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NFA Investor Newsletter


Feb. 3, 2015
In this Issue:
Credit card use denied at retail forex firms The top 10 scam trends of 2014 CFTC launches its SmartCheck investor protection resource 12 investment tips for 2015 Visit NFA at Traders Expo New York Recent enforcement actions

 

Credit card use denied at retail forex firms

National Futures Association (NFA) recently announced that the Commodity Futures Trading Commission approved banning the use of credit cards to fund retail forex and futures accounts. The ban became effective Jan. 31, 2015.

"Since our inception, NFA has been committed to protecting investors," says NFA President and CEO Dan Roth. "Forex and futures markets are both high-risk and volatile, and individuals who wish to participate should use only risk capital to fund their accounts. Allowing customers to fund accounts with credit cards encourages them to trade with borrowed money."

This prohibition is a direct result of an extensive study by NFA of forex dealer members' business practices. NFA looked at more than 15,000 retail forex accounts and noted that an overwhelming amount of these accounts were funded by small retail customers using a credit card or borrowed funds, and a majority of these accounts were unprofitable.

"Over the last decade, NFA has made significant strides in its regulation of the retail forex markets," Roth says. "From the increase in capital requirements to mandating content requirements so that all customers could receive comprehensive and accurate account information, this ban is just another very important step to fulfill our mission to protect customers."



The top 10 scam trends of 2014

With 2014 now in the books, it's time again to look back at the highlights of the past year. Unfortunately, the "highlights" in this case are more sobering than entertaining.

The National Consumer League (NCL) recently issued a report on the top 10 scam trends reported in 2014, based on reports to its Fraud.org website. Once again, victims reported being approached by scammers via telephone most often (42.85 percent), ahead of the Internet (30.07 percent), email (15.71 percent) and postal mail (6.92 percent).

Based on its analysis of more than 10,000 consumer complaints submitted in 2014, consumers should continue to keep an eye out for "refund and recovery" frauds, which was the fastest-growing type of telemarketing scam reported. The predominant version of this scam involved a fraudster who contacted consumers claiming to be a collector of unpaid debts. If consumers questioned the debt, the fraudster frequently threatened them with jail time, legal action or other consequences.

NCL listed the following types of attacks as the top scams reported in 2014:

  1. Internet: General Merchandise. Sale (not auction) goods purchased are either never delivered or misrepresented.
  2. Prizes/Sweepstakes/Free Gifts. Scammers request payment to claim prizes that never materialize.
  3. Fake Check Scams. Consumers are paid with phony checks for work or items they are trying to sell, and then are instructed to wire the money back to the buyer.
  4. Recovery/Refund Companies. Scammers contact victims who already have been defrauded claiming to be able to help recover lost funds for a fee.
  5. Advance Fee Loans/Credit Arrangers. False promises of business or personal loans—even if credit is bad—for an up-front fee.
  6. Computer Equipment/Software. Scammers claim to offer "technical support" for computer problems and charge a fee to fix nonexistent problems.
  7. Scholarships/Grants. For a fee, a “search company” offers to conduct customized search for scholarships or grants for which students can apply. Scammers then take the money and run or provide a worthless list.
  8. Phishing/Spoofing. Emails pretending to be from a well-known source ask consumers to enter or confirm personal information.
  9. Friendship & Sweetheart Swindles. Con artists nurture an online relationship, build trust and convince victims to send money.
  10. Office Ad Space/Directory Listings. Fake invoices are sent in response to telemarketing calls asking for confirmation of business or organizational information.

However, it's not all doom and gloom for victims. One positive trend in NCL's 2014 report is the means in which victims reported sending money to con artists. Previously, wire transfer had been the most popular payment method reported. But in 2014, nearly half (48 percent) of all victims reported paying by credit card when they lost money to a scam. This is positive because victims who pay with credit cards can more easily recover lost funds when they promptly report the suspicious charges to their bank or credit card company than those who pay via wire or pre-paid debit cards.

For more information about other types of scams, read NFA's Scams and Swindles guide.



CFTC launches its SmartCheck investor protection resource

The Commodity Futures Trading Commission (CFTC) recently launched SmartCheck.CFTC.gov, a website featuring investor education resources and tools to conduct background checks of financial professionals. The site is intended to be a one-stop resource for investors performing due diligence before making any commodities- or securities-related investment decisions.

Prior to the SmartCheck website, investors had to consult a variety of databases from different government and self-regulatory organizations to conduct a thorough background check of financial professionals. Now, this research is much easier because SmartCheck acts as a portal and navigation tool to check the registration status, history and disciplinary record of firms and individuals at National Futures Association (NFA), Financial Industry Regulatory Authority, CFTC and Securities and Exchange Commission.

In addition to being a comprehensive background check tool, SmartCheck also features important news reports that are relevant to investors, as well as educational blogs and videos. The site also currently has three interactive video challenges that allow investors to practice their responses when presented with an investment opportunity.

One of the tools most prominently featured on SmartCheck is NFA's Background Affiliation Status Information Center (BASIC). NFA's database contains registration, disciplinary and financial information about derivatives industry firms and salespeople. The disciplinary information is provided by NFA, the CFTC and U.S. futures exchanges. More than 150,000 investors and industry professionals access BASIC in a typical month. Additionally, in an effort to provide greater transparency to futures commission merchant (FCM) customers, NFA recently made more FCM financial data available on its BASIC pages.

In the coming months, the CFTC's SmartCheck campaign will begin running a series of national online, television and print advertising alongside additional outreach efforts to reduce investment fraud. The CFTC's efforts will help to ensure that as many investors as possible are made aware of these valuable resources.



12 investment tips for 2015

The New Year is a time for resolutions and, for many, that includes getting their financial investments in order. While these types of resolutions are made with the best intentions, hasty financial decisions can quickly lead to ruin.

Here are 12 investment tips to keep in mind before making any financial decision, courtesy of the Securities and Exchange Commission.

  1. Always check the background of an investment professional. Use NFA's Background Affiliation Status Information Center (BASIC) for derivatives professionals and FINRA's BrokerCheck for securities professionals. Both services are free and
    easy-to-use.
  2. Promises of high returns with little or no associated risk are classic warning signs of fraud. Every investment carries a degree of risk, and potential for greater returns almost always come with greater levels of risk.
  3. Paying off high-interest debts may be your best investment strategy. Nothing frees up future capital better than eliminating high-interest debt on credit cards or other loans.
  4. Don't ignore the fees associated with buying, owning and selling an investment product. Expenses can vary from product to product, and even small changes can make a big difference on your bottom line.
  5. Reduce the overall risk of an investment portfolio by diversifying investments. Investing in only a few products or sectors can leave you exposed to a great deal of risk.
  6. Ensure any offer or sale of securities is registered with the SEC or is exempt from registration; otherwise it's illegal. Registration is important because it provides investors access to key information about the company's management and finances. Always visit BrokerCheck before making any decisions about purchasing securities.
  7. Avoid active trading and other common investing mistakes. Many investors also focus too intently on past performance, favor certain investments for arbitrary reasons or don't know when to get out of an investment.
  8. Beware of con-artists. Research shows that con-artists are experts at the art of persuasion, often using a variety of tactics tailored to influence their victims and prey on their vulnerabilities.
  9. Mutual funds are not guaranteed or insured by the FDIC or any other government agency. This is true even if you buy the fund through a bank and it carries the bank's name.
  10. Be careful when using social media as an investment tool. Social media outlets have become one of the newest hotbeds of scammer activity. Be wary of any investment opportunity you learn about through social media.
  11. Watch out for affinity fraud. This type of fraud targets members of an identifiable group, such as fraternal organizations, religious or ethnic communities, or members of the military.
  12. When in doubt, ask for help. There are a number of resources available to help investors. If you have questions about a professional in the derivatives industry, you can call NFA's Information Center at 1.800.621.3570.


Visit NFA at Traders Expo New York

If you're local or just looking for an excuse to visit the Big Apple, you can visit NFA at the 2015 International Traders Expo at Marriott Marquis Hotel in New York City from February 28 to March 2. 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 located at booth exhibit hall at booth #5408.

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

For complimentary registration to The International Traders Expo New York, click here or call 800.970.4355.



Recent enforcement actions

In the fourth quarter of 2014, NFA issued Decisions, Member Responsibility Actions and Complaints against the following NFA Member firms and individuals. Click on the name for more detailed information.

Decisions in Disciplinary Cases
Quantitative Trading Advisors LLC
Hatim Abdel Hamid Youssef
Quick Trade Futures Inc.
Jim Xu
IFG Markets LLC
Wilson Cheng
Success Bullion USA LLC
Chris Jann
Boost Capital Inc.
Belvedere Asset Management LLC
Keith D. Pagan
Prime Algo Financial LLC
Yves S. Soete

Decisions continued
FXDirectDealer LLC
Joseph Botkier
Cambridge Strategy Asset Management Ltd
Wealthbuilder Capital Advisors
Courtney D. Smith
Back Bay FX Services LLC
Paul C. Towne
eFloorTrade LLC
Diamond Head Capital LLC
John Alan Moore
Christopher Thomas Moore

Member Responsibility Actions
Emini Experts LLC
Dante Stephen Giovannetti

Complaints
Roditi & Roditi LLC
Leviathan Asset Management LLC
Back Bay FX Services LLC
Paul C. Towne
FX Evolve LLC
Jason B. Hoerr
EdgeValencia LLC
Stephen Edge
Joseph P. Valencia, Jr.


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