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NFA Investor Newsletter

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April 17, 2012
In this Issue: Money Smart Week 2012 Brokerage Accounts Investor Tips Precious Metals Fraud Crowdfunding SEC Investor Advisory Committee

NFA spreads investor education message during Money Smart Week

Money Smart Week 2012

NFA will participate in three events in conjunction with Money Smart Week in Chicago. Coordinated by the Federal Reserve Bank of Chicago, Money Smart Week (April 21-28) offers more than 450 free educational classes, seminars and activities focusing on financial topics for people of all walks of life.

On Wednesday, April 25, NFA will join other regulatory and enforcement agencies at a Financial Regulators Fair at the State of Illinois Building, Thompson Center. Representatives from twelve agencies, including the Commodity Futures Trading Commission (CFTC), Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) will distribute information on financial protection, banking, credit and investing. The event will run from 10:00 a.m. to 2:00 p.m.

On Thursday, April 26, NFA, the CFTC and AARP will co-sponsor a seminar titled "Avoiding Fraud is Your Best Money Strategy". The program will be held at the AARP Illinois office at 222 N. LaSalle St., 4th floor conference room, from 12:00 p.m. to 1:00 p.m. Representatives from the CFTC and NFA will provide attendees with advice on how to identify the warning signs and avoid investment fraud. Anyone wishing to attend the program should pre-register with Yelena Yankovskaya by calling (312) 458-3607 or emailing

Finally, on Friday, April 27, NFA will co-sponsor a seminar titled, "Introduction to Trading Futures, Options and How to Avoid Investment Fraud." The program will be held at the Chicago Board Options Exchange (CBOE) at 400 S. LaSalle St. from 11 a.m. to 12 p.m. Representatives from NFA will discuss trading derivatives as well as how to identify warning signs and avoid investment fraud. Anyone wishing to attend the program should pre-register by calling Ruth Hong Brininger at (312) 781-1371 or emailing

For more information on these and other Money Smart Week events, visit

FINRA provides investors with tips to understand brokerage accounts

Do you read through your brokerage statements with a fine tooth comb? The Financial Industry Regulatory Authority (FINRA) emphasizes the importance of carefully reviewing brokerage account statements and published an Investor Alert earlier this year identifying red flags. In "It Pays to Understand Your Brokerage Account Statement and Trade Confirmations," FINRA explains that reviewing brokerage statements helps investors stay on top of investment holdings, provides valuable information that can alert investors to errors and can even help investors recognize misconduct by brokers or a brokerage firm such as unauthorized trading or overcharging customers for handling transactions. Below are some of the key areas outlined in the alert that investors should pay attention to regarding brokerage account statements.

Statement Period. It may be a red flag if your statement period or end date is not specified or does not follow a consistent pattern.

Account Numbers. Look out for account numbers that don't match previous statements or if your account information is outdated.

Firm Contact Information. Be wary of a firm that provides a number that is always busy or out of service. Also, make sure the name of the professional you are to contact looks familiar to you.

Clearing Firm. A clearing firm settles or clears the trade. Make sure the name of the clearing firm and their contact information is on your brokerage statement.

Account Summary. Review all the information in your account summary to ensure you authorized all of the trading activity. Also, look out for unrealistic performance data, such as significantly high returns, and assess the fee structure for excessive or unfair fees.

Finally, don't hesitate to ask your broker to provide details about your account statement! These costs ultimately impact the overall return on your investments and you have a right to this information.

If you do see a discrepancy, you always have the option to file a complaint with FINRA, the Securities and Exchange Commission (SEC) or other enforcement agencies.

CFTC advises public of possible precious metals fraud

The lure and price of precious metals may be attractive to some investors but the Commodity Futures Trading Commission (CFTC) says beware! Earlier this year, the CFTC issued a Consumer Advisory Alert related to the promise of easy profits to be made in gold, silver, platinum, palladium and other precious metals. They recommend that the public be alert to companies, that often call themselves "metals dealers" or "merchants," that sell investments in precious metals based on sales pitches claiming a person can make a lot of money with little risk. These companies offer financing agreements and say they will store the goods in a storage facility or "bank" but the CFTC warns that this could be fraud!

Remember that what seems too good to be true probably is! The CFTC's Advisory explains that these firms are structured so that the consumer pays only a small percentage of the precious metals' total purchase price and then, the company arranges a loan to the consumer to finance the rest of the precious metals' purchase price. However, the CFTC said that these firms often do not use the consumer's money to purchase the metals at any time, do not arrange loans or do not actually store the metal with an independent bank yet they charge the consumer with phony interest and storage fees.

Another problem is that firms fail to point out that if customers only put a portion of the payment down, they will have to send the company additional funds if the prices move unfavorably.

The CFTC warns that those consumers who purchase or invest with fraudulent precious metals companies usually do not make the promised profits and in fact, lose all or a significant portion of their investments.

If you are exploring an investment in precious metals, the CFTC advises consumers to look for "warning signs" such as firm notes that expressly state that the transactions are NOT regulated by the CFTC or National Futures Association. Another red flag is a precious metals company that does not identify the financial institution or bank that will be loaning the customer money and does not identify where the physical metal is located.

For more information about fraud related to precious metals, please see the CFTC's Advisory Alert.

"Crowdfunding" continues to cause concern, this time related to JOBS Act

Do you remember in last quarter's newsletter we reported on the Entrepreneur Access to Capital Act, which introduced the concept of "crowdfunding"? This enables entrepreneurs to fundraise online for up to $2 million per year in investment capital. It also exempts these small businesses from registering the securities with the state.

The National American Securities Administrators Association (NASAA) believes the "crowdfunding" legislation does not protect investors because it would allow entrepreneurs to solicit investments directly from individuals online without having to register with the SEC. Hence, they believe, making it easier to scam investors.

NASAA is continuing to speak out against "crowdfunding" specifically related to the recently signed Jumpstart Our Business Startups (JOBS) Act.

President Barack Obama signed the JOBS Act on April 5, 2012, which hopes to increase American job growth and stimulate the economy. However, a provision in the bill requires the SEC to establish a registration exemption for "crowdfunding". Issuers who use the "crowdfunding" exemption will be required to disclose a minimal amount of information to the SEC but, similar to the Entrepreneur Access to Capital Act, the Act preempts state regulators from reviewing or registering the securities sold under the "crowdfunding" exemption in their state.

NASAA is concerned that this legislation establishes the SEC as the sole responsible party for policing "crowdfunding" and that the SEC doesn't have the time or resources to effectively regulate this new market. Emphasizing their earlier concern, NASAA believes that "crowdfunding" will not receive regulatory scrutiny until after fraud has been committed.

It's important to note that NASAA is not against "crowdfunding"; however, it does believe a balance needs to be made between benefits for small business and investor protection.

For more information about the JOBS Act, please read President Obama's remarks. You can read more about NASAA's concern with "crowdfunding" in commentary on their website.

SEC announces members for new investor advisory committee

On April 9, 2012, the SEC announced the formation of a new Advisory Committee required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Replacing an advisory committee that was disbanded after the Dodd-Frank Act was passed, the new 21-member committee will advise the SEC on regulatory priorities, the regulation of securities products, trading strategies, fee structures and on the effectiveness of disclosure. They will also provide insight on initiatives to protect investor interests, to promote investor confidence and to sustain the integrity of the securities markets.

The committee, under Section 911 of the Dodd-Frank Act, is authorized to submit findings and recommendations for review and consideration by the Commission.

All five sitting Commissioners nominated the members of the newly formed committee. Members represent senior citizens and other individual investors, mutual funds, pension funds and state securities regulators.

For a complete list of the 21-member committee, please visit the SEC's website.

Recent Enforcement Actions

In the first quarter of 2012, NFA's Business Conduct Committee issued Decisions, Member Responsibility Actions, Final Orders in Registration Cases and Complaints against the following NFA Member firms and individuals. Click on the name for more detailed information.

Decisions in Disciplinary Cases
Calatrava Securities LLC
Cogito Asset Management Corp.
Currensee Inc.
Dalton General Partner Limited
Sandra Farr
Greg Firman d/b/a E-Trade FX
FX Currency Traders Inc.
Golden Forex Inc.
Harvest Investment Group Inc.
Intercapital Markets Corp.
Jones Commodities Inc.
Kairos Asset Management LLC
Mark B. Katzenberger
Todd J. Krejci
Haochun Ku
David J. Leibowitz
Jacob N. Martinez
Susan M. O'Meara
Option Investments Inc., et al.
Peregrine Financial Group, Inc.
Range Wise Inc.
Rhino Fund Management LC
Joshua T.J. Russo
Nolan J. Schiff
Tracy Morgan Spaeth
Jacek Sroka
Strategic Futures Management, Inc.
Russell R. Wasendorf, Jr.
Leon L. Wolmarans
Meixuan Zhang

Member Responsibility Actions
Arista LLC
BKT Capital Management LLC
Basil Fayadh
Robert A. Christy
Crabapple Capital Group LLC
Jonathan Hansen
J Hansen Investments LLC
Abdul Saltan Walji

Final Orders in Registration Cases
Keith W. Jeske
William R. Kelman
Bradley E. Knight

Susan M. O'Meara
Option Investments Inc., et al.
Peregrine Financial Group, Inc.
Nolan J. Schiff
Russell R. Wasendorf, Jr.

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