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NFA Investor Newsletter

October 24, 2012


In this Issue: FCM Financial Data
Financial Literacy Report
Money Smart Week
BrokerCheck
Whistleblower Program FIA Expo Traders Expo Recent Enforcement Actions


Promoting greater transparency of FCM financial data

The National Futures Association has been working to upgrade its investor research tools in an effort to provide greater transparency for futures investors and assist them in conducting due diligence. As part of these efforts, NFA will soon debut new financial information about Futures Commission Merchants (FCM) on its Background Affiliation Status Information Center (BASIC) .

BASIC is a free service investors can use to research the registration and disciplinary backgrounds of current and former Commodity Futures Trading Commission (CFTC) registrants. The service provides registration histories and information concerning disciplinary actions taken by NFA, the CFTC and all U.S. futures exchanges.

NFA's enhancements to BASIC center on the organization's efforts to shore up investor confidence in customer segregated funds. As part of this, FCMs are required to report certain financial information to NFA on a monthly or semi-monthly basis that now will be made publicly available on BASIC to assist customers in their due diligence review of an FCM via an easy-to-read display.

The financial information included on an FCM's BASIC page will include three reports:

  • FCM Capital Report: This report will show the most recent month's information on adjusted net capital, required net capital and excess net capital;
  • FCM Customer Segregated Funds Report: This report will show total funds held in segregated accounts, total funds required to be held in segregated accounts, excess segregated funds, the percentage of segregated funds that are held in cash and each of the investments permitted under CFTC Regulation 1.25 and whether the FCM held any funds at a depository that is an affiliate of the FCM during the previous month; and
  • FCM Customer Secured Amount Funds Report: Identical to the FCM Customer Segregated Funds Report, this report will show the same information in regard to an FCM's secured funds.

The first publicly visible monthly reports will be for the month ended September 30. In subsequent periods, NFA will update the FCM Capital Report on a monthly basis. The Customer Segregated Funds Report and Customer Secured Amount Funds Report will be updated on a semi-monthly basis.

Viewers eventually will have access to the previous 12 months' data for all three report types once NFA collects the information.

This financial data will be available to the public on November 1.



SEC issues investor financial literacy report

The Securities and Exchange Commission (SEC) issued a staff study in late-August with findings on what investors want to know about financial professionals and investment products and services, and when and how investors want to receive such information.

The study, which was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, was conducted in order to identify the existing level of financial literacy among retail investors as well as methods and efforts to increase the financial literacy of investors.

The study, primarily conducted by the SEC's Office of Investor Education and Advocacy (OIEA), is based on a Library of Congress report on financial literacy among retail investors in the U.S., public comments, qualitative research (focus groups) and quantitative research (online survey) and the expertise of a cross-divisional task force consisting of staff from several divisions and offices within the SEC. The staff distilled this information into a comprehensive snapshot of investor behavior, and synthesized some ideas of how to best communicate with investors going forward.

The following highlights some of the information gathered from the research:

Existing level of financial literacy. The report found that studies reviewed by the Library of Congress indicate that U.S. retail investors lack basic financial literacy. The studies demonstrate that investors have a poor grasp of elementary financial concepts, and lack critical knowledge of ways to avoid investment fraud.

Surveys also demonstrate that certain subgroups, including women, African-Americans, Hispanics, the oldest segment of the elderly population and those who are poorly educated, have an even greater lack of investment knowledge than the average general population.

The most-effective existing private and public efforts to educate investors. Based on the feedback of commenters, the report's authors have identified that the most-effective existing public and private investor education programs are:

  • Research-based;
  • Goal-oriented and emphasize important investor education concepts; and
  • Easily accessible, delivered efficiently and relevant to their target audience.

Strategy to increase the financial literacy of investors. As an approach to improve financial literacy, the study outlines that OIEA and other Financial Literacy and Education Commission participants have resolved to work together to develop programs that:

  • Target specific groups, including young investors, lump sum payout recipients, investment trustees, the military, underserved populations and the elderly;
  • Promote the importance of checking the background of investment professionals;
  • Promote Investor.gov as the primary federal government resource for investing information; and
  • Promote awareness of the fees and costs of investing.


Money Smart Week unveils new national website

Money Smart Week

Money Smart Week, a public awareness campaign intended to help consumers better manage their personal finances, is on a mission. The campaign, which celebrated its 10th anniversary in 2012, has adopted the ambitious goal of holding classes in all 50 U.S. states by 2014.

In support of that lofty goal, Money Smart Week earlier this month debuted its newly redesigned, national website, MoneySmartWeek.org.

"The main objectives for the site were to simplify navigation and increase the amount of resources for consumers and partners," Alejo Torres, senior outreach manager of the Federal Reserve Bank of Chicago, said in a release. "I believe we've accomplished both of those objectives and hope you find the site as useful as we've intended it to be."

Money Smart Week began in 2002 as a joint project between the Federal Reserve Bank of Chicago and the Money Smart Advisory Council. The groups collaborated to coordinate the efforts of hundreds of organizations across the country, including businesses, financial institutions, schools, libraries, not-for-profits, government agencies and the media. These partner groups-now numbering more than 1,500 nationwide-come together each year to promote the importance of financial literacy, inform consumers about where they can get help, and provide free educational seminars and activities throughout the week. Money Smart Week programming is offered to all demographics and income levels, and covers all facets of personal finance from establishing a budget to first-time home buying to estate planning.

Since 2002, when the Federal Reserve Bank of Chicago and Money Smart Advisory Council worked together to host 40 financial seminars and educational activities across the city of Chicago, Money Smart Week has undergone significant growth. More than 110,000 people attended a Money Smart Week event in 2012.

And with respect to its mission, Money Smart Week has seen significant geographic expansion in the past decade. It has grown well beyond its initial Second City focus to hold events in 13 states. Money Smart Week's reach now spans the entire Federal Reserve 7th District, which includes Illinois, Indiana, Iowa, Michigan and Wisconsin, and most recently added Oregon, Washington and West Virginia in 2011.

NFA will again participate the next Money Smart Week, which is scheduled to run from April 20-27, 2013. Check NFA's website for more information about its activities as the event nears.

FINRA upgrades its investor research tools

The Financial Industry Regulatory Authority (FINRA) recently unveiled new enhancements to its BrokerCheck investor research tool. BrokerCheck is a free service investors can use to research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers, as well as investment adviser firms and representatives.

The recent enhancements to BrokerCheck were intended to help users more easily access broker-dealer and investment adviser registration information.

As a result of the improvements, BrokerCheck users now have:

  • Centralized access to licensing and registration information on current and former brokers and brokerage firms, and investment adviser representatives and investment adviser firms;
  • The ability to search for, and locate, a financial services professional based on main office and branch locations, as well as the ability to conduct ZIP code radius searches (in increments of five, 15 or 25 miles); and
  • Access to expanded educational content, including new help icons that clarify commonly referenced terms throughout the system and within BrokerCheck reports.

"FINRA is constantly looking for new ways to make BrokerCheck easier to use and to make the information more accessible to investors," Derek Linden, FINRA executive vice president, registration and disclosure, said about the enhancements in a release.

The information about brokers and brokerage firms made available through BrokerCheck is derived from the Central Registration Depository, the securities industry online registration and licensing database.

Similarly, the information about investment adviser firms and representatives comes from the Securities and Exchange Commission's Investment Adviser Public Disclosure database. BrokerCheck features professional background information on about 1.3 million current and former FINRA-registered brokers and 17,400 current and former FINRA-registered brokerage firms. It also has information on about 441,000 current and former investment adviser representatives and 45,700 current and former investment adviser firms.



Facts about the CFTC Whistleblower Program

This story was written by the CFTC for NFA Members and investors

In January, the Commodity Futures Trading Commission (CFTC) announced the opening of its Whistleblower Office. Created under the Dodd-Frank Act, the CFTC's whistleblower program allows for the payment of monetary awards to eligible whistleblowers, and provides anti-retaliation protections for whistleblowers who share information with or assist the CFTC.

The following are some basic facts about the program:

  • The CFTC will pay awards to eligible whistleblowers who voluntarily provide the Commission with original information about violations of the Commodity Exchange Act that lead the Commission to bring an enforcement action that results in more than $1 million in monetary sanctions.
  • The CFTC can also pay whistleblower awards based on monetary sanctions collected by other authorities (including self-regulatory organizations) in actions that are related to a CFTC enforcement action, and are based on information provided by a CFTC whistleblower.
  • The total amount of a whistleblower award will be between 10 and 30 percent of the monetary sanctions collected in either the CFTC action or the related action.
  • A whistleblower can be any person who provides the CFTC with original information about a violation of the Commodity Exchange Act. Such information can be based on either the person's independent knowledge or independent analysis. Under the CFTC's Whistleblower Rules, however, certain specified persons are ineligible to receive whistleblower awards.
  • In order to become a whistleblower, an individual must file a Form TCR with the CFTC.
  • A whistleblower may file anonymously.

You can learn more about the CFTC's whistleblower program by visiting the program's webpage on www.cftc.gov where you will find forms, program rules, frequently asked questions, filing instructions, and notices of actions for which whistleblowers can file award claims. If you have any questions, you may contact the CFTC's Whistleblower Office by sending an email to whistleblower@cftc.gov.



NFA to present workshop at FIA Expo 2012

The Futures Industry Association's (FIA) Expo 2012 is rapidly approaching. The convention, which showcases products, services and information for market professionals and participants, will be held at the Hilton Chicago, located in Chicago, Ill., on October 31 and November 1.

The annual convention offers a variety of sessions that allow attendees-ranging from business, operations and technology professionals and traders-to discuss industry trends, hear expert views on key issues, improve trading skills and learn about new products, systems and practices.

NFA is scheduled to conduct a workshop, beginning at 9:00 a.m. on Thursday, November 1, that is intended to provide an in-depth review of various NFA registration and customer protection initiatives. Panelists will cover details of swap dealer registration, and the resulting Section 4s implementing requirements, swaps intermediary registration, as well as how swap participants will be integrated into NFA's governance and funding structures.

NFA staff members also will appear on panels at the following sessions:

Additionally, NFA staff members will be on hand in the exhibit hall at booth 216. Expo attendees are welcome to stop by to ask questions and pick up information materials.

To register for FIA Expo 2012, visit www.futuresindustry.org/expo-registration.asp.



NFA to attend Traders Expo in Las Vegas

The International Traders Expo will be held at Caesar's Palace in Las Vegas, Nevada, on November 14 to 17. The Traders Expo offers traders an opportunity to meet face-to-face with, learn from and ask specific questions of a long list of trading experts.

NFA is scheduled to participate in the presentation, "Red Flags: Questions to Ask Your Futures or Forex Broker Before Opening an Account." The panel discussion, which is slated for 8:00 a.m. to 9:00 a.m. on November 16, is expected to discuss the questions retail traders should be asking of a forex or futures broker prior to depositing funds, and the types of answers they should hear. Panelists also will provide information on where investors can go to help them conduct their due diligence.

NFA also will be set up in the exhibit hall at booth 812. Attendees are welcome to stop by to talk with members of the compliance staff, ask questions and pick up information materials.

For complimentary registration to The Traders Expo Las Vegas, call (800) 970-4355 and mention priority code 028945, or visit the Expo's website.

 


Recent Enforcement Actions

In the third 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
Alpari US LLC
Angus Jackson Inc. of Florida
Atlantas Group, Inc.
Martin H. Bedick
Capital Venture Holdings LLC
DL Global Futures LLC
Toney B. Eggleston
Global Leverage Inc.
Jacob J. Gullick
Jermaine C. Harmon
Edmund K. Hysni
Informed Funds LLC

Decisions (continued)
Institutional Liquidity LLC
Steven H. Joseff
Richard A. Lani
Ryan Litfin
Michael E. Rose
Titan Capital Group III LP
Vincent Capital Group LLC
David Waring

Member Responsiblity Actions
Peregrine Asset Management, Inc.
Peregrine Financial Group, Inc.

Final Orders in Registration Cases
Golden Forex Inc.

Complaints
Avail Trading Corp.
Integrated Brokerage Services LLC
Francis Littleton
Jack Manoukian
Strategic Trading Associates LLC


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