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Regulator News: Industry Participants Jaffarian and Bry Seek Election to NFA Board

Friday, December 02, 2011

Regulator News

Industry Participants Jaffarian and Bry Seek Election to NFA Board

Election to the NFA board is being sought by two industry participants: Ernest Jaffarian, President and CEO of Efficient Capital Management, a well-known diversified Commodity Pool Operator, and Douglas Bry, President of Northfield Trading.  These leaders are seeking the positions held by well-known participants Aleks Kins, president and CEO of AlphaMetrix, and Craig Caudle, CEO of Liberty Funds Group, Inc., who were recommended by the nominating committee.

In a statement announcing their bid, Mr. Jaffarian and Mr. Bry said:

“The MF Global bankruptcy has shaken the confidence that was pretty much universally shared in the financial strength of our industry and the security of segregated funds,” they said in a statement.  “At the same time, the regulators continue to debate who has jurisdiction over what products and activities, focusing on details and limiting growth opportunities, while they miss the big picture problems.”

“As a result of the MF Global bankruptcy, a number of our colleagues have already been forced out of business, and customers are now asking questions about the safety of their funds at FCM's,” the statement reads, noting the pain the issue is causing the industry of uncorrelated investments.  “The cost of handling the MF Global bankruptcy in a customer friendly way would have been minimal compared to the potential for a negative long-term impact, yet our industry failed to rise to the challenge.  As daily reports of the ‘shortfall’ continue to dominate the press, it is not overly dramatic to say that the future of our industry hangs in the balance.”

“It is our intent to aggressively represent the perspectives and needs of CTA's and CPO's, and do all within our power to make certain that the regulatory and other changes that are sure to come not only restore confidence, but actually enhance that confidence.”

The issues raised deserve consideration, and NFA members should be involved in industry decisions at this moment in industry history. 
To view the NFA nominating process and current board nominees, click here.  http://bit.ly/tyP89b

Enforcement Actions:

Below are statements from the NFA and CFTC.  For further information visit www.nfa.futures.org or www.cftc.gov

NFA suspends introducing broker Angus Jackson, Inc. of Fort Lauderdale, Florida and its principals

October 27, Chicago - National Futures Association (NFA) has suspended Angus Jackson, Inc. of Florida (Angus Jackson) and its principal, Martin H. Bedick from NFA membership for a period of seven years. Angus Jackson is an Introducing Broker (IB) located in Fort Lauderdale, Florida. NFA also suspended Michael E. Rose, another principal of Angus Jackson, for a period of two years. Both Bedick and Rose are also permanently barred from acting as a principal of an NFA Member. The Decision, issued by an NFA Hearing Panel, is based on a Complaint filed in December 2010.

The Panel found that Angus Jackson and Bedick provided false information to NFA about an unregistered individual who was acting as a broker for the firm and about commission payments made to such individual by falsely representing that such individual provided computer consulting services to the firm and that payments to such individual were for such services. The Panel also found that Angus Jackson failed to provide the required annual anti-money laundering (AML) training to a number of its associated persons (APs). Additionally, Angus Jackson included an order for a non-customer account in the same bunched order and provided post-execution allocation instructions for bunched customer orders which IBs are not permitted to do under NFA rules. Finally, the Panel found that Rose was aware that an unregistered individual received commissions but ignored the situation and his responsibilities as a principal of the firm.

The complete text of the Complaint and Decision can be viewed on NFA's website (www.nfa.futures.org).

NFA takes emergency enforcement action against Auburn, Alabama firm, TS Capital Management

October 27, Chicago - National Futures Association (NFA) announced today that it has taken an emergency enforcement action against TS Capital Management LLC (TS Capital Management), a Commodity Pool Operator located in Auburn, Alabama. The Member Responsibility Action (MRA) is deemed necessary to protect investors in commodity pools and other investment vehicles controlled by TS Capital Management and/or John Stroud (also known as John David Stroud or David Stroud). Stroud is an owner and the CEO of the firm.

TS Capital Management has failed to cooperate with NFA in its audit and investigation of the firm by failing to produce books and records and other information requested by NFA. During its audit, NFA learned that TS Capital Management is affiliated with several unregistered entities operated by Stroud. TS Capital Management and Stroud provided NFA with false and misleading information concerning certain transactions involving the firm and the activities of its affiliates. As a result, NFA has been unable to complete its investigation into whether or not TS Capital Management and Stroud have acted properly in their dealings with investors; whether they misused investors' funds; whether they provided false information to investors concerning the status of their investments; and whether TS Capital Management is in full compliance with NFA Requirements.

TS Capital Management is prohibited from soliciting or accepting any funds or investments for any pools or other investment vehicles over which TS Capital Management or any of its principals, including Stroud, exercises control and from placing any trades. The MRA also prohibits TS Capital Management from disbursing or transferring any funds of customers, investors, pool participants or commodity pools over which it exercises control without prior NFA approval.

The MRA will remain in effect until such time TS Capital Management demonstrates that the firm is in complete compliance with all NFA Requirements. TS Capital Management may request a prompt hearing before NFA's Hearing Committee.

The complete text of the MRA can be viewed on NFA's website (www.nfa.futures.org).

Federal Court Orders Wisconsin-based Forex Dealer Jacob Juma Omukwe and His Companies to Pay over $2.6 Million in Restitution and Penalties in Foreign Currency Scheme

November 23, 2011 - Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) obtained a supplemental consent order requiring defendants Jacob Juma Omukwe and his companies, JadeFX, LTD (JadeFX) andJade Investments Group, LLC (Jade), jointly and severally to pay over $2.6 million in restitution and civil monetary penalties to settle a CFTC anti-fraud enforcement action filed in March 2011.

The CFTC alleged that the defendants, of Wisconsin Dells, Wis., operated a multi-million dollar fraudulent off-exchange retail foreign currency (forex) scheme through its website and fraudulently solicited and misappropriated more than $3.2 million from customers worldwide to trade forex. The complaint also alleged registration violations (see CFTC Press Release 5997-11, March 9, 2011).

The court’s supplemental order, entered by Chief Judge William M. Conley of the U.S. District Court for the Western District of Wisconsin on November 17, 2011, sets judgment for restitution and civil monetary penalties and requires Omukwe, JadeFX, and Jade jointly and severally to pay $1,302,656 in restitution and a $1,302,656 in civil monetary penalty.
In a prior consent order of permanent injunction, entered on March 8, 2011, the court found that Omukwe, JadeFX, and Jade violated the Commodity Exchange Act by defrauding customers in connection with forex transactions. That order also found that Omukwe and JadeFX committed registration violations, and it permanently prohibits the defendants from engaging in any commodity-related activity and from registering with the CFTC in any capacity.

The CFTC staff members responsible for this case are Gregory Scopino, Sophia Siddiqui, Amanda Harding, Tracey Wingate, Michael Amakor, Patricia Gomersall, Jeremy Christianson, Timothy J. Mulreany, Paul Hayeck, and Joan Manley.

CFTC Charges California Residents Robert Cannone, Thomas Breen, and Francis Franco and Their Company, National Equities Holdings, Inc. with $1.4 Million Commodity Pool Fraud

November 16, 2011 - The defendants charged with fraudulent solicitation, misappropriation of customer funds, and false statements
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a complaint in federal court in Santa Ana, Calif., charging defendants Robert J. Cannone of Laguna Niguel, Thomas B. Breen of San Juan Capistrano, Francis Franco of Anaheim, and their companyNational Equity Holdings, Inc. of Laguna Niguel, with fraudulently operating a $1.4 million commodity futures pool and with registration violations.

The CFTC complaint, filed in the U.S. District Court for the Central District of California, alleges that from at least May 2009 through at least May 2010, the defendants fraudulently solicited and accepted at least $1.4 million from 20 or more individuals to trade commodity futures contracts by participating in a commodity pool called NEH.

The defendants traded only a portion of the pool participant funds in proprietary accounts, sustaining overall and significant losses of approximately $582,631, according to the complaint. Defendants also allegedly misappropriated the majority of the pool participants’ funds to make so-called returns to participants in monthly payments that defendants claimed were the profitable proceeds of their trading. Cannone, Breen, and Franco also are charged with misappropriating pool participant funds for personal use. To conceal their fraud and trading losses from the pool participants, defendants allegedly issued false account statements reflecting profits.

After claiming to customers that all of their funds were lost in trading, and promising to return their funds, pool participants have not received their principal back, according to the complaint.

Additionally, National Equity Holdings failed to register with the CFTC as a commodity pool operator, and Cannone, Breen, and Franco failed to register as associated persons of National Equity, the complaint alleges.

Specifically, in their solicitations, the defendants (1) falsely claimed to have a successful and experienced trader (Franco) for the pool, (2) misrepresented the likelihood of profits and the risks associated with trading commodity futures, (3) failed to disclose that they were not properly registered with the CFTC to operate a pool, and (4) failed to disclose their intended uses of pool participant funds, according to the complaint. Cannone, Breen, and Franco allegedly operated in concert and aided and abetted each other in the fraud.
In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution to defrauded customers, civil monetary penalties, and permanent injunctions against further violations of the federal commodities laws.

The CFTC thanks the Federal Bureau of Investigation (Orange County Office) and the U.S. Attorney’s Office for the Central District of California (Santa Ana Office) for their assistance.

Risk Disclosure:

MANAGED FUTURES IS NOT APPROPRIATE FOR ALL INVESTORS.  IT CAN INVOLVE VOLATILITY AND RISK OF LOSS.

While this article is written with balance and accuracy in mind, the content is designed for sophisticated qualified eligible persons.  It is not appropriate for all individuals. 
Qualified eligible person as defined under the (CFTC) Regulation 4.7., because they are: Registered investment company; Bank; Insurance company; Employee benefit plan with >$5,000,000; Private business development company Organization described in Sec. 501(c)(3) of the Internal Revenue Code with >$5,000,000 in assets; Corporation, trust, partnership with >$5,000,000 not formed to invest in exempt pool; Person with net worth >$1,000,000; Person with net income >$200,000 each of last 2 yrs. or >$300,000 when combined with spouse; Pool, trust separate account, collective trust with >$5,000,000 in assets;  User also confirms they meet the following Portfolio Requirement: Own securities with a market value >$2,000,000; Have had on deposit at FCM, in last 6 months, >$200,000 in margin and option premiums; Have combination of securities and FCM deposits. The percentages of required amounts must = 100%.

Opinions:

User represents themself to be a sophisticated investor who understands volatility, risk and reward potential.  User recognizes information presented is not a recommendation to invest, but rather a generic opinion, which may not have considered all risk factors.

User recognizes this web site and related communication substantially represent the opinions of the author and are not reflective of the opinions of any exchange, regulatory body, trading firm or brokerage firm. The opinions of the author may not be appropriate for all investors and there is no warrantee relative to the accuracy or completeness of same.  The author may have conflicts of interest, a disclosure of which is available upon request. 

RISK DISCLOSURE

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. YOU COULD LOOSE ALL OF YOUR INVESTMENT OR MORE THAN YOU INITIALLY INVEST. IN SOME CASES, MANAGED COMMODITY ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS.

THE DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF THE PRINCIPAL RISK FACTORS AND EACH FEE TO BE CHARGED TO YOUR ACCOUNT BY THE COMMODITY TRADING ADVISOR (“CTA”). THE REGULATIONS OF THE COMMODITY FUTURES TRADING COMMISSION (“CFTC”) REQUIRE THAT PROSPECTIVE CUSTOMERS OF A CTA RECEIVE A DISCLOSURE DOCUMENT WHEN THEY ARE SOLICITED TO ENTER INTO AN AGREEMENT WHEREBY THE CTA WILL DIRECT OR GUIDE THE CLIENT’S COMMODITY INTEREST TRADING AND THAT CERTAIN RISK FACTORS BE HIGHLIGHTED. THIS DOCUMENT IS READILY ACCESSIBLE AT THIS SITE. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY MARKETS. THEREFORE, YOU SHOULD PROCEED DIRECTLY TO THE DISCLOSURE DOCUMENT AND STUDY IT CAREFULLY TO DETERMINE WHETHER SUCH TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.

YOU ARE ENCOURAGED TO ACCESS THE DISCLOSURE DOCUMENT. YOU WILL NOT INCUR ANY ADDITIONAL CHARGES BY ACCESSING THE DISCLOSURE DOCUMENT. YOU MAY ALSO REQUEST DELIVERY OF A HARD COPY OF THE DISCLOSURE DOCUMENT, WHICH WILL ALSO BE PROVIDED TO YOU AT NO ADDITIONAL COST.

MUCH OF THE DATA CONTAINED IN THIS REPORT IS TAKEN FROM SOURCES WHICH COULD DEPEND ON THE CTA TO SELF REPORT THEIR INFORMATION AND OR PERFORMANCE. AS SUCH, WHILE THE INFORMATION IN THIS REPORT AND REGARDING ALL CTA COMMUNICATION IS BELIEVED TO BE RELIABLE AND ACCURATE, PUBLISHER CAN MAKE NO GUARANTEE RELATIVE TO SAME. THE AUTHOR IS A REGISTERED ASSOCIATED PERSON WITH THE NATIONAL FUTURES ASSOCIATION.

No part of this publication or website may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher.



 
This article was published in Opalesque Futures Intelligence.
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