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NFA Investor Newsletter

January 15, 2008

In this Issue: The Lure of Investor Chat Rooms and Bulletin Boards Higher Capital Requirements for Forex Dealer Members Resolve to be a Smart Investor in 2008

Beware the lure of investor chat rooms and bulletin boards 

We all like to feel that we are part of a community - a place where we can express our opinions with a group of people who share our interests. The Internet provides us with many opportunities to do just that through live chat rooms, online forums and bulletin boards. In many cases, you can obtain valuable information from these Web sites. You can also, however, obtain false information and even become a victim of fraud.

At NFA, we frequently receive telephone calls and emails from individuals who cite information they read in a chat room or bulletin board. Many times, this information is inaccurate.

Remember, most chat rooms, online forums and bulletin boards allow individuals to post messages using an alias. Some posters even use multiple aliases. That means it is very difficult for you to know the true identity of the individual behind the message. Don't assume that the person posting the information is an investment professional that has no ulterior motive in sharing his information with total strangers.

The North American Securities Administrators Association (NASAA) offers the following tips to remember when participating in a chat room, online forum or bulletin board:

  • Don't expect to get rich quick.
  • Don't assume that your online computer service polices its investment bulletin boards.
  • Don't buy anything on the basis of online hype.
  • Don't act on the advice of a person who hides his or her identity.
  • Don't assume that just because someone says that they have checked something out that they have actually done so.
  • Watch out for conflicts of interest.

In addition, Microsoft Corporation lists the following 5 safety tips for chat rooms:

1. Never give out your personal information in a chat room.
2. Never agree to meet a stranger in person whom you met in a chat room.
3. When you're asked to enter or sign up for a chat nickname, choose a name that doesn't give away you personal information.
4. Be wary of other chatters who ask you to meet in private chat rooms.
5. Check the terms and conditions, code of conduct and privacy statement at the chat site before you begin chatting.

For additional information, check out NASAA's Investor Alert on Internet Fraud and Abuse.


Resolve to be a smart investor in 2008

It's the time of year when we make all sorts of resolutions. The Alliance for Investor Education (AIE) recommends that we all "Resolve to Save and Invest." AIE, a non-profit organization made up of the United States' leading financial-related foundations, non-profit organizations, associations and governmental agencies, lists 13 top resources for consumers in the "Resolve to Save and Invest in 2008" section of the AIE Web site.

"The Alliance wants to make sure that Americans are armed with the best available information they need to easily set aside funds for a secure future," said AIE President Michael D. Jones, who also serves as senior executive vice president and chief administrative officer for Financial Industry Regulatory Authority (FINRA).

NFA's publication, "Opportunity and Risk: An Education Guide to Trading Futures and Options on Futures", is one of AIE's recommended resources for consumers. For a complete list, visit the AIE's Web site.

NFA Forex Dealer Members must meet higher net capital requirements

Many of the U.S. firms currently offering retail off-exchange foreign currency (forex) trading are Members of NFA. Effective December 21, 2007, these firms must maintain a minimum net capital requirement of $5 million.

"Because a Forex Dealer Member's activities create greater financial risks than the type of traditional exchange-traded futures and options, these firms need to maintain a larger amount of capital," says NFA General Counsel Tom Sexton. "We believe that this additional net capital requirement will provide better customer protection."

All Futures Commission Merchants, including Forex Dealer Members, are required to submit monthly financial statements to the Commodity Futures Trading Commission. The CFTC compiles this information and posts it on its Web site (www.cftc.gov). In addition, Forex Dealer Members submit weekly financial statements to NFA so that NFA can closely monitor the firms' financial status.

Remember that forex trading is a high-risk venture. NFA offers several resources to help you understand the risks of forex trading, including a brochure, an online learning program and a forex investor alert. In addition, individuals should always check the registration status of any forex firm (using NFA's online Background Affiliation Status Information Center) before opening an account.


Recent Enforcement Actions

In the fourth quarter of 2007, NFA's Business Conduct Comittee issued Decisions, Member Responsibility Actions and Final Orders in Registration Cases against the following NFA Member firms and individuals. Click on the name for more detailed information.

Decisions in Disciplinary Cases
American National Trading Corp.
H. Tony Cantillo
Christ Investment Service LLC
Steven D. Erdman
Karl A. Flowers
Thomas E. Fritz
Lee A. Gaus
Globalprice Inc.
Hamilton Williams LLC
Molly Lau
Mansur Capital Corporation
Justin J. Marsch
New World Holdings LLC
One World Capital Group LLC
Stephen T. Roy
Royal Forex Trading LLC
Jack Schenker
Solid Gold Financial Services Inc.
Tradeco Clearing Group LLC
Michael Vardanian
Don Varden
John E. Walsh
Guy Zummo

Member Responsibility Actions
Forex Liquidity LLC
One World Capital Group LLC

Final Orders in Registration Cases
Sean E. Feighan
Beata Geigalaite Vachula
James A. Grzetich
John Logan
Alexander Rust


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