While traders were busy making pips rain last September 8, the Commodity Futures Trading Commission (CFTC) announced that it filed enforcement actions against 11 forex-related firms across Federal District Courts in Illinois, New York, Utah, and Wyoming.
As you all know, the CFTC’s mission is to protect the public from abusive practices related to the sale of commodity and financial futures and options. Luckily for us, the CFTC has been enforcing stricter forex regulations since October 2010, when it required entities that wish to participate in the forex market to register with the CFTC.
The CFTC stepped up its game last January when it filed enforcement actions against 14 entities. Out of those 14 firms, 11 have already settled their charges or have defaulted, while 3 cases are still pending. This time around the CFTC is charging 11 forex-related companies. Is your broker one of them? Here’s the list:
1st Investment Management, LLC, a Wyoming LLC
City Credit Capital, (UK) Ltd., a United Kingdom company
Enfinium Pty Ltd., an Australian company
GBFX, LLC, a New York LLC
Gold & Bennett, LLC, a New York LLC
InterForex, Inc., a British Virgin Islands company
Lucid Financial, Inc., a Utah corporation
MF Financial, Ltd., a Belize company with offices in New York City
O.C.M. Online Capital Markets Limited, a British Virgin Islands company
Trading Point of Financial Instruments Ltd. a Cyprus company
Windsor Brokers, Ltd., a Cyprus company
According to the CFTC, 9 out of 11 of these firms acted as Retail Foreign Exchange Dealers (RFEDs). Remember, RFEDs and Futures Commission Merchants (FCMs) usually take the opposite side of a traders’ transaction. Under the Commodity Exchange Act (CEA) and CFTC Regulations, an entity acting as an RFED or FCM must register with the CFTC.
As for Gold & Bennett, LLC and Lucid Financial, Inc., the CFTC asserted that they placed forex trades at an RFED without declaring themselves as an “Introducing Broker.”
The CFTC is currently looking to file for preliminary injunctions against these brokers. For all you non-lawyers out there, an injunction will prevent a broker from carrying out its everyday operations (like the handling and processing of client trades) until the broker complies with the CEA and CFTC regulations.
In addition to the injunction, the CFTC will be filing for civil monetary payments, trading bans, disgorgement (giving back of profits obtained through illegal activities) and rescission (cancellation of contracts).
The bigger question for investors is, “What happens if my broker is on that list?”
While you won’t be thrown in jail for trading with any of the brokers listed above, it wouldn’t hurt to take caution with your transactions with them. After all, it is YOUR hard-earned money at stake and you wouldn’t want to go through any legal headaches should anything bad happen.
I suggest you contact your broker and ask them what they plan to do about the allegations. If you aren’t pleased or are iffy about your brokers’ response, then it might be time explore your options.
If you have any questions, you can also ask the CFTC itself for more information. Big Brother is there to help! Here’s a helpful link for any forex fraud inquiries: