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NFA Investor Newsletter

NFA Investor Newsletter

Past Investor Newsletters

October 29, 2013
In this Issue:
Spear phishers hit close to home All that glitters isn't gold NFA to speak on panels at FIA Expo 2013 Visit NFA at the AAII Investor Conference & Traders Expo Las Vegas Recent enforcement actions


Spear phishers hit close to home

It was extremely disconcerting for NFA to learn earlier this month that fraudsters were soliciting customers and creditors of Peregrine Financial Group (PFG) who currently are awaiting the resolution of their claims by the U.S. Bankruptcy Court.

Former PFG customers called NFA to inquire about the legitimacy of an email that was sent on October 4. The email requested personal information from the recipients, and insinuated that if this information was provided, they would receive $250,000.

Upon learning of the email, NFA immediately worked with the PFG bankruptcy trustee to verify that it was a fraud, and sent an announcement to PFG's customers to notify them of the email's illegitimacy. NFA also posted a notice from the trustee about the deceptive email on the homepage of its website to warn visitors and Members of the fraud.

This type of online scam is known as "spear phishing"—where fraudsters target specific groups of people who share a commonality and trick them into divulging their personal information via email. Perpetrators typically get hold of some form of inside information to deceive the list of recipients, like the list of PFG customers, and then send a legitimate-looking message, typically citing urgent and plausible-sounding explanations as to why they need your personal data.

Once the fraudsters have your personal information, they can access your bank accounts, credit cards and even create new identities.

The Federal Bureau of Investigation suggests keeping the following points in mind to avoid becoming a spear phishing victim:

  • Most companies, banks, agencies, etc. don't request personal information via email. If you're ever in doubt about the veracity of an email, call the sender. However, don't use the phone number contained in the email—that's typically also phony.
  • Use a phishing filter; many current web browsers have them built in or offer them as plug-ins
  • Never follow a link to a website from an email—always enter the URL manually
  • Don't be fooled by the latest scams

Additionally, October is National Cyber Security Awareness month for the National Consumers League, the Department of Homeland Security and the National Cyber Security Alliance. According to their list of the top 10 reported scams of 2012, phishing ranked No. 4—the second-most common form of online fraud. The group suggests people take note of the following online safety habits to avoid falling prey to scammers.

You likely have heard the famous adage, "there is no honor among thieves." The venerable Sir John Falstaff bemoaned this very point in "Henry IV, Part 1." So please beware when you receive seemingly legitimate emails that request any personal information.

All that glitters isn't gold

You know the old saw. So did Chaucer and Shakespeare, whose famous line in "The Merchant of Venice" has helped to keep it fresh in peoples' minds for centuries. Therefore, you might think that no one falls victim to precious metals fraud all these years later. Unfortunately, that's not the case.

In these days of economic uncertainty, advertisements abound touting the primacy of gold and precious metals as a safe—if not extremely lucrative—investment. But don't buy into the hype—there are many reasons why this may not be true, and also could be a means of defrauding you of your hard-earned ducats.

The Commodity Futures Trading Commission (CFTC), which has been vigilant in policing precious metal schemes, in late September, filed an enforcement action against a triad of companies and their principal, alleging that they scammed customers out of $2.4 million in precious metals transactions and made illegal, off-exchange commodity transactions over the past two years.

The CFTC claims Lions Wealth Holdings Inc., Lions Wealth Services Inc., 20/20 Precious Metals Inc. and Bharat Adatia falsely asserted to sell gold, silver, platinum and palladium to retail customers in retail commodity transactions. The CFTC also alleges that they offered to arrange for loans to customers to purchase physical metals and the storage and transfer of customers' physical metals to an independent depository.

Instead, the CFTC says the group did not sell or transfer ownership of any physical metals, disburse funds as loans or cause any metals to be stored in depositories for, or on behalf of, Lions Wealth and 20/20 Metals customers. The defendants purportedly forwarded customer funds to a third-party, which also did not purchase or hold metals in the customers' names, and then charged the customers for storage fees and other charges on metals that did not exist, as well as interest on loans that were never made.

Thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which took effect on July 16, 2011, off-exchange precious metals transactions such as these are illegal. However, between when the law went into effect and Feb. 22, 2013, at least 74 Lions Wealth and 20/20 Metals retail customers collectively incurred nearly $2.4 million in trading losses, commissions, interest charges and other fees.

To help protect retail customers against this type of fraud, especially in response to the increase in companies offering investors the opportunity to purchase precious metals, the CFTC issued a Precious Metals Fraud Advisory. The advisory also warns that companies frequently fail to purchase physical metals for customers and, instead, just keep customers' funds. Additionally, the advisory cautions consumers that leveraged commodity transactions are unlawful unless executed on a regulated exchange.

People who wish to purchase precious metals definitely should do their due diligence prior to their investment. Be sure to check the registration status and disciplinary history of any futures firm or broker in NFA's Background Affiliation Status Information Center (BASIC). Also, read the following alerts on investing in gold, bullion and bullion coins and collectible coins from the Federal Trade Commission.

The Futures Industry Association's (FIA) Expo 2013 is coming up next week. 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 November 6 and 7.

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 staff members will appear on panels at the following sessions:

  • "Has the Industry Delivered on Enhanced Customer Asset Protection?" - November 6, 2:00 p.m.
  • "Getting Ready for 2014 Firm Audits" - November 6, 2:00 p.m.

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 2013, click here.

Visit NFA at the AAII Investor Conference & Traders Expo Las Vegas

Investors can meet with NFA staff members in both Florida and Nevada in the month of November. NFA will be on hand at the 2013 AAII Investor Conference, located at the Loews Royal Pacific Resort in Orlando, Fla. November 15 to 17.

NFA is scheduled to host a presentation, "Diversifying Portfolios with Managed Futures and Forex: What Investors Need to Know." The presentation, which will run from 9:00 to 10:15 a.m. on November 17, will discuss the reasons why individual investors trade futures and forex, what risks are involved, how to conduct due diligence and what questions to ask before trading.

NFA also will be represented in the exhibit hall at booth 117.

Just a few days later, NFA will attend the 2013 International Traders Expo at Caesar's Palace in Las Vegas, Nevada, from November 20 to 23. 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 will be set up in the exhibit hall at booth 410.

Attendees are welcome to stop by, ask questions and pick up informational materials at both conferences.

To register for the 2013 AAII Investor Conference, click here. And for complimentary registration to the Traders Expo Las Vegas, visit the Expo's website or call 800.970.4355.

Recent enforcement actions

In the third quarter of 2013, NFA 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
ABL Traders Trading Group LLC
Terry J. Dorrity
Fidelity Planning Group
Financial Commodity Investments
FXDirectDealer LLC, et al. (12BCC00021)
FXDirectDealer LLC, et al. (12BCC00030)
Global Arena Commodities Corp.
James E. Green
IKON Global Markets Inc.
Interactive Brokers LLC (12BCC00032)
Interactive Brokers LLC (13BCC00008)
Diwakar Jagannath
Craig Kendall
Gokhan Kisacikoglu
Abdul Latona
John A. Piazza
Quants Capital LLC

Member Responsibility Actions
David M. Giunta
Jonathan M. Hansen
Newport Private Capital LLC

Final Orders
Alpha Capital Ventures LLC
Stanley C. Brooks
Troy W. Delmer
Gold Coast Futures Group
Michael D. Minnoch
Jennifer S. Renz
Gurpreet Singh Sabharwal
Dean G. Tanella

Ace Investment Strategists LLC
Alternative Capital Advisors LLC
Keith R. Bramlett

Complaints continued
Cap Ex Partners LLC
Yu Dee Chang
Thomas Allen Chavez
Gary Creagh
Robert Juan Escobio
Edward Thomas Trading Co.
FX Bootcamp LLC
Edward Thomas Gomes
Interactive Brokers LLC
Ralph H. Johnson
Wayne A. McDonell
Bruce Newman
Rylan Peters
Steven M. Silver
Southern Trust Securities, Inc.
Vision Financial Markets LLC
Wall Street Pirate Management LLC

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