Posted on 29, May | Posted by admin

In May 2013 MB Trading received a CFTC administrative action for “Violating Minimal Financial Requirement Rules” in regard to their retail FX business. In the NFA’s words: “[MB Trading failed] to comply with minimum financial requirements for registered RFEDs and Futures Commission Merchants (FCMs) that offer or engage in retail off-exchange foreign currency (forex) transactions”.

See the NFA release: Narrative for 0315389 – MB TRADING FUTURES INC

From the NFA:

May 14, 2013
CFTC Orders MB Trading Futures Inc., a Registered Retail Foreign Exchange Dealer, to Pay $200,000 Penalty to Settle Charges of Violating Minimal Financial Requirement Rules

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against MB Trading Futures Inc. (MB Trading), a registered Retail Foreign Exchange Dealer (RFED) of El Segundo, California, for failing to comply with minimum financial requirements for registered RFEDs and Futures Commission Merchants (FCMs) that offer or engage in retail off-exchange foreign currency (forex) transactions. MB Trading has been registered with the CFTC as an FCM since February 28, 2006 and as an RFED since September 9, 2010.

Effective October 18, 2010, the CFTC adopted comprehensive new rules to protect individual investors that buy forex contracts from, or sell forex contracts to, forex firms. Under these rules, RFEDs and FCMs that offer or engage in retail forex transactions must at all times maintain adjusted net capital of $20 million, or more in some circumstances, and hold enough assets to meet or exceed their total retail forex obligations to customers. The new rules impose several restrictions on the types of funds that firms can include in their adjusted net capital and asset computations.

According to the CFTC Order, for more than 16 months after adoption of the new rules, between October 18, 2010 and March 1, 2012, MB Trading improperly included certain funds held in four accounts in its adjusted net capital computations. After excluding those funds as required, the Order finds that MB Trading failed to meet its adjusted net capital requirements for 456 calendar days between October 18, 2010 and March 1, 2012.

During the same period, MB Trading also improperly included certain funds held in two of the same accounts, along with funds held in a third account, in its asset computations, according to the Order. After excluding those funds as required, the Order finds that MB Trading failed to hold enough assets to meet or exceed its total retail forex obligation to customers for 501 calendar days between October 18, 2010 and March 1, 2012.

Had these funds properly qualified under the regulations, MB Trading would have complied with its adjusted net capital and asset requirements, according to the Order.

The CFTC Order imposes a $200,000 civil monetary penalty and a cease and desist order on MB Trading for these violations. The Order notes that in settling this matter, the CFTC took into account MB Trading’s cooperation and the corrective action it undertook after its deficiencies were discovered.

The CFTC appreciates the assistance of the National Futures Association.

CFTC Division of Enforcement staff responsible for this action are Stephanie Reinhart, Melissa Glasbrenner, William Janulis, Scott Williamson, Rosemary Hollinger, and Richard Wagner. Tom Bloom, Kurt Harms, Justin Beebe, and Lauren Fulks of the CFTC’s Division of Swap Dealer and Intermediary Oversight also assisted in this matter.

Last Updated: May 14, 2013

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CFTC Sues Interactive Brokers Over Customer Funds – Reuters

Posted on 9, Apr | Posted by admin

From Reuters:

“The Commodity Futures Trading Commission ordered Interactive Brokers Group to pay a $225,000 civil monetary penalty, the second time in less than a year that the watchdog is fining the futures broker.

The CFTC found that the group had failed to meet a range of requirements for customer funds, the regulator said on Tuesday.”

IB, which holds over 140,000 customer accounts was found guilty for failing to calculate the amount of customer funds on deposit, and maintaining sufficient capital in customer segregated accounts within the U.S. These issues occurred roughly between 1/2008 and 4/2011.

From 9/2011 to 5/2012, IB covered some of its futures and options customer obligations with Japanese yen and Swiss francs to “maximize its interest earnings and not at the request of any of its commodity customers”. Due to this IB failed to retain sufficient capital in segregation, to the extent of approximately $90 million to $300 million. Apparently IB identified this issue and self-reported the violation to the CFTC. During this time, however, IB maintained excess segregated funds ranging from $48.4 million to $455.3 million at all relevant times.

Questions? Call Dennis Holden the Media contact within the CFTC at 202-418-5088

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NFA adds New Tool for Added FCM Transparency

Posted on 28, Nov | Posted by admin

The NFA has added a new feature to its Basic database system. Previously their system allowed anyone to see basic information and disciplinary actions against one of its individual members or member firms.

Recently, in an effort to add some transparency to our opaque futures industry, the NFA has added a new tool on the profile page of each FCM.

You can read about their new development on the NFA website home page, here.

The additional information allows a user to view  an overlap of the data available on the monthly FCM financial report from the CFTC: adjusted net capital, net capital requirements and excess net capital.

The most interesting component is not available from the CFTC (to our knowledge) and is completely new. Users now have the ability to see which assets a FCM has invested in and maintains exposure to. FCMs are legally allowed to invest customer assets in certain interest bearing vehicles outlined by the CFTC and NFA. These allowable vehicles are: government securities (Treasuries), CDs, money market funds, municipal bonds and Government Sponsored Enterprise Securities (GSEs). Users are now able to view approximate allocations for each FCM and how it chooses to allocate funds.

This addition by the NFA is several years too late and is only a small step. Also, even if this tool were available last Spring, investors still would not have been clued into any red flags with PFG Best. PFG lied to the NFA and the NFA would have, in turn, unknowingly posted PFG’s lies in this new digital venue. This additional tool doesn’t prevent the next Russell Wasendorf Sr. from defrauding the public, but it is better than nothing.

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Old News, Still Waiting for Action from the CFTC

Posted on 26, Jul | Posted by admin

In March 2012, the CFTC sued MBF Clearing for not properly segregating client funds. Unfortunately, there has been no action taken by the CFTC or any final penalty given, therefor we cannot factor this situation into our evaluation of MBF Clearing. As soon as action is taken and a monetary penalty is assessed, it will immediately factor into our rating of MBF Clearing.

Our clients and the general public need to be kept up to speed on these types of developments.

Read more here from Bloomberg.

View the filing data here, via the NFA Basic database.

Preview from the NFA Basic database:

“CFTC Charges MBF Clearing Corp. with Violations of Customer Fund Segregation Requirements

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today charged MBF Clearing Corp. (MBF), a registered futures commission merchant (FCM), with violating the Commodity Exchange Act (CEA) and Commission regulations concerning segregation of customer funds and with supervision failures.

When an FCM deposits its customers’ funds in a bank account, the CEA and Commission regulations require that: the FCM title the account as a customer segregation account; the FCM obtain a written acknowledgement that the bank has been informed that the funds in the account belong to the FCM’s customers and indicates that the funds are separately accounted for and held in accord with the segregation provisions of the CEA; and that the funds must be available in one business day.

According to the CFTC’s complaint, MBF, which from September 2008 through March 2010, routinely held between $30 million and $90 million in customer funds in a non-compliant account, violated all of these requirements. Specifically, the complaint charges that MBF held customer funds in an improperly titled non-segregated money market fund account, which did not carry a legal obligation to make the funds available in one business day, and that because these funds were not properly considered as customer segregated funds, MBF had segregated customer fund deficiencies for more than one year. For example, MBF was deficient by more than $15 million as of month-end for June 2009, which MBF failed to report on its required monthly statement of financial condition to the Commission.”

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Russell Wasendorf Under Arrest, Forged Statements for 20 Years

Posted on 13, Jul | Posted by admin

CNBC reports that unidentified sources claim that PFG Best CEO, Russell Wasendorf, is awake and responsive. Authorities announce that he has been placed under arrest for making false statements to the CFTC.

From CNBC:

“CEDAR FALLS, Iowa — Russell Wasendorf, the founder and CEO of failed trader Peregrine Financial Group, has been arrested, CNBC has learned.

He has been charged with making false statements to the Commodity Futures Trading Commission relating to the value of customer segregated funds at PFG beginning back in 2010 and continuing until July 2012.

“I have committed fraud,” Wasendorf said in a signed statement, according to the criminal compliant. Wasendorf also said he forged bank statements for 20 years.”

Russell Wasendorf’s suicide note, hat tip Zero Hedge:

“I have committed fraud. For this I feel constant and intense guilt…

The forgeries started nearly twenty years ago…

Should I go out of business or cheat

I guess my ego was too big to admit failure…”

Additional details here.

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Conflict of Interest: PFG Best and the NFA

Posted on 11, Jul | Posted by admin

Ann Barnhardt has been involved professionally in the futures industry for some time and was hit hard by the collapse of MF Global. She has been on a mission ever since and I applaud her. The industry is broken and needs some legitimate attention. Fortunately, it seems the PFG Best failure has reignited her passion in digging up dirt. From Ann via Jesse Cafe Americain:


“The National Futures Association needs to be sued into the ground by all of the PFGBest customers, as well as many of the NFA employees PERSONALLY.

In 2010 I was audited by the NFA, which is a bi-annual (every two years) occurrence for Independent Introducing Brokers. The NFA tried to tell me that a commercial hedge broker could not execute more than one round-turn per client per cash inventory cycle.

Yes, I kid you not. They actually tried to make that argument. As in a feedlot or rancher who is hedged with short futures and has a big open profit on the hedge MAY NOT exit that short futures and buy puts in order to manage that position. Or, if a hedger has an option position that has a big open profit, the hedger may NOT roll that option position into a different strike price in order to capture equity and protect against time value erosion.

The NFA actually tried to argue that it is against the law for a hedge broker to transact more than one round-turn per cash commodity inventory cycle. Again, I can’t make this crap up. I have all of their stunningly ignorant letters to prove all of this.

But here is the point, and anyone out there who is a PFGBest customer or an attorney representing a PFGBest customer needs to listen up:

The same “Senior Compliance Manager” who signed off on the PFGBest affadavit and who is listed on the NFA website as both the “Director of Audits/Investigations” and the “Director of FOREX Compliance”, Lauren Brinati, is the same woman whom I and my attorneys dealt with two years ago.

Now, hold on to your pantyhose.

One of my attorneys in the Schuyler Roche Crisham firm in Chicago, as livid as I was by the NFA’s galactically stupid contention about hedgers being limited to one round-turn per cash inventory cycle, called Lauren Brinati to discuss the NFA’s position. Lauren Brinati said that she couldn’t discuss the matter with my attorney directly because:

“I don’t actually understand any of this stuff. I just sign whatever comes across my desk.”
Lauren Brinati, June 2010″


I encourage you to read this post in its entirety. There needs to be a catalyst to force change within the  futures industry as a whole. Let’s hope the combination of PFG Best and MF Global will suffice.

Although it may be nice to read what Ann and Attain Capital write, there simply needs to be action. Hopefully a legitimate lawsuit can be brought on parties that have hurt the industry as a whole. I look forward to watching this unfold.

From what I hear, our May 2012 ratings report on Zero Hedge has created quite a stir in the industry. Let’s hope this is just the beginning of positive material changes.

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Refco, MF Global & Now PFG Best, When Will Regulators Get a Clue?

Posted on 10, Jul | Posted by admin

Attain sent out a nice newsletter in response to the current situation with PFG Best, a broker they and their clients held money with. One of their contacts within PFG suggests that Mr. Wasendorf attempted suicide by directing his car exhaust into his vehicle through a tube. Although this hasn’t been verified yet.

We suggest reading the Attain letter here.

“Yesterday we learned that PFGBest has had a customer fund shortfall amounting to approximately $220mm (perhaps dating back to 2010). As the story has unfolded, the details have been at turns nauseating and infuriating, as a web of deceit unravels before our eyes.

MF Global had us angry, but this time, it’s personal. Our clients have money with PFGBest. We have money with PFGBest. We were misled by senior leadership that we not only trusted as partners in business. We were let down by regulators. We were failed by our government.

Enough is enough. Here, we’ll break down what we know so far, the possibilities on the horizon, and the swift, decisive action necessary to keep this travesty from becoming the final nail in the coffin of a marketplace that serves as a heartbeat of our global economy. Because, to borrow a phrase from Captain John Paul Jones, we have not yet begun to fight.”

Last year, after the MF Global bankruptcy, Attain Capital was vocal about the shortfalls of regulators and the flaws within the FCM business. Hopefully now they won’t let up and will keep pressuring the NFA and CFTC to make meaningful changes.

Attain touches on some suggested remedies that could help put an end to the loss of customer segregated funds via fraud and theft. In addition to including futures and FX accounts under the SIPC insurance umbrella and creating regulations on how to unwind a bankrupt FCM, there need to be proactive protocols. Unfortunately, the NFA and CFTC are reactionary agencies and have zero experience pioneering advances within the industry. That needs to change.

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What Went Wrong at PFG Best?

Posted on 10, Jul | Posted by admin

PFG BestHere is what we know over the last several hours:

Russ Wasendorf Sr., the CEO and founder of PFG Best attempted suicide this morning in his car and failed. He is in critical condition at a local university hospital

PFG Best identified “accounting irregularities” in the banking records.

The NFA (National Futures Association) has effectively shut down PFG Best, enabling liquidations only. Accounts are frozen and withdrawals are not possible at this time.

The NFA inquired to the segregated funds held at a U.S. bank (JP Morgan) as there was a ~$220mil discrepancy (PFG Best has approximately $400 mil in client funds). PFG stated that about $225mil was held at their U.S. Bank, when in reality only $5mil was held in the customer segregated account.

What did we know before today that enabled Atlas Ratings to identify PFG Best in the BOTTOM 5% of all FCMs (only 4 FCMs ranked below PFG Best on our proprietary rating scale).

Almost across the board, PFG Best lagged dramatically in most categories. The only category where they did not have low marks was in regard to exchange penalties. The commodity exchanges had not penalized PFG very often for their clearing procedures or floor recordkeeping, that much was done adequately within the company.

Everything else we monitor showed weakness within the company:

Their net capital ratio and the trend of that ratio was extremely weak.

Their business is not diversified, they rely on minimal interest revenue, commissions and any proprietary trading.

Customer assets growth has been weak, healthy companies attract and retain new accounts.

PFG Best has had many CFTC & NFA penalties, these are major red flags. They failed to ID a massive ponzi scheme to the tune of $195mil that was “trading” through PFG Best.

Customers have engaged in arbitration with PFG Best and won. The NFA has sided with customers in numerous occasions in regard to disputes. In all of these situation, PFG Best was required to reimburse or pay their past customers for damages.

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NFA Shuts Down PFG Best, Accounting Irregularities. CEO Attempts Suicide

Posted on 9, Jul | Posted by admin

PFG Best looks to be the next MF Global. Atlas Ratings has PFG Best (Peregrine Financial Group) in the BOTTOM 5% of all FCMs in operation. Only three FCMs rank below PFG Best.

Our clients had the information to avoid PFG Best.

Russell Wasendorf has attempted suicide (unsuccessfully we assume) and the company has found some “accounting irregularities”. If history is any indication this will mean fraud.

The NFA will have information on their website this evening and you can call to submit your email address for current information.

The NFA has shut down PFG Best and they are in liquidation mode only. They have frozen funds and not releasing any money back to clients at this stage.

We encourage you to take a hard look at your current FCM and do the necessary research to ensure that this won’t happen to your broker down the road. Atlas Ratings successfully identified MF Global as exceedingly high risk and also identified PFG Best as extremely high risk as well.

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Only Update in Regard to PFG Best, For Now.

Posted on 9, Jul | Posted by admin

Monday, July 9, 2012


Due to a recent emergency involving Russell R. Wasendorf, Sr., a suicide attempt, some accounting irregularities are being investigated regarding company accounts.  PFGBEST is wholly owned by Mr. Wasendorf.  Therefore, the NFA and other officials have put all funds on hold, and PFGBEST is in liquidation-only status with our clearing FCM.  What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds.  We will update you as any new procedures are stipulated and with any further information as it becomes available.



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