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NFA Investor Newsletter

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October 19, 2010

In this Issue: Forex Investor Alert High Yield Investment Programs Consumer Protection with Gold Investments Las Vegas Traders Expo

NFA issues investor alert regarding new forex rules

On October 18, NFA issued an investor alert outlining the impact of new rules issued by the Commodity Futures Trading Commission on consumers investing in the off-exchange foreign currency (forex) markets. The rules require, with certain exceptions, any firm acting as a counterparty to certain retail forex transactions to register with the CFTC as a Retail Foreign Exchange Dealer (RFED) or Futures Commission Merchant (FCM). In addition, the rules require, with certain exceptions, any individual acting as a forex solicitor, account manager or pool operator to register as Introducing Brokers (IBs), Commodity Trading Advisors (CTAs) or Commodity Pool Operators (CPOs) or as an associated person of one of these entities and become Members of NFA.

"We want to ensure that forex investors know that the entities they have previously been conducting business with are now required to be registered with the CFTC and be NFA Members," said Larry Dyekman, director of Communications and Education at NFA. "Investors can check the registration status of any forex firm through NFA's Background Affiliation Status Information Center, or BASIC, which is available free of charge on our website."

BASIC contains current and historical registration information concerning all current and former CFTC registrants, including name, business address and registration history. BASIC also provides information concerning disciplinary actions taken by NFA, the CFTC and all U.S. futures exchanges.

"If you are researching a firm, you should also conduct a background check of all the individuals listed as principals of the firm," said Dyekman. "Sometimes the firm will have no disciplinary history, but one or more of the principals may have been disciplined while working at other firms."

Read the full text of the forex investor alert.

FINRA warns investors about High Yield Investment Programs

The Financial Industry Regulatory Authority (FINRA) recently issued an investor alert warning investors about the risks of high yield investment programs (HYIPs). According to the alert, HYIPs are "unregistered investments created and touted by unlicensed individuals." People touting these products cite high, unsustainable rates of return with little or no risk.

FINRA's alert describes some of the more common practices scammers use to lure unsuspecting investors to invest in HYIPs. The alert also gives practical tips on how to spot HYIP scams and where to turn for help.

Read the full text of the FINRA investor alert about HYIPs.

National Consumers League urges Congress to pass consumer protection legislation regarding gold investments

With the continued uncertainty in the stock market, an increasing number of consumers are purchasing gold to diversity their investment portfolios. However, there are rising concerns that the risks of purchasing gold are not being fully disclosed to these potential buyers.

The National Consumers League (NCL), a nonprofit consumer organization located in Washington, DC, recently announced its support for H.R. 6149, the "Coin and Precious Metal Disclosure Act," which would require full disclosure of relevant fees and the purchase price, melt value and resale value of coins and metal bullion.

NCL says that it has received reports of "gold dealers pressuring customers to purchase collectible coins at prices inflated far beyond market value." The organization goes on to say that "it concerns us that salespeople working for a prominent gold dealer were found by the Securities Division of the Secretary of State of Missouri to be offering financial advice to consumers without being licensed as investment advisers."

The U.S. House of Representatives Subcommittee on Commerce, Trade and Consumer Protection for the Committee on Energy and Commerce held a hearing on September 23 to discuss the proposed legislation and potential deceptive practices in the gold and precious coins marketplace.

More consumer information can be found on NCL's website.  

NFA provides investor education at Las Vegas Traders Expo

NFA is sponsoring an information booth at the Las Vegas Traders Expo on November 17-20 at the Caesar's Palace Conference Center. NFA staff will distribute copies of NFA's investor education materials and discuss the new forex rules that became effective on October 18.

The Expo offers educational seminars and workshops as well as an exhibit hall featuring trading software providers, futures and options exchanges and other vendors. In previous years, the Expo has attracted more than 4,000 traders. For more information visit the Expo's website.

Recent Enforcement Actions

In the third quarter of 2010, 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.

Rogelio Camacho
Eric Clary
Direct Futures LLC, et al.
Joseph G. Gibbs
James J. Gilberti
Seth Goldberger
Investors Trading Institute
Maxtak Capital Advisors LLC
Matthew E. Meyer
Oxford Trading Group, Inc.
Jonathan Petak
Pinnacle Resource Management Inc.
Trendphonic Futures Trading LLC, et al.
Vista Trading Advisors, Inc.
Simon S. Welds
Francis R. Zofay

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