NFA Forex Dealer Dead Pool

[forex scholar]

The news about the NFA shaking up the forex industry by dramatically raising capital requirements has kicked off a lot of speculation. So I gathered everything I have learned about this new NFA proposal and am posting here for your review. As someone who has been burned by a bankrupted forex broker I can tell you it is not a pleasant feeling to watch your funds get sucked into some black hole. So my advice is to stay away from any firm that is not currently meeting the coming $5 million capital requirement. And if you already have money at such a firm, get it out, now. If you don't, you could end up like the poor souls at United Global Markets (UGMFX) who can't get their money out due to an NFA account freeze: http://www.forexfactory.com/showthread.php?t=35197

Who has the Money & Who Doesn't
To find out how much money your broker has goto this link:
http://www.cftc.gov/files/tm/fcm/tmfcmdata0704.pdf

Healthy Forex Firms
FXCM ($51,000,000)
GFT ($48,000,000)
Oanda ($44,000,000)
FX Solutions ($20,000,000)
Gain Capital ($20,000,000)
CMS ($10,000,000)

Dead Firms Walking
One World Capital ($1,105,000)
Velocity4X ($1,587,000)
Direct Forex LLC ($1,523,000)
FiniFX ($1,464,000)
Forex Club ($3,304,000)
GFS Futures & Forex ($3,074,000)
Nations Investments ($1,699,000)
Royal Forex Trading ($1,102,000)
SNC Investments ($1,565,000)
FXDD ($781,000)
I Trade FX (-$3,039,000!!!!! Close to Bankruptcy!!!!)
MB Futures ($3,080,000)
Money Garden ($3,399,844)
United Global Markets (Bankrupt)

Here is the actual NFA proposal to raise capital requirements (below that is the sad email from the CEO of UGMFX stating the firm is going under.) The CFTC is expected to sign off on it this summer. I'll comment further on the proposal in a future posting as it will actually require most firms to have upwards of $10 million in capital when you take into consideration such things as open customer positions and margin levels. In any case, this should be sober reading to anyone who is currently trading at one of the "Dead Firms Walking."

NFA Proposal
The proposals pertain to the minimum adjusted net capital requirement and the concentration charge and set certain requirements for FDMs' internal financial controls.

Minimum Adjusted Net Capital and Concentration Charges

In the past twenty years, there have been nine FCM insolvencies. Since 1990, there have been only two insolvencies by traditional FCMs trading on U.S. exchanges, and no funds in segregated customer accounts were lost in either of those two instances. This is from a population that averages around 250 (over the last 20 years). Even in the Refco matter, the FCM filed for bankruptcy not because customer funds were at risk but, rather, to facilitate the sale of its assets and the transfer of its accounts in connection with the parent company’s insolvency.

The FCM insolvency rate becomes more troubling when FDMs are added to the mix. Of the three bankruptcy or receivership proceedings for insolvency occurring in the last four years, two have involved FDMs (Refco was the third), and they are drawn from the smaller FDM population (averaging around 40). Specifically, in late 2003, an FDM misappropriated almost $2 million of customer funds, which depleted the amount of assets necessary to meet the amounts owed to customers. The Commodity Futures Trading Commission ("CFTC") is still working to try to get back some of the customers’ funds. More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million. The CFTC also brought an emergency action in U.S. District Court, and the Court immediately appointed a receiver who was subsequently able to sell the FDM’s customer accounts. Due to this sale, it appears that the customers were made whole.

This discrepancy between FDMs and FCMs involved in on-exchange transactions is even greater when looking at the number of financial MRAs NFA has issued in the last ten years. During that period, NFA issued twelve MRAs to FCMs for failing to demonstrate compliance with NFA’s financial requirements. Three of these firms were traditional FCMs with an on-exchange business, one was a forex dealer registered as an FCM prior to the advent of the FDM category, and the remaining eight were FDMs.

NFA's concern that one day an FDM might be unable to meet its financial obligations to its customers has heightened as the amount of retail customer funds held by FDMs has increased to over $1 billion. The above described FDM insolvencies have done nothing to abate this concern, particularly with the most recent occurring just months after the $1 million capital requirement became effective. If the receiver had not sold the FDM's accounts, then twice within less than four years customers of FDMs would have lost funds due to an FCM insolvency. Additionally, since March, eight different FDMs have fallen under the early warning requirement of $1.5 million.

One of the reasons for the 2006 increase to the FDM capital requirements was that an FDM’s dealer activities create greater financial risks than the agency transactions involved in traditional exchange-traded futures and options. A second reason is that the need for adequate capital is particularly acute for FDMs since customers trading off-exchange forex have not received a priority under the Bankruptcy Code in the event of a firm’s insolvency. Both of these reasons still exist.

NFA is not alone in recognizing the increased financial risk of acting as a dealer. Congress recognized that acting as a dealer increases financial risk and requires substantially higher capital on the part of the dealer. Pursuant to Section 4c(d)(2)(A) of the Commodity Exchange Act (the "Act") the grantor of a dealer option must maintain at all times a net worth of $5 million. The Commission has likewise recognized the increased financial risk resulting from being a dealer, imposing an adjusted net capital requirement of $2.5 million on leverage transaction merchants ("LTMs").[1]

When the Commission adopted the financial requirements for LTMs in 1984, it noted that the leverage market is "essentially a principals' market" and that the "purchaser of a leverage contract is solely dependent on the LTM for performance on the contract."[2] This is the exact same situation that customers are in when they purchase or sell currencies with an FDM. Further, as with an LTM, an FDM "takes the other side of every [contract] entered into by a [customer]" and the FDM "is the sole guarantor of performance on the [contract]." When trading with an FDM "there is no clearing organization to take the other side of every trade, no FCM guaranty of variation margin to the clearing organization and no clearing organization guaranty fund and assessment power."[3] Due to these factors, the financial requirements for FDMs, like LTMs, must be substantially higher than those for FCMs engaging in agency transactions.

As noted above, the Commission imposed the $2.5 million capital requirement for LTMs in 1984. Based upon the Consumer Price Index, $2.5 million in 1984 dollars would be worth approximately $5 million today. Accordingly, NFA is proposing to raise the minimum adjusted net capital for FDMs to $5 million. An increased capital requirement would result in an FDM having a larger buffer to meet its obligations to its customers. Additionally, an increase in capital requirements for FDMs would ensure that FDMs have a larger financial stake in their forex business.

Along with the increased capital requirement, NFA is proposing to eliminate the concentration charge on significant positions with unregulated counterparties, including customers. The charge is designed, in part, to ensure that an FDM has sufficient capital to pay any losses even if it cannot collect profits due to counterparty defaults. As you know, NFA has been reviewing this concentration charge over the past several months. As part of its comments, at least one FDM suggested imposing a higher capital requirement on FDMs and eliminating the concentration charge. For some firms, eliminating the charge will free up additional capital to meet the increased net capital requirement.

NFA agrees that a higher capital requirement may obviate the necessity for applying the concentration charge. The increased capital requirement provides a greater buffer against counterparty credit risk. NFA would, however, replace the concentration charge with a limitation on the types of firms with which an FDM may maintain assets and cover its exposure for purposes of CFTC Regulation 1.17.

Under this proposal, an FDM may not include assets held by an unregulated person or affiliate in its current assets for purposes of determining its adjusted net capital, unless the unregulated person or affiliate qualifies for an exemption under current NFA Financial Requirements Section 11(b) and 11(c), respectively.[4] Similarly, positions entered into to cover an FDM’s exposure could not be counted for purposes of avoiding the haircuts imposed by CFTC Regulation 1.17 unless the counterparty is an entity that qualifies for an exemption under current NFA Financial Requirements Section 11(b). Under that provision, entities that qualify for an exemption include U.S. banks; NASD-member broker-dealers; NFA-Member FCMs; state-regulated insurance companies; banks, broker-dealers, FCMs, and insurance companies regulated in certain foreign jurisdictions; and other entities approved by NFA. Positions entered into with an affiliate to cover an FDM's exposure could not be counted for purposes of avoiding the CFTC haircut unless NFA has issued an exemption for the affiliate under the more limited circumstances that currently qualify for an affiliate exemption under NFA Financial Requirements Section 11(c). Customer positions on the FDM’s platform could be netted against each other, but this netting could not include positions with affiliates.

Internal Financial Controls

NFA also has concerns over the lack of adequate internal controls some FDMs have over their financial books and records. In the past year alone, NFA took two MRAs against FDMs that were under their minimum capital requirements. In both cases, the firms had inadequate internal controls over their financial books and records. In NFA’s experience, over the past few years many firms have entered the retail forex business with limited business and financial expertise. Some of these firms also use unknowledgeable personnel to handle their day-to-day bookkeeping. Furthermore, the fact that these are dealer markets makes the financial recordkeeping more complex than it is for a firm that is strictly an intermediary. Our experience also shows that the financial problems at these firms are compounded by the fact that many of the new FDMs—and even some of the more established ones—use relatively unknown accounting firms that may not have experience auditing companies with more complex financial requirements. As a result, FDMs have a much higher incidence of financial problems than traditional FCMs.

This situation concerns staff, and we recommend adopting a new rule to ensure that FDMs have proper internal controls and a means to evaluate those controls. Proposed Financial Requirements Section 15 has three prongs.

· It requires new FDMs to provide NFA with an internal control report prepared and certified by an independent public accountant qualified to certify financial statements for public companies (i.e., a firm registered and in good standing with the Public Company Accounting Oversight Board). The Member would be required to provide this report before commencing its retail forex business. The rule would also authorize NFA staff to require an FDM to provide subsequent internal control reports if circumstances warranted.

· The rule would authorize NFA staff -- in appropriate circumstances -- to require an FDM's annual financial statements to be certified by an independent public accountant qualified to certify financial statements for public companies. This requirement will give FDMs the freedom to choose other auditors unless NFA has reason to be concerned about the firm's financial statements.

· Each FDM would be required to have an AP/principal who is responsible for supervising the firm’s financial functions. This individual would be subject to discipline if the firm’s internal controls are inadequate in their design or because they are not followed. Staff also proposes to amend the forex interpretive notice to clarify that part of this supervisory responsibility includes hiring and retaining qualified accounting staff and, unless the firm is a public company with an independent audit committee, to research and recommend the firm's independent auditor.

Mr. Stephen Leahy

Chief Financial Officer

United Global Markets, LLC

20 Park Plaza, Suite 1000

Boston, MA 02116

Tel # (617) 357-5122

sleahy@ugmfx.com

Dear Valued Client:

United Global Markets (UGMFX) has been notified that we are in violation of CFTC Regulation 1.17(a)(4) by our regulatory body, the National Futures Association. We have been notified that we fall below the minimum Adjusted Net Capital requirements of $1,000,000 and therefore may not allow clients to open new positions until we increase our own capital.

To be clear, United Global Markets has more than enough cash assets as compared to our liabilities to our clients. But we do not have $1,000,000 of our own liquid assets which is the NFA’s required minimum.

We are speaking to an institutional partner that has both more than the capital requirements AND shares our philosophy of treating clients fairly. However as with most large financial institutions, they have not been able to due their due diligence on United Global Markets in the short time period since the NFA’s proposed changes to Financial Requirements.

Therefore, in compliance with the NFA-issued notice of violation of CFTC Regulation 1-17(a)(4), our clients may only close open positions and not initiate new positions until further notice. Additionally we may not accept new client accounts or further funds from existing clients.

For those who wish to withdraw funds, please fax or e-mail a Withdrawal Request Form and we will process quickly.

http://www.ugmfx.com/downloads/Withdrawal_funds.pdf

[lemmon138]

Hello. I am concerned about this as well. Most of my accounts are with the big ones, so I'm okay, but I do have an acct with MB Futures. I am wondering if the accounting is a bit different for this one, b/c MB Futures is a side company of MB Trading (a much larger stock trading ECN.) And they might be protected by the parent company. Any thoughts? I may call them this weekend and inquire on this matter. Also, I have looked over the spreadsheet of all the brokers, and I wonder why some recognizable names are not listed... like Dukascopy, North Finance, and Trade Monster. Does this list only reflect brokers who work with the NFA?

Thank you for posting all this. Very important stuff that we all should be aware of. Personally, very surprised to see Oanda has a ton of money, and CMC so little. I thought CMC was huge!

[EFX_justin]

I posted this on another forum in response to the same exact post......hope this clears the air.

Hi all-

Well, looks like someone started a situation in the last 24 hours and I want to talk everyone through exactly what is going on. Let’s start with the facts, then move to the reality, and then maybe a little opinion. As you know, I try not to spend time naming or talking about other brokers specifically. My job is to help you out with EFX and not try to answer questions about (or bad-mouth) another platform.

The story that started all of the boards talking this morning was a post that the NFA is about to move the minimum net capital requirement to $5 million, and that they are closing the doors on a bunch of companies over the last few weeks. Along with about 20 other platforms, we were listed by whomever wrote the post as being “at risk” because we currently show a net cap that is well above the minimum currently required, but we don’t show $5 million.

Now, the clever part of the post that was put out there (you’d have to look at the bigger firms that intentionally maintain a higher net cap to figure out who had the motivation to do this) is that it implies that because six brokers doors were “shuttered” (term used in the post), the other 20 or so are in danger and the NFA is out to kill. This is a fairly ridiculous link. The firms that were closed had problems with their net capital dropping under the CURRENT minimum. In some cases, they were basically out of money. Of course they were closed after the NFA did their due diligence per the guidelines and eventually determined that they were not going to get their net cap back up.

Folks, the NFA is a regulatory body. They want to protect the public, but they also exist because of forex platforms. If they shut them all down unnecessarily, they hurt themselves too. They come around, they charge fees, they do audits, etc. Let’s set some facts straight.

The way we understand it, the NFA is going to vote on July 1 whether to raise the minimum net capital requirement to $5 million, up from the current $1.5 million. If they do approve that (that’s the first IF, nothing changes in the world if they don’t), then member firms will have until January 1, 2008, to get their net capital to $5 million. Do we feel like this would be an issue for us, as we already hold much more than the current requirement and over half of what we need to the potential new requirement? No. So let’s just take the vote at face value, assume that it happens, and then address what it should mean for us in the easiest solution. Nothing. I should point out that it wasn’t long ago that the NFA raised the minimum net capital from a few hundred thousand to $1.5 million, and we met that without any issues even though we weren’t showing it before.

They aren’t going to walk into all of these firms on July 2 and shut them down. And, just so we’re clear, if the NFA moves the cap requirement up and a firm can’t get the money in to meet the requirement, that doesn’t mean that your money as a customer is affected. Some of the things that I’ve heard over the last 24 hours are so crazy. Here’s one: “If the NFA moves the net cap requirement up and a firm can’t comply, don’t we lose all of our money as the customers of the firm because they have to close?” Huh? No relation. The firm would first need to lose all of their assets and then yours for that to be the case.

Let me talk a little bit about other options for some of the smaller firms. There is nothing that says that any of these firms have to be NFA members. They can operate through the SEC or NASD.

Before I get to what this means in a practical sense, let me post two paragraphs from MB Trading Futures' (our FCM) compliance department dealing with the issue:

"First, the National Futures Association (NFA) has noticed its Forex Dealer Members (FDM) of a new proposal to increase the minimum net capital requirements of those members. The proposal is in the early stages of the approval process; it has not been approved by the NFA Board, which is the minimum requirement.

NFA is simply providing FDMs with an opportunity to respond to the proposal that recommends increasing the minimum net capital requirements of FDMs to $5 million from $1 million (or 5% of total customer liabilities, whichever is greater), which are due on July 6, 2007. NFA will draft a final version of the proposal based on comments received from FDMs. The final version of the proposal will be submitted to NFA’s Board for approval. NFA’s Board could approve the final version or a modified version of the final proposal. Once the proposal is finally approved by the NFA Board, it must be submitted to the CFTC for approval. CFTC could approve the finalized version of the proposal as submitted by the NFA Board or approve a modify version. It is anticipated that the final stage of the approval process will be December 2007 at the earliest."

Now, those are the facts. Let’s talk about what this means in the real world. Why do firms need a net capital in the first place? I find it disturbing the number of people that trade forex and don’t understand how it works. 99% of firms out there are deal desks, including several that are pretending not to be. It doesn’t have anything to do with the size of their spreads or their software. It means ONE thing. They make their income by trading against YOU. You buy, they sell to you. You sell, they buy from you. At the end of the day, it’s very simple. They make money when their customers collectively lose money. Now, stop and think about it for a second. You’re a firm. You have hundreds or even thousands of customers, and you have to provide them with a quote (which you have complete control to move around REGARDLESS of what the real banks are showing on the interbank system). What happens if all of your customers want to buy the EURUSD one day? You’re selling it to them.
Forex is a highly leveraged deal. What if the EURUSD keeps going up? The firm is short and selling more if the customers are buying. While obviously most deal desks make a ton of money, the RISK of being the platform is huge. If you get caught heavy in the wrong direction and the market goes hard against you, you can eat up everything that your firm is worth quickly. And, just so we are clear, if a firm has a $5,000,000 capitalization and then all of their customer money, if they lose $8,000,000 on an “event,” meaning a big loss against their customers, they have no capital, and the customer assets are seized next. That’s the same in any financial business, brokerages and banks included. Whatever capital is required, and then potentially some insurance level for the company or the customers, and then any event that creates a loss that exceeds that and the customer money is at risk. This isn’t just forex. There was a major national stock brokerage firm in the last couple of weeks that went from having millions and millions of dollars to negative $18 million or so due to a bad trade/investment in the bond market. Firm is gone, customers are scrambling. It can happen.

And of course, in reality, just because a firm/brokerage/bank has a huge net capital doesn’t mean that things are safer. They tend to take bigger risks with that money because they need a return on that money. They don’t just leave it sitting in cash. So a firm with a $50,000,000 net capital is probably showing a risk level that is more in line with having that sort of valuation, which means they can get hit just as hard and fast if they don’t know what they are doing as a smaller operation.

Now, what is the situation with us here at EFX? We are, as has been discussed forever on these boards, NOT a deal desk. At all. Remotely. I challenge anyone to suggest differently. We’ll get on a webinar and walk you through it. Your order sits on a server that no one sees and when that order becomes marketable, it hits a bank in the interbank system. We don’t take the other side of your trade. Ever. Therefore, we aren’t at the same level of risk that all of these deal desks are on a daily basis. We pass your order through and settle your exchange of currency at the end of the day between ourselves and the bank that took the trade at the price that your order executed against the bank. We charge you a fee for making that transaction possible. Obviously, it’s working. We have so many banks now in the system that our EURUSD quote spends much of the day under 1 pip. So does the GBPUSD. Ever heard the phrase “When banks compete, you win”? Maybe we should have had that motto first.

So where is our risk of having financial troubles? The biggest risk lies in overseeing our customer accounts. If someone has $1000 in their account and buys 5 GBPUSD and the GBPUSD goes down 180 pips, the account is down to $100. That’s where the customer is at risk, because a news spike could then drop it a quick 40 more pips, and now the customer account has gone negative. We wish that everyone traded with a stop in the system to prevent this situation from arising, but they don’t. So, we have extensive systems in place that includes human and computer monitoring to make sure that accounts that get near zero are watched appropriately. We don’t want to close out a position for a customer, but when people trade without stops and get themselves into that type of situation, of course we have to. We have to protect ourselves and all of our other customers. Beyond that, our risk is really just our operations, the cost of having a back office that does what we do. That is not significant compared to the risk that most deal desks have to show daily.

Now, here’s my opinion. What you are seeing is exactly what we have wanted to see from this industry. It is regulating itself better to protect the consumer (trader). Doing so requires raising the amount of money necessary to do business. This keeps the smaller, less-capitalized players out, which is good for the consumer. We believe that LOWER leverage levels are going to be mandated eventually. No one makes money trading at 400 to 1. They get crushed. 100 to 1 or 50 to 1 as a maximum would be sufficient. The professional traders who make money in this business don’t trade anywhere near that level anyway. The industry needs to enforce better “truth in advertising” laws, and we’re seeing that more and more. You can’t pretend that you aren’t a dealing desk just because people like to hear you say that, but then make your money in the spread. If you aren’t charging a fee for providing a customer with an execution, then by definition, you are a dealing desk. Period. I have no idea if the NFA is actually going to raise the net capital requirement, but we see all of this as a positive as we continue to develop and prepare to deploy Project Omega, and we look forward to further improvements in the industry that help protect the consumer. And of course, we will comply with the guidelines of a regulatory body, as we always have.

Hope this answers everyone’s questions. Maybe after the week of Fourth of July, we will do a special webinar event to talk openly and answer direct questions. I’ll try to set it up with one of our VPs. Trade well.

[forex scholar]

EFX's response is very troubling. First off, this rule in all likelihood is going through. So yes, the NFA and CFTC have to approve it. But it's going to become law. The NFA's reasoning is devastating. It's hard to argue with the logic behind it.

Second off, EFX has a steep road to climb in order to meet this new capital requirement. $5 million is just the tip of the iceberg and regardless of how EFX conducts their dealing desk (which is irrelevent) you need that money to stay in business. If EFX has the money, then put it up now. Why put your customers through the agony of not knowing whether or not you'll be around in six months? Instead, EFX is offering spin. Why? Because if they had the money they would have already put it up. Use your common sense and beware. Too many traders have gotten burned by small forex brokers. If traders still choose to take the risk, so be it. But you can't say you weren't warned.

[Libros]

Justin,
all asset must be lose before it affect client money?
how guarantee that? from where we can look?



forex scholar, looks like you're broker fanatic.
what is your prefered broker?
why ibfx and interactive broker not listed?

all healthy broker offer big spread except Oanda.
and Oanda offer crazy nonsense spread widening policy.

What about REFco before, anybody know the history on 'capital' side?

can anybody make criticism against Northfinance?



"on business, capital not always win."

i have story about company in my country.
it's big investment company among others. the biggest if i can say.
so what?? it had just dropped and out in just one day.
i will tell this story if there is request for this. cause i don't like talking alone


"no one can guarantee money except central bank itself."

[forex scholar]

In lieu of this coming rule change stick with the major brokers listed as "healthy" and avoid the unhealthy ones.

[forex scholar]

Another important point to keep in mind is that $5 million is just the initial minimum capital requirement. In addition to this requirement regulators also require brokers to set aside 10% of all customer assets aside in addition to the $5 million requirement. That means that a firm with $30 million in customer assets will have to set aside an additional $3 million. Then there are concentration charges the firm must also set aside capital for. Altogether that means most firms will need at a minimum TEN MILLION DOLLARS in net capital to survive. Judging from the Dead Firms Walking list none of those firms are even remotely close to meeting these requirements. If anything, the situation is much worse than it appears. Again, if you have money with a smaller firm talk to your broker and ask them these questions. After all, its only your money at stake.

[scorpion]

Interest points all along...

So now it's July 7. What's the verdict? According to Justin from EFX, NFA should have voted last week.

The numbers seldom speak the harsh reality behind it. IMO, FXCM and GFT are just too big to respond to support tickets under 48 hours. FXCM platform even with the new look doesn't offer advance features such as charting with custom indicators, backtester, and built-in scripting for automation like those of MetaTrader. I would still have to say that you should try the demos of various brokers to judge which one should deserve your deposit.

NFA is merely a regulator. Will it be justified to seize all the capital when a financial firm cannot comply with it? I don't think so (correct me i'm wrong). Even if it can dissolve a firm, it's going to allow traders to get their own funds. The maximum punishment NFA can give to a firm that has committed any fraud is to simply take back the "Registered with NFA #123", and then off the traders go trading with their unregulated brokers. But there's more to it. NFA is not alone. Some brokers may simply go offshore and register with foreign regulators.

[forex scholar]

Well, it looks like the forex dead pool is about to claim its first two victims. Read it and weep.

The NFA has issued serious complaints against two small, undercapitalized firms.

The first is Advanced Markets (Amifx). The NFA says in its complaint, “On June 28, 2007, NFA issued a Complaint charging AMI with cheating, defrauding or deceiving another person or attempting to do so and failure to observe high standards of commercial honor and just and equitable principles of trade. The Complaint also charged AMI with failure to maintain required adjusted net capital; failure to take required charges; failure to collect and maintain required security deposits; failure to file accurate weekly reports; and failure to maintain accurate records.”

http://www.nfa.futures.org/basicnet/...px?seqnum=1251

What is even more frightening is that Amifx has only $1,020,000 in capital. Could this be ANOTHER UGMFX?

The second is against Bacera Corporation (whoever they are?) But just like UGMFX Bacera looks like they got no money left. On June 28, 2007, NFA issued a Complaint charging Bacera with failure to give required notice; failure to maintain required adjusted net capital; failure to take required charges; and failure to maintain accurate records. The Complaint also charged Bacera with cheating, defrauding or deceiving another person or attempting to do so and failure to observe high standards of commercial honor and just and equitable principles of trade. Finally, the Complaint charged Bacera, Wong, Hsu and Valdivia with failure to supervise.

It seems like these smaller firms are going under on a weekly basis. I'll keep everyone posted as the dead forex firms walking continue to die off...

[scorpion]

I think those got to do more with fraud, not minimum capital requirement, not the size of firm. Records are expected to be accurate, not using some kind of creative accounting to lie the financial situation. The best example is Refco which went bankrupt with $4,000,000,000 capital. Number says nothing, because they hid the same amount of debt under our noses.

Serious complaints were given to big brokers too. Search and you'll see them.