissing in my pants cause im presently managing a $1.3mil fxcm account. Hope those crooks are clean with their records

lol, who's the bigger crook you or fxcm , just kidding

if had to pick one it will be fcstone

we all know about those Money Mangers

damn PT! U are not helping issues. Im literarily pissin!

Probably 'cause they are better regulated.

Ain't that the truth. I practically gave up on visiting this forum as I grew so tired of that mentality.

I'm all for well regulated trading companies when that regulation actually protects customers. But ineffective regulation can be worse than no regulation at all because it instills a false sense of safety. This case seems to be an illustration of ineffective regulation.

As poundtherock said, by simply changing the requirement for auditors / regulators to get account statements directly from the bank, many of these surprise meltdowns could be stopped early in the process, before all the funds have evaporated.

I don't disagree, but that wasn't really my point. I was just referring to the theme of, "does XYZ Broker with a PO Box in Cyprus accept US clients for 500:1???". Here it's not so bad, other FX forum sites are pretty much dedicated to that topic.. But let's not get this thread off-topic, try to keep it PFG-specific from here on.

The PFGBest revelation raises serious questions about the safety of the U.S. Futures industry. One of the themes that had been struck throughout the MF Global mess is that the safety of segregated funds had been absolute up until that “one-off” event. Now, apparently customer segregation has been violated twice in nine months.

In a complaint filed this morning against PFG and Russell Wasendorf Sr. by the Commodity Futures Trading Commission (CFTC) alleging fraud, misappropriation of customer funds, violation of customer fund segregation Laws and making false statements, the Commission alleges that “from at least February 2010 through the present, PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations.”

Additionally, the U.S. Federal Bureau of Investigations (FBI) is participating in the probe, according to Sandy Breault, a spokeswoman for the FBI's Omaha office. "“We are currently reviewing the facts of the situation,” she said, declining to elaborate.

This comes nine months after the MF Global debacle and six months after the CFTC along with CME Group and the National Futures Association (NFA) completed an audit of 70 firms holding customer segregated funds. The CFTC reviewed the 14 largest firms and CME and NFA reviewed 56 firms.

In a Jan. 25 statement, the Commission noted, “The limited reviews of the 70 FCMs found that, as of the review date, each firm maintained assets in Section 4d segregated accounts in excess of the net liquidating equities of each of its customers as required under Section 4d of the Act and Commission regulations. The limited reviews further found that, as of the review date, each FCM maintained assets in Part 30 secured accounts in excess of the aggregate margin required.”

John Roe co-founder of the Commodity Customer Coalition said “here we go again.” In an e-mailed statement Roe says, “Yesterday’s revelations regarding PFGBest should dispel the notion that serious reforms are not merited in the wake of MF Global’s collapse. Since the year 2000, four of the 15 largest bankruptcies in U.S. history included firms who had FCM operations (Enron, Refco, Lehman, MF Global). The list would be larger had Merrill Lynch and Bear Stearns not been forcibly acquired by other firms. Something is clearly seriously wrong with this industry and the regulatory scheme that governs it.”

Roe also noted the FCM review. “When the primary regulators in charge of this industry can get it this wrong this quickly, the regulations protecting customers are a paper tiger. Heads should be rolling over this,” Roe says.

The CFTC complaint further alleges that defendants made false statements in filings required by the Commission regarding funds held in segregation for customers trading on U.S. Exchanges.

Jeff Greenblatt, a futures trader and director of Luca Wave International, says, “Why would anybody trust any broker anymore? Are they just going to allow these people to rape and pillage the industry to the bone until nothing is left? How can this industry recover from MF Global when the trend continues?”

Insurance need?

The crisis at PFG is increasing the call for a Securities Investment Protection Corporation (SIPC) style insurance plan for futures segregated funds. This came up following the MF Global debacle but was largely dismissed because of the high cost of such a program. This morning CFTC Commissioner Bart Chilton reiterated his support for such an insurance program in an emailed statement to the Wall Street Journal.

“The only mechanism which can mitigate the impact of fraudsters is account insurance,” Roe says. “We have proposed a liquidity facility for victims of failed commodity brokerage firms. However, there is tremendous resistance to the concept of account insurance for commodity customers from the industry. It will require substantial public pressure resulting in legislative action from Congress to make such an insurance mechanism a reality.”

Former CFTC Chairman Philip McBride Johnson rejected the notion of an insurance program, preferring the creation of a central customer funds repository. Johnson says a repository plan eliminates the risk and be cheaper. “All customer funds would move solely and directly between the trader and the repository. Each customer would maintain a trading account with the broker and a funds account with the repository,” Johnson notes, adding the broker customer relationship would not change much, “But customers would send their initial and maintenance margins directly to the repository for deposit in their separate accounts there, and all return payments would flow directly from the repository to the customer.”

CME Group initiated a scaled down version of an insurance program, CME Group Farmer & Rancher Protection Fund, covering family farmers and ranchers up to $25,000 and agricultural cooperatives up to $100,000.

Robb Ross, principal of commodity trading advisor (CTA) White Indian Trading, says the best solution may be to have all customer funds held at the exchange clearinghouse. Ross, whose CTA had customers at MF Global during it bankruptcy as well as customers at PFG, fears this could harm commodities trading. “Who is going to trade commodities,” he wonders.

Following MF Global's collapse on Oct. 31, 2011, a number of customers migrated to PFG. Ironically, Roe notes that the SIPA Trustee’s rolling distributions to customers actually may have shielded them from additional losses at PFG. "The remaining 28% of your 4d and 100% of your 30.7 property trapped in MF Global’s SIPA liquidation will be sent to you via check. Sadly in a zero interest rate environment, a bankruptcy claim may be the safest place for your money."

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From $225 mil to $5 mil... and the NFA (good boys club) sits there scratching their asses.

Yeah makes me feel real protected.

Way to go NFA and CFTC another good one for your resume of stupidity.

Don't need Jim Carey for Dumb & Dumber when you got these two. lol

PT, it's time for you to take PFG Best out from your Preferred Broker's List

Regards,
MrJinks.

One piece of good news, Canadian PFG clients are protected:

http://www.theglobeandmail.com/globe...rticle4402543/

i think brokers file paper work once a week, so here what im thinking, regulator goes to broker office ask broker for paper work and ask broker how much custormer funds do you have, broker say i got 400 mill total, 200 mill is in the bank the other 200 mill is tied up in margin trading for customers, regulator check out the funds in marging and see 200 mill tied up in margin, then get the bank to fax them a statement and see 200 mill is in the bank, thats week one

now week two

regulator goes back to broker, ask broker for paper work and ask broker how much customer funds you have, broker say i got 400 mill total, 200 mill in bank and 200 mill in margin trading for customers, regulator check out margin account and see 200 mill tied up in margin, bank fax over broker account statement and see there's only 180 mill and not 200 mill the broker claim, regulator goes back to broker and say WTF is that 20 mill, im freezing everthing, nothing moves untill we find out where that 20mill went.

this way customers has a chance to get 99% of there money back

The CFTC alleges Mr. Wasendorf misused client money and doctored company accounts for the past two years. never would of happen by my example above