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PFGBest Accounts Frozen (PFG scandal big thread)


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PFGBest Accounts Frozen (PFG scandal big thread)

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  #301 (permalink)
 djkiwi 
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Big Mike View Post
Yes and one thing people have to understand.... I've seen several posts about people wanting to move to a larger, safer institution. MF Global was huge, and incredibly unsafe.

The days of looking for size as protection are gone. Looking at numbers on a piece of paper or in an Excel column are worthless, since the numbers are fabricated easily.

The point is, you can't trust anyone or anything right now. And this will remain the case until their is legislation which basically provides insurance for customers (SIPC/FDIC type).

I think this will happen eventually. But the question is what happens between now and then.

Basically, if you are a professional trader you simply need to be smart. You can't just take all your money out and wait on the sidelines. But you can make sure your account balance is only what it really needs to be, and not more.

Mike

@Big Mike.

True, nothing is entirely safe and the minimum balance idea is good. If you swing trade the overnights margins can be a little stiff so you can only go so far.

The MF Global situation and PFG are slightly different. Firstly, MF Global used customer funds for risky investments, whereas PFG was out and out theft by an officer. It would have been impossible for the CEO of MF Global to steal $200m out of the company and merely deposit it into his own personal account.

Secondly, the clients of MF Global will likely receive 100% payback of their funds. In the cases of single individual theft the payback to customers are near zero or not much more. One is misappropriation of segregated funds and the other is theft.

The question what to do right now?

Personally, I'm not going to do anything different after this.

If you have an equities account at IB then consider trading futures there. You will have individual account coverage of $900k of SIPC coverage at IB for cash held for equities OR futures provided you elect to the securities sweep option.

With my AMP futures account I have none of this protection. Is IB dipping into segregated funds? I will never know but by all accounts IB appears to be a better run organization than PFG or MF Global with better controls. I like the fact that I can read their annual report and find out audited trading volume and profits are growing with profit of $860k per employee. I don't like the fact that IB is nearly owned and controlled by one guy but I like the fact that they have a chief compliance officer who reports directly to the internal audit committee to combat this concern. Is it foolproof? No, but what is?

Given all of this PFG mess, I'm not going to swing trade overnight with AMP and although AMP makes up a small percentage of my overall account will look at reducing it to the minimum.

Cheers
DJ

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  #302 (permalink)
 cory 
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jungian View Post




..
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pass!

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  #303 (permalink)
 kevinkdog   is a Vendor
 
 
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karoshiman View Post
.. I don't have an account with PFG, but feel sorry for all who have and I'm worried about the industry overall.

are in this business...

I have an account at TradeStation. They say they have excess SIPC insurance policy in place for futures and forex accounts with coverage up to $300m. However, I still do not feel secure given this recent news in such short period of time as I do not know whether the insurance will really work in case of fraud...

Even though Tradestation calls this "excess SIPC insurance," I have confirmed with Tradestation that it DOES COVER futures accounts (as karoshiman stated).

Sorry again for doubting you karoshiman. I've been TS customer for 8 years, and I never knew this "excess policy" existed. I hope we never need it, and if we do, I hope it covers things!

**********************
From: ClientService@tradestation.com

Dear Mr. Davey,


The additional coverage through Lloyds of London applies to all TradeStation brokerage accounts, including futures.



For further inquiry into this matter, please reply to this email or call the Client Services Department.



Sincerely,

Daniel



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  #304 (permalink)
 steve2222 
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SpongeBob coins won?t cost NZ Mint after US broker collapses | The National Business Review

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  #305 (permalink)
 aligator 
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kevinkdog View Post
I hope we never need it, and if we do, I hope it covers things!

If you recall TS took over IBFX recently. Considering that IBFX received a $40M special interest blank check, also not too long ago, does not turn into a Trojan horse for TS in the near term.

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  #306 (permalink)
 rt-trader 
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Earlier on in this thread, some were advocating having a/c's with different brokers to spread risk.

Quite some time ago I had done this and had a/c's at MFG and PFG. When MFG collapsed I figured I would just stick with PFG on the basis that lightning was most unlikely to strike twice!

So now like many others I am looking for another broker and wondering if the best form of risk management is to just walk away....

It occurs to me that this latest event has the potential to trigger others, as traders decide to sweep their a/c's back to minimum balances to manage 'broker failure risk'. Should this happen in large numbers, then any firms that are marginal may be pressed hard.

Slow redemption of funds could be an early sign of this - remain vigilant should you notice this happening.

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  #307 (permalink)
 GridKing 
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Gotta say MB Trading I've been with for 6+ years , not the fanciest shindig but the important stuff seems to be priority and the CEO answers my emails ...

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  #308 (permalink)
 Big Mike 
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djkiwi View Post
With my AMP futures account I have none of this protection. Is IB dipping into segregated funds? I will never know but by all accounts IB appears to be a better run organization than PFG or MF Global with better controls. I like the fact that I can read their annual report and find out audited trading volume and profits are growing with profit of $860k per employee. I don't like the fact that IB is nearly owned and controlled by one guy but I like the fact that they have a chief compliance officer who reports directly to the internal audit committee to combat this concern. Is it foolproof? No, but what is?

Given all of this PFG mess, I'm not going to swing trade overnight with AMP and although AMP makes up a small percentage of my overall account will look at reducing it to the minimum.

Cheers
DJ

I can read PFG's report and find profits. I could read MF Global and find the same. PFG's CEO was on the NFA board. The CFO appears to have been directly involved as well.

Means nothing. Records can be, have been, and will continue to be falsified. The only true safety is insurance.

Mike

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  #309 (permalink)
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wavey View Post
my thoughts go to all affected traders, hopefully the backup account is ready to battle through those tough times. If one reads through this list closely, you come to realize there was at least a foreshadow building up...

First MFG(lobal), Now PFG: Who Is Next? | ZeroHedge

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  #310 (permalink)
 olobay 
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Got this email from the NFA:



My money was with PFG but I called up my introducing broker, Cannon Trading, and I don't want to spread rumours or give anybody false hope because there is too much unknown at this point, but he said that he heard that the money that vapourized was not from futures accounts but rather from PFG's forex accounts. He did not tell me how he heard this but he just passed on this info. He was kind of optimistic that once they start doing some forensic auditing, they wil find a paper trail and recover some of the money. Again this is not fact, just hearsay and I don't want anybody to get their hopes up.

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  #311 (permalink)
 ThatManFromTexas 
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kevinkdog View Post
Even though Tradestation calls this "excess SIPC insurance," I have confirmed with Tradestation that it DOES COVER futures accounts (as karoshiman stated).

Sorry again for doubting you karoshiman. I've been TS customer for 8 years, and I never knew this "excess policy" existed. I hope we never need it, and if we do, I hope it covers things!

**********************
From: ClientService@tradestation.com

Dear Mr. Davey,


The additional coverage through Lloyds of London applies to all TradeStation brokerage accounts, including futures.



For further inquiry into this matter, please reply to this email or call the Client Services Department.



Sincerely,

Daniel



@kevinkdog

If what they have told you is accurate, kudos to them for going the extra mile.

However, security is relative ... all is well as long as ...

1. The policy remains in force (TS continues the coverage)

2. Claims don't exceed amount insured

3. TS actions do not violate conditions of the policy (theft, fraud, etc)

4. Lloyd's remains solvent (example: European Banks insured and the euro collapses breaking Lloyds')

5. Claims are paid out in a timely fashion (i.e. Denied claims end up in court for resolution,Lloyds goes into receivorship)

That said , if TradeStation is the only firm that offers the additional coverage and barring the above mentioned possibilities, they may very well be a more secure choice than other brokers.


Footnote: Lloyds is not without it's own issues


In the late 1980s and early 1990s, Lloyd's went through the most traumatic period in its history. Unexpectedly large legal awards in U.S. courts for punitive damages led to large claims by insureds, especially on APH (asbestos, pollution and health hazard) policies, some dating as far back as the 1940s. Many of these policies were designed to cover all liabilities not excluded on broadform liability policies.

Also in the 1980s Lloyd's was accused of fraud by several American states and the names/investors. Some of the more high profile accusations included:
Lloyd's withheld their knowledge of asbestosis and pollution claims until they could recruit more investors to take on these liabilities that were unknown to investors prior to investing in Lloyd's;
Enforcement officials in 11 U.S. states charged Lloyd's and some of its associates with various wrongs such as fraud and selling unregistered securities;
Ian Posgate, one of Lloyd's leading underwriters, was charged with skimming money from investors and secretly trying to buy a Swiss bank; he was later acquitted.

Good luck and I wish you the best!

Regards,
TMFT

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  #312 (permalink)
 TradeFlightPlan 
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Everything you ever wanted to know about FCMs, or at least the fabricated information they choose to share with the NFA:

https://www.cftc.gov/marketreports/financialdataforfcms/ssLINK/fcmdata0412-xls

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  #313 (permalink)
 Big Mike 
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If it is as simple as FCM's procuring third party insurance to protect and incentivize their clients, then I would expect to see more of this soon.

It is still far from perfect, as the above post points out. But a step in the right direction, given the environment.

Mike

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  #314 (permalink)
 djkiwi 
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ThatManFromTexas View Post
@kevinkdog

If what they have told you is accurate, kudos to them for going the extra mile.
Footnote: Lloyds is not without it's own issues

Regards,
TMFT

@ThatManFromTexas raises some good points. As mentioned earlier an email from a customer services rep should be taken with a grain of salt as invariably they are unsure of the intricacy of the rules. I'd hate to see anyone else get caught out. Below is the tradestation insurance policy from the Tradestation website which makes it fairly clear futures accounts are not covered. See last sentence. If you opened a securities account there is coverage. The only issue that matters is the cash sweep and that is the question that needs to be asked.

If only have a futures account and no securities account then the only way to be covered is if all the cash is swept into one pot and insured. If the cash for futures accounts is kept separately from the cash for equities accounts then I don't see how there is coverage based on the insurance policy below. The Lloyds coverage kicks in after the SIPC and is still based on securities accounts.

Furthermore even if it was swept into one pot in the event of a claim SIPC would be within their rights to not payout on any cash relating to futures account.

"TradeStation Securities is a member of the SIPC. SIPC provides protection of up to $500,000 for each securities account brokerage customer, subject to a limitation of $250,000 for cash balances, in the event of the financial failure of a broker-dealer. For securities brokerage accounts the custody and clearing of and for which are handled by TradeStation Securities, an excess SIPC insurance policy placed through Lloyd’s of London provides coverage for loss of securities and/or cash in excess of primary SIPC protection, up to $300 million in the aggregate (and up to $24.5 million per any one account, subject to a $900,000 per account maximum for cash). Based upon the asset size per account and in the aggregate of TradeStation Securities’ securities account customer base as of the date of this report, this excess-SIPC protection, combined with primary SIPC protection, should, while no assurances can be given, be adequate to cover the loss of 100% of those customer assets in the unlikely event that TradeStation Securities experienced financial failure and all customer assets were somehow lost. Neither SIPC nor excess-SIPC coverage applies to fluctuations in the market value of securities or any losses other than those directly caused by the financial failure of a securities broker-dealer. SIPC does not apply in any manner to FCMs, RFEDs or FDMs or to futures or forex accounts"

SIPC clarified this in a letter to the SEC in 2007 when they wrote:

"Under SIPA, a customer's claim for "cash" derives from a few sources. One, the "cash" arises from the broker's sale of securities for the account of the customer. Two, the "cash" has been deposited by the customer with the broker for the purpose of purchasing securities. Three, the cash consists of dividends or other return generated on securities held by the broker for the customer. 15 U.S.C. $78lJ(2). Key is the fact that the cash owed by the broker to the customer is on deposit in connection with the purchase or sale of a "security," as defined in SPA. The facile labelling of an asset as "cash"does not transform it into a protected asset if unrelated to the purchase or sale of a "security." http://www.sec.gov/comments/s7-08-07/s70807-16.pdf".

Cheers
DJ

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  #315 (permalink)
 Cloudy 
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Personal "small, home auditor"
Exclusive: U.S. probing failed broker PFGBest's use of small auditor | Reuters

U.S. grains worries
U.S. grain trade wants answers in PFGBest broker scandal | Reuters

Mystery
https://finance.yahoo.com/news/pfgbest-mystery-deepens-vegas-marriage-205933638.html?l=1

video:
U.S. Morning Call: Iowa futures firm PFGBest collapses | Video | Reuters.com

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  #316 (permalink)
 Big Mike 
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Public Conference Call to Discuss PFG Wednesday 5:15pm EDT | Commodity Customer Coalition

The CCC will be hosting a public conference call to discuss the PFG fraud Wednesday at 5:15pm EDT. We will also be giving an update on MF Global and the recommendations we have provided to the Senate for strengthening customer protections in the futures industry.

The recording of the call is attached. The quality is not great, I did not have time to enhance the audio.

Mike

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  #317 (permalink)
karoshiman
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djkiwi View Post
@ThatManFromTexas raises some good points. As mentioned earlier an email from a customer services rep should be taken with a grain of salt as invariably they are unsure of the intricacy of the rules. I'd hate to see anyone else get caught out. Below is the tradestation insurance policy from the Tradestation website which makes it fairly clear futures accounts are not covered. See last sentence.

...


They talk about "loss of securities and/or cash" and not only "securities". And the margin in your futures account is essentially cash.

They have some further info on this site about safety of funds:

Safety of Funds for Futures Traders | TradeStation

There they state:

Your TradeStation equities accounts are further protected with SIPC insurance. SIPC insures your equities accounts up to $500,000, including $250,000 for cash. Beyond this, TradeStation has arranged for additional protection through Lloyd's of London, insuring all accounts up to an aggregate limit of $300 million.

This together with the statements by the TS reps (whether they understand the situation or not), would make it difficult for them to argue differently in case of a law suit (which hopefully will never happen). They've made their customers believe, that there is protection for futures accounts as well (up to the amount described above).

Though I see the points of TMFT and there might be a risk with Lloyd's as well, my concern is more about the conditions of the excess insurance, i.e. the cases which are covered by this excess insurance (bankruptcy, fraud, etc.?). I've sent them an email 2 days ago and asked about it and got the link above from them. Unfortunately, there they don't answer this question so I've sent them my question again, stating that this question is not answered on that page. See, what they will come up with...

By the way, that "safety of funds" page includes a lot of blah blah about regulation, separate accounts etc. which we know now does not mean anything. But, what I like is the fact that they are not involved in proprietary trading. This is one risk aspect less ...

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  #318 (permalink)
 wavey 
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Zchartist View Post
The Atlas Rating / ZeroHedge website is "NOT" a solid source :

Moneycation: Zero Hedge Website Review

Thanks for sharing your ZH site review, not vouching for them, but think the Atlas Rating #'s are interesting to review and keep in mind.

There can be no solid predictor of course of those things to happen and I wouldn't dare to imply that. It seems we as traders just have to be even more on our toes in those times and make sure our risk is balanced and spread out.

We have been systems trading now professionally for +7 yrs and have faired alright with cleaning up accts regularly.

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  #319 (permalink)
 traderwerks 
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karoshiman View Post

Your TradeStation equities accounts are further protected with SIPC insurance. SIPC insures your equities accounts up to $500,000, including $250,000 for cash. Beyond this, TradeStation has arranged for additional protection through Lloyd's of London, insuring all accounts up to an aggregate limit of $300 million.

I read the safety of funds page, and I don't see the same thing you see.

It says "Securities accounts" and "equities accounts".

It seems pretty clear to me that they are not talking about futures accounts. It does not matter if it is cash or not, it is the type of account.

I agrees with @ThatManFromTexas and @djkiwi

The customer service reps can say whatever they want, the courts will go with what is written on the contract you signed when you opened the account.

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  #320 (permalink)
 Big Mike 
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Except the title of the page is "Safety of funds for Futures Traders". Just need to email the CFO and get it in writing.

Mike

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  #321 (permalink)
 Big Mike 
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Big Mike View Post
Just need to email the CFO and get it in writing.

Mike

I have sent an email to the CFO, and if I get a response I will share it here.

Mike

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  #322 (permalink)
 traderwerks 
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Big Mike View Post
Except the title of the page is "Safety of funds for Futures Traders". Just need to email the CFO and get it in writing.

Mike

Yes it does.

I guess I am just too cynical when it comes to brokers.

I hope the email to the CFO can clear this up.

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  #323 (permalink)
 ThatManFromTexas 
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karoshiman View Post
They talk about "loss of securities and/or cash" and not only "securities". And the margin in your futures account is essentially cash.

They have some further info on this site about safety of funds:

Safety of Funds for Futures Traders | TradeStation

There they state:

Your TradeStation equities accounts are further protected with SIPC insurance. SIPC insures your equities accounts up to $500,000, including $250,000 for cash. Beyond this, TradeStation has arranged for additional protection through Lloyd's of London, insuring all accounts up to an aggregate limit of $300 million.

This together with the statements by the TS reps (whether they understand the situation or not), would make it difficult for them to argue differently in case of a law suit (which hopefully will never happen). They've made their customers believe, that there is protection for futures accounts as well (up to the amount described above).

Though I see the points of TMFT and there might be a risk with Lloyd's as well, my concern is more about the conditions of the excess insurance, i.e. the cases which are covered by this excess insurance (bankruptcy, fraud, etc.?). I've sent them an email 2 days ago and asked about it and got the link above from them. Unfortunately, there they don't answer this question so I've sent them my question again, stating that this question is not answered on that page. See, what they will come up with...

By the way, that "safety of funds" page includes a lot of blah blah about regulation, separate accounts etc. which we know now does not mean anything. But, what I like is the fact that they are not involved in proprietary trading. This is one risk aspect less ...


traderwerks View Post
I read the safety of funds page, and I don't see the same thing you see.

It says "Securities accounts" and "equities accounts".

It seems pretty clear to me that they are not talking about futures accounts. It does not matter if it is cash or not, it is the type of account.

I agrees with @ThatManFromTexas and @djkiwi

The customer service reps can say whatever they want, the courts will go with what is written on the contract you signed when you opened the account.




Securities accounts - Held at TradeStation Securities, Inc.

Brokerage firms are required to follow certain rules that are designed to minimize the chances of financial failure and, more importantly, to protect customer assets if they do fail. For example, the SEC's Rule 15c3-1 — the "Net Capital Rule"— requires brokerage firms lo maintain certain levels of their own liquid assets. The minimum net capital a firm must have on hand depends on its size and business. As of December 31, 2011, TradeStation Securities, Inc. had net capital of approximately $54.7 million, which was approximately $52.2 million in excess of its required net capital of approximately $2.5 million.
In addition, the SEC's Rule 15c3-3 — the "Customer Protection Rule" — requires brokerage firms that have custody of customer assets to keep those assets separate from their own accounts. In other words, customers' cash must be placed in a special, separate "reserve" account; and fully paid customer securities must be kept separate from firm and customer margin securities. As of December 31, 2011, TradeStation Securities, Inc. had approximately $1.02 billion of customer funds reserved and segregated in bank accounts clearly identified as customer funds in accordance with Rule 15c3-3. The amount required to be segregated is computed every week and any shortage needs to be deposited before 10:00 a.m. of the following business day. As an additional safety, TradeStation maintains approximately $10 million in excess of the required amount to be segregated from its own proprietary funds.

Your TradeStation equities accounts are further protected with SIPC insurance. SIPC insures your equities accounts up to $500,000, including $250,000 for cash. Beyond this, TradeStation has arranged for additional protection through Lloyd's of London, insuring all accounts up to an aggregate limit of $300 million. For more information on SIPC coverage, we encourage you to visit the SIPC website.

Everything in the above section refers to equities.

Everything in the below section refers to Futures.


Futures accounts - Held at TradeStation Securities, Inc

TradeStation Securities Inc., as a Futures Commission Merchant (FCM) that carries customer accounts, is subject to the Customer Protection Rule requirements of the Commodity Futures Trading Commission (CFTC) Rules 1.20 and 30.7. These rules state that the company is required to maintain enough cash and cash equivalents in special reserve accounts, and identified as such, to cover at all times the required segregation reserve amounts. The reserve requirement must be calculated daily and filed electronically through the National Futures Association's (NFA) web based WinJammer system. Additionally, the company must also properly segregate these funds from any other proprietary bank account of the company. As of December 31,2011 TradeStation had $451.3 million segregated in accordance with the above CFTC requirements.


Let's hope no Tradestation customer has to find out the hard way

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ThatManFromTexas View Post

...


Yes, I am not 100% happy with the phrasing as well as it obviously leaves room for interpretation as one can see from this discussion here.

Mike's idea with the CFO is great.

I've sent the following message to client services and posted this also in the aforementioned TS community thread which I've started over there:

Hi,

Contacted client services and received a link to that website:

Safety of Funds for Futures Traders | TradeStation

However, on that site as well as in the aforementioned paragraph which I've quoted initially from your website regarding Account Security, it is not clearly phrased that "futures accounts" are covered by that excess SIPC insurance as well.

Given the current situation in the futures industry, it should be of high interest for TradeStation's future/futures business, to be clear in this regard or otherwise one can only suspect that futures accounts are not secure at TradeStation.

Hence, I suggest to change such official statement and include a sentence that explicitly states that futures accounts are protected by the excess SIPC insurance, i.e. mention the words "futures account" in that sentence and do not use any wishy-washy phrasing which leave room for interpretation.

Regards,
k

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ThatManFromTexas View Post
Securities accounts - Held at TradeStation Securities, Inc.

Brokerage firms are required to follow certain rules that are designed to minimize the chances of financial failure and, more importantly, to protect customer assets if they do fail. For example, the SEC's Rule 15c3-1 — the "Net Capital Rule"— requires brokerage firms lo maintain certain levels of their own liquid assets. The minimum net capital a firm must have on hand depends on its size and business. As of December 31, 2011, TradeStation Securities, Inc. had net capital of approximately $54.7 million, which was approximately $52.2 million in excess of its required net capital of approximately $2.5 million.
In addition, the SEC's Rule 15c3-3 — the "Customer Protection Rule" — requires brokerage firms that have custody of customer assets to keep those assets separate from their own accounts. In other words, customers' cash must be placed in a special, separate "reserve" account; and fully paid customer securities must be kept separate from firm and customer margin securities. As of December 31, 2011, TradeStation Securities, Inc. had approximately $1.02 billion of customer funds reserved and segregated in bank accounts clearly identified as customer funds in accordance with Rule 15c3-3. The amount required to be segregated is computed every week and any shortage needs to be deposited before 10:00 a.m. of the following business day. As an additional safety, TradeStation maintains approximately $10 million in excess of the required amount to be segregated from its own proprietary funds.

Your TradeStation equities accounts are further protected with SIPC insurance. SIPC insures your equities accounts up to $500,000, including $250,000 for cash. Beyond this, TradeStation has arranged for additional protection through Lloyd's of London, insuring all accounts up to an aggregate limit of $300 million. For more information on SIPC coverage, we encourage you to visit the SIPC website.

Everything in the above section refers to equities.

Everything in the below section refers to Futures.


Futures accounts - Held at TradeStation Securities, Inc

TradeStation Securities Inc., as a Futures Commission Merchant (FCM) that carries customer accounts, is subject to the Customer Protection Rule requirements of the Commodity Futures Trading Commission (CFTC) Rules 1.20 and 30.7. These rules state that the company is required to maintain enough cash and cash equivalents in special reserve accounts, and identified as such, to cover at all times the required segregation reserve amounts. The reserve requirement must be calculated daily and filed electronically through the National Futures Association's (NFA) web based WinJammer system. Additionally, the company must also properly segregate these funds from any other proprietary bank account of the company. As of December 31,2011 TradeStation had $451.3 million segregated in accordance with the above CFTC requirements.


Let's hope no Tradestation customer has to find out the hard way


Thanks for the great discussion, everyone.


I wonder what Lloyds of London believe they are insuring?

Tradestation Customer Service and even the CFO (if Mike gets a response) might believe one thing, but as anyone who has ever dealt with an insurance company knows, what a policyholder believes/thinks is never the same as what a policywriter believes/thinks!

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kevinkdog View Post
Thanks for the great discussion, everyone.


I wonder what Lloyds of London believe they are insuring?

Tradestation Customer Service and even the CFO (if Mike gets a response) might believe one thing, but as anyone who has ever dealt with an insurance company knows, what a policyholder believes/thinks is never the same as what a policywriter believes/thinks!

Kevindog is right about that. I worked for John Hancock and Prudential back in the 80's and 90's and you would have no idea how many claims were escalated because of misunderstandings of all types of policies from auto, life and annuities.

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kevinkdog View Post
Thanks for the great discussion, everyone.


I wonder what Lloyds of London believe they are insuring?

Tradestation Customer Service and even the CFO (if Mike gets a response) might believe one thing, but as anyone who has ever dealt with an insurance company knows, what a policyholder believes/thinks is never the same as what a policywriter believes/thinks!


Drat! There is another risk...

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 ThatManFromTexas 
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kevinkdog View Post
Thanks for the great discussion, everyone.


I wonder what Lloyds of London believe they are insuring?

Tradestation Customer Service and even the CFO (if Mike gets a response) might believe one thing, but as anyone who has ever dealt with an insurance company knows, what a policyholder believes/thinks is never the same as what a policywriter believes/thinks!


itrade2win View Post
Kevindog is right about that. I worked for John Hancock and Prudential back in the 80's and 90's and you would have no idea how many claims were escalated because of misunderstandings of all types of policies from auto, life and annuities.


karoshiman View Post
Drat! There is another risk...

Come on guys... you have enough real issues to worry about without inventing stuff ....

As my daddy always said, "No sense borrowing trouble"

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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ThatManFromTexas View Post
Come on guys... you have enough real issues to worry about without inventing stuff ....

As my daddy always said, "No sense borrowing trouble"


Hey, didn't you come up with the topic, that Lloyd's itself is a risk?

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ThatManFromTexas View Post
Come on guys... you have enough real issues to worry about without inventing stuff ....

As my daddy always said, "No sense borrowing trouble"


I'm confused. You brought up 5 issues with the Lloyd's policy in the first place...

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Related note, TDA seems to have something similar



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WSJ Video...

Video - Did Peregrine Insiders See the Storm Coming? - WSJ.com

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Embeded:



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Bloomberg Video


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CFTC Commissioner O'Malia on Peregrine, Industry


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Put them all in jail. The son, the new wife, the entire Board of Directors. It is the Board of Directors job to know what is going on in company. If they knew they are criminals. If they did not know it should be criminal negligence. This probably will not happen but need to strike fear into hearts across industry that if you do this your family, entire board and anyone close to inside will go to jail.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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I think Wasendorf Sr will be hung out to dry, without a doubt. The CFO too. Who else is unclear at this point.

Corzine had a get out of jail free card, but this guy won't. His NFA buddies won't be able to protect him, the NFA itself will be under tremendous pressure to demonstrate how elaborate his deception was which explains why they were fooled, so they will crucify this guy.

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Source: Exclusive: U.S. probing failed broker PFGBest's use of small auditor | Reuters


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(Reuters) - U.S. futures industry investigators are looking into why Iowa-based collapsed brokerage PFGBest used a tiny accounting firm that appears to be operating from inside a suburban Chicago home to audit its books, according to a person familiar with the matter.

Experts said the use of such an auditor should have been a red flag to regulators of a futures brokerage with more than $500 million in assets and several hundred employees across the United States as well as in Shanghai and Canada.

There are comparisons with the way convicted Ponzi schemer Bernard Madoff used an auditor operating out of a strip mall in suburban New York and convicted swindler Allen Stanford's investment firm retained a little-known auditor on the Caribbean island of Antigua.

PFGBest's financial statement ended December 31, 2010, shows that a firm called Veraja-Snelling Company, based in Glendale Heights, Illinois, certified that the futures broker was in compliance with federal commodities regulations governing the segregation of customer money.

On Tuesday, the U.S. Commodity Futures Trading Commission accused the now-bankrupt brokerage and its founder Russell Wasendorf Sr. of misappropriating roughly $200 million of customer money in a fraud it said dates back to at least February 2010, and then lying to cover it up.

The alleged fraud came to light after Wasendorf's apparent suicide attempt on Monday morning outside the firm's Cedar Falls, Iowa, offices.

The CFTC is looking into the role of the auditor as it continues to investigate PFGBest, said the person familiar with the matter, who was not authorized to speak publicly.

When reached at her Glendale Heights home on Tuesday night, Jeannie Veraja-Snelling, who listed herself an officer of the firm when she registered with the Public Company Accounting Oversight Board in February 2010, said she could not talk about PFGBest.

"I don't know what's going on. I just found about it all an hour ago so I can't talk about it," said Veraja-Snelling, appearing distraught.

A PFGBest spokeswoman did not return a call seeking comment.

Another source told Reuters on Tuesday that Wasendorf went to great lengths to fabricate PFGBest's financials, saying he intercepted confidential regulatory documents that were mailed by the National Futures Association to what the industry self-regulatory group believed was U.S. Bank, the bank used by PFGBest.

Instead, the NFA was sending the documents, used to independently verify a broker's bank balances, to a post office box that Wasendorf had set up, the source said.

In the 2010 report, Veraja-Snelling & Co wrote that there were no material weaknesses involving internal controls and that the "corporation's practices and procedures were adequate."

The NFA confirmed that the accounting firm, which has no disciplinary history with Illinois financial regulators and has not been accused of any wrongdoing, also audited PFGBest's 2011 financial statements.

It was not clear if it was still PFGBest's auditor at the time of its bankruptcy filing on Tuesday.

An NFA representative declined to comment further. A CFTC spokesman did not have an immediate comment.

HOME BUSINESS

Veraja-Snelling & Co is located on a busy, four-lane street inside a modest house, that is a faded-pink color, in Glendale Heights, some 30 minutes outside of Chicago.

Jeannie Veraja-Snelling has been certified in the state of Illinois since 1999.

However, she does not list having any public company clients in her 2011 annual filing with the PCAOB.

On Tuesday night, she came to the door wearing a green sleeveless shirt and blue denim shorts. A stack of cardboard filing boxes was sitting just inside the door.

She declined to answer questions about how she came to be retained by PFGBest. She did not respond to a follow-up e-mail and voice mails asking questions.

Little information appears to be publicly available about Veraja-Snelling.

According to online records submitted to the U.S. Securities and Exchange Commission, the firm audited some broker-dealers, including Best Direct Securities, LLC, which is owned by PFGBest, for the year ending December 31, 2009.

The online records also indicate Veraja-Snelling has audited other small-sized securities brokers, such as Chicago-based Arclight Securities LLC for its 2007 financial statement, and Corporate Investments Group over several years, including 2011.

Audit experts say that just because PFGBest hired a small auditor to do its books does not necessarily say anything about the auditor's competence.

Instead, they said, it speaks more to the management of PFGBest and why the firm did not pick a larger auditor with a more established reputation.

"Typically if you are in a business like this, you want to have people have confidence in your numbers and feel like you have got a big name behind them," said Lynn Turner, a former chief accountant for the SEC.

The failure of regulators at the NFA to notice some of the red flags, they added, is also troubling.

"You would think that a regulator would notice this and that should trigger much higher scrutiny," said Tom Selling, who writes an accounting blog called the Accounting Onion. "There's no question that the regulator's protocol should take that into account, especially a sole practitioner."

INVESTIGATION CONTINUES

Experts say it is not common for the CFTC to bring actions against auditors, but it is not unprecedented.

In September of last year, the CFTC charged the national accounting firm McGladrey & Pullen and its partner David Shane with issuing an unqualified audit opinion on futures brokerage One World Capital Group.

At the time the case was filed, David Meister, the head of CFTC enforcement, stated that "the commission will not hesitate to impose significant sanctions on auditing firms and hold individuals personally responsible when they fail to adhere to their professional obligations."

The company and the audit partner settled the CFTC's case without admitting or denying the charges. The firm agreed to pay $900,000, and Shane paid $100,000.

Another potential regulatory body that could look into the situation is the PCAOB, which gained new authority under the 2010 Dodd-Frank Wall Street reform law to inspect auditors of broker-dealers.

A PCAOB spokeswoman declined to say if Veraja-Snelling had been inspected under the new program, or whether the PCAOB will investigate the firm in light of the alleged fraud at PFGBest.

Joseph Carcello, a professor at the University of Tennessee, said the PCAOB has limited resources but may look into PFGBest's audits because of the publicity around the case.

"It has some echoes of Madoff ... I'd be shocked if they don't think about it," he said.

(Reporting By Sarah N. Lynch, Emily Stephenson and Nick Carey; Editing by Karey Wutkowski, Martin Howell and Chris Gallagher)

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kevinkdog View Post
I'm confused. You brought up 5 issues with the Lloyd's policy in the first place...

My point was that whether or not there is a policy, or what it covers should not be the major concern ....

The main issue is ... do you feel it is prudent to continue trading or does the situation warrant standing aside until things become more clear .

I just hate seeing traders losing their hard earned money due to no fault of their own.

I'm just a simple man trading a simple plan.

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karoshiman View Post
Yes, I am not 100% happy with the phrasing as well as it obviously leaves room for interpretation as one can see from this discussion here.

Mike's idea with the CFO is great.

I've sent the following message to client services and posted this also in the aforementioned TS community thread which I've started over there:

Hi,

Contacted client services and received a link to that website:

Safety of Funds for Futures Traders | TradeStation

However, on that site as well as in the aforementioned paragraph which I've quoted initially from your website regarding Account Security, it is not clearly phrased that "futures accounts" are covered by that excess SIPC insurance as well.

Given the current situation in the futures industry, it should be of high interest for TradeStation's future/futures business, to be clear in this regard or otherwise one can only suspect that futures accounts are not secure at TradeStation.

Hence, I suggest to change such official statement and include a sentence that explicitly states that futures accounts are protected by the excess SIPC insurance, i.e. mention the words "futures account" in that sentence and do not use any wishy-washy phrasing which leave room for interpretation.

Regards,
k


Received the following reply on my post above in the TS community:


karoshiman,

All items listed under Securities pertains to equities accounts only which is where the Lloyd's coverage is included.

What is listed under the Futures account headline pertains to Futures accounts only and the same idea for Forex accounts.

Thank you,

Dean
TradeStation Technical Support



So, TMFT was right... the futures accounts are not covered by the Lloyd's insurance...

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ThatManFromTexas View Post
I just hate seeing traders losing their hard earned money due to no fault of their own.

Of course...

But some of us have "no choice" if we want to keep earning a paycheck. I could try to switch back to equities and ETFs more and de-fund my futures accounts at various institutions, but I think (personally) that would be a major overreaction.

I will certainly not keep large excess funds at brokers any longer, but I think standing aside is not an option. That said, I am watching everything very closely, just like everyone else.

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@tigertrader and @Private Banker, if you are around, would love to hear your input.

Are you making changes with regards to funding levels at your brokerage(s) due to this?

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ThatManFromTexas View Post
My point was that whether or not there is a policy, or what it covers should not be the major concern ....

The main issue is ... do you feel it is prudent to continue trading or does the situation warrant standing aside until things become more clear .

I just hate seeing traders losing their hard earned money due to no fault of their own.

Gotcha. Thanks for clarifying. This is key:
"do you feel it is prudent to continue trading or does the situation warrant standing aside until things become more clear ."

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 ThatManFromTexas 
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Big Mike View Post
Of course...

But some of us have "no choice" if we want to keep earning a paycheck. I could try to switch back to equities and ETFs more and de-fund my futures accounts at various institutions, but I think (personally) that would be a major overreaction.

I will certainly not keep large excess funds at brokers any longer, but I think standing aside is not an option. That said, I am watching everything very closely, just like everyone else.

Mike

@Big Mike

I wasn't worried about experienced traders like you ... I was concerned about a lot of small traders who don't have a very large nest egg to start with and don't do this for a living ... for whom standing aside might be the most prudent move for them.

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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 kevinkdog   is a Vendor
 
 
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Received the following reply on my post above in the TS community:


karoshiman,

All items listed under Securities pertains to equities accounts only which is where the Lloyd's coverage is included.

What is listed under the Futures account headline pertains to Futures accounts only and the same idea for Forex accounts.

Thank you,

Dean
TradeStation Technical Support



So, TMFT was right... the futures accounts are not covered by the Lloyd's insurance...



Since I got a different answer directly from TS (via e-mail), it is obvious that they don't even know. Great.

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 ThatManFromTexas 
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Since I got a different answer directly from TS (via e-mail), it is obvious that they don't even know. Great.

@kevinkdog

On the bright side....

1. MFGlobal got into trouble due to their proprietary trading, TS doesn't do proprietary trading.

2. PFG was controlled by a handful of people making fraud easier. TS is a much different organization. It would be very difficult for them to repeat what PFG did.

3. TS has $52.2 million in excess of its required net capital

4. TS auditor is KPMG a large national auditing firm. PFG used a one woman firm who works out of her house. Bernie Madoff used a one man auditing company.... who worked out of his house.

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marks
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would like to know if Tradestation is FCM? PFGBEST appeared not be a FCM.

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 itrade2win 
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IMO...I think it would be prudent for all to be very vigilant and build a relationship with their broker and ask for information that may reassure any and all concerns based on the previous CFM's fiasco's. I am with Velocity Futures and I know they are a smaller organization which gives me some concerns, but nothing worth losing sleep over. I want to get some answers such as who their auditors are, ask for Balance sheets and every financial information that satisfies my concerns. I want to act like I am a share holder of the company and want to know as much about them as I can learn. Will this prevent this from happening to those of us who have our money parked there? Of course not, but at least I did my job in making informed decisions.

I think its wise to keep only the minimum to keep trading what ever size you are currently trading and withdraw on a regularly bases. We all know the problems we potentially face and its up to us to protect our interest and not the NFA and CFTC to protect us as we already know that haven't been up to now.

Its unfortunate for those who are dealing with the MFG and PFG mess, I hope things turn for the better.

Cheers
Ryan

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@kevinkdog

On the bright side....

1. MFGlobal got into trouble due to their proprietary trading, TS doesn't do proprietary trading.

2. PFG was controlled by a handful of people making fraud easier. TS is a much different organization. It would be very difficult for them to repeat what PFG did.

3. TS has $52.2 million in excess of its required net capital

4. TS auditor is KPMG a large national auditing firm. PFG used a one woman firm who works out of her house. Bernie Madoff used a one man auditing company.... who worked out of his house.


Thanks TMFT!

However, TS is owned by this Japanese firm Monex Group, which acquired TS only recently. Don't know much about them, except from the internet (!) it seems that they are not so small... whatever that means...

The net capital figure looks better than what other brokerages show. Still, this can be manipulated... and KPMG is for sure more promising than this one-man-show audit firm of PFG. But as Enron showed, huge audit firms do not guarantee anything either...

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karoshiman
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Since I got a different answer directly from TS (via e-mail), it is obvious that they don't even know. Great.

Yes, that's disturbing. In my thread over at TS, the other tech (!) guy did respond differently as well. Guess, that's the wrong guys to ask... ... but that's the guys reading and responding in the TS community...

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 ThatManFromTexas 
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marks View Post
would like to know if Tradestation is FCM? PFGBEST appeared not be a FCM.

@marks

According to the CFTC ... yes they are


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marks
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@ThatManFromTexas thanks for checking.

could you also check if it's listed at CME Group FCM Clearing Member list?

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 ThatManFromTexas 
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marks View Post
@ThatManFromTexas thanks for checking.

could you also check if it's listed at CME Group FCM Clearing Member list?

@marks

Doesn't appear so. I know they used to clear futures through R.J. Obrien. Do not know if that is still true.

Clearing Firms

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 itrade2win 
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News Headlines

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marks
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PFGBest clears futures through Jefferies.

should it be a cause of concern if futures brokerage is not a FCM?

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 liquidcci 
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marks View Post
PFGBest clears through Jefferies.

should it be a cause of concern if brokerage is not a FCM?

@marks FCM's under more stringent rules. But as we have seen that does not stop fraud from happening.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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 ThatManFromTexas 
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marks View Post
PFGBest clears through Jefferies.

should it be a cause of concern if brokerage is not a FCM?

@marks

What is important is knowing what the entire food chain consists of. I have an account with Mirus that clears through Rosenthal Collins. All my financial concerns would center on RCG.

I'm just a simple man trading a simple plan.

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 Cloudy 
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Ok, got the new expected reassurance letter from Rosenthal Collins Group (RCG):

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 aligator 
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Cloudy View Post
Ok, got the new expected reassurance letter from Rosenthal Collins Group (RCG):

O'boy, it reminds me of a similar letter PFG sent me after the MFG mess. They were just buying time to send my money to the Island. Should have read between the lines. Too bad, too late.

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 Big Mike 
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Source: News Headlines


Quoting 
CEDAR FALLS, Iowa — Just days before Peregrine Financial Group collapsed, the firm's president sent an email to employees suggesting the crisis had passed, CNBC has learned.

"It is believed that based on current cost cuts and projections for increases in income in particular from international business ... that PFGBEST will be able to run at break even," wrote President and Chief Operating Officer Russell Wasendorf, Jr., in the July 6 email obtained by CNBC and verified by multiple PFG employees.

The email is attached.

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 Big Mike 
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Interesting article on whistle blowers and fraud

Source: Whistleblowers ?essential? to protect client funds, says former SEC chief | news | Trading & Execution | Regulation | thetradenews.com


Quoting 
An investigation into alleged misappropriation of customer funds at US-based futures commission merchant Peregrine Financial Group (PFG) serves to highlight the need for stronger regulatory oversight and greater whistleblower protection, according to Jordan Thomas, partner and chair of the whistleblower representation practice at law firm Labaton Sucharow.

US regulator the Commodity Futures Trading Commission (CFTC) filed a complaint earlier this month against Peregrine and owner Russell Wasendorf senior in which it alleged that Wasendorf committed fraud by misappropriating customer funds, violating customer fund segregation laws and making false statements in financial documents filed with the Commission. The CFTC alleges that during a National Futures Association (NFA) audit in July, PFG falsely claimed that it held in excess of US$220 million of customer funds, when in fact it held an estimated US$5.1 million. Wasendorf attempted to commit suicide on 9 July 2012.

“Things don’t happen in a vacuum,” Thomas told theTRADEnews.com. “It is particularly troubling that both here, and in the case of MF Global, ethical people who must have known about these abuses remained silent. When misconduct is common and accepted by financial service professionals the integrity of our entire financial system is at risk.”

Troubled ethics

The PFG case follows a survey by Labaton Sucharow which found that 24% of respondents across the US and UK financial services firms believed they may need to engage in unethical or illegal conduct to achieve success in their company.

Moreover, according to the June survey, 26% said they had seen or had first-hand knowledge of such wrongdoing in the workplace, while 16% of respondents said they would commit a crime such as insider trading if they could get away with it.

An even higher proportion of those questioned (39%) thought their competitors were likely to have engaged in illegal or unethical behaviour to be successful. Some 30% believed their compensation or bonus plan created pressure to compromise ethical standards or break the law. Only 30% had confidence that regulators effectively deter, investigate and prosecute misconduct.

“Regulators are only as good as the information they have available to them,” said Thomas. “They conduct spot checks and they monitor for abuse, but consider how few staff they have and then compare that with the thousands of financial organisations and individuals they are expected to cover – it is a huge task. That’s why whistleblowers are essential if we are to ensure the integrity of financial markets.”

Formerly an assistant director in the division of enforcement and assistant chief litigation counsel at the SEC, Thomas was one of the chief architects of the SEC Whistleblower Program, which offers eligible whistleblowers employment protections, monetary awards and the ability to report anonymously in an effort to encourage reporting of financial misdeeds. The Whistleblower Program also has extraterritorial reach.

Coming clean

Labaton Sucharow has just launched its SEC Whistleblower Eligibility Calculator, a web-based tool that allows users to find out whether they are eligible for the SEC programme. The intention is to provide a safe, anonymous means for professionals who are aware of abuses to report them. It is hoped that a large proportion of future cases of financial misconduct will have been brought to light by whistleblowers, according to Thomas.

“Virtually everyone is eligible for the whistleblower program at some point, with very few exceptions,” he said. “People who know about abuse such as mixing of client funds can now report it safely and anonymously, online, without fear of retaliation. There is no question that clients will have much greater protection, thanks to this programme.”

Earlier this week, CFTC commissioner Scott O’Malia suggested broker-dealers should be permitted to maintain customer funds in omnibus accounts, to provide more efficient margining and greater protection for customer funds. It has also been reported that the CFTC’s five commissioners are currently voting on changes proposed by the NFA, under which higher levels of reporting would be required from brokers over transfers of customer funds.

“These new requirements will help begin the process of restoring public confidence in the financial integrity of customer segregated funds,” said Dan Rother, NFA president. “Making this information available to the public will give investors a better picture of the financial standing of the futures commission merchant with which they are conducting business.”

Last month, the CFTC confirmed that it will retire an “alternative method” for calculating client assets dating back to 1987 that was misused by former US-based equity and derivatives broker MF Global.

An estimated US$1.6 billion from client accounts held by MF Global went missing after the firm filed for bankruptcy in October last year; it is alleged that former company CEO Jon Corzine deliberately used client funds to cover the firm’s own prop trading shortfalls.

Elliott Holley
+44 (0)20 7397 3820
elliott.holley@information-partners.com

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 Big Mike 
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Source: News Headlines

The email is attached.

Mike

Image for those too lazy to load the PDF:



This is a rather interesting email.

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 Private Banker 
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@tigertrader and @Private Banker, if you are around, would love to hear your input.

Are you making changes with regards to funding levels at your brokerage(s) due to this?

Mike

Hi Mike,

Good question. I've always kept my accounts funded enough to do business with regards to the size I want to trade and the risk being assumed. I take out all my profits at the end of each month and start clean each month. This accomplishes several things. One, I'm able to take out my profits and reinvest them in passive investments. Two, I'm controlling my exposure in what could be compared to having money in the bank back during the wild west. You just don't know what's going to happen and only keep enough in there for my day-to-day operations. When I'm trading poorly, I reduce size to keep within the account's risk exposure. I also work with multiple brokers in the event something like the MFG or PFG event. I had an account with MFG a few years ago but pulled it around the time when Corzine came in and luckily didn't have anything with PFG.

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 Big Mike 
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Image for those too lazy to load the PDF:



This is a rather interesting email.

Mike

Just thinking out loud.

If Jr on the 6th thinks things are suddenly looking better, do you think that Sr was lying to him? But that still leaves the whole shotgun wedding (presumably to protect assets) with a bad taste, I mean why the shotgun wedding, and the rush'd POA, if things were peachy?

But why would Jr send an email telling everyone things are peachy and they are getting their salary cuts back, hurray, if things were not good... I mean it would just be implied that the prior cuts would remain in effect, no email was necessary...

Just .... interesting.

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Hi Mike,

Good question. I've always kept my accounts funded enough to do business with regards to the size I want to trade and the risk being assumed.

Thx. I think we are on same page, which is basically - no change. I don't have huge accounts so it wouldn't be the end of the world if one of them were lost to fraud, or held up in court for a year.

Yeah, I really feel bad for the guys that were with MFG then got pushed to PFG as an "approved" firm... I mean, holy crap...

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 ThatManFromTexas 
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Cloudy View Post
Ok, got the new expected reassurance letter from Rosenthal Collins Group (RCG):


aligator View Post
O'boy, it reminds me of a similar letter PFG sent me after the MFG mess. They were just buying time to send my money to the Island. Should have read between the lines. Too bad, too late.

@Cloudy

@aligator

The difference is that yes they do post their audited financials and they do show where your money is....





RCG auditor ....

McGladrey & Pullen operates in an alternative practice structure with RSM McGladrey. Though separate and independent legal entities, they work together to serve their clients. Together, the two companies are ranked as the fifth-largest U.S. accounting firm by revenue (the largest non-Big Four entity) and have approximately 7,100 employees in 88 offices.





PFG Auditor

Veraja-Snelling & Co is located on a busy, four-lane street inside a modest house, that is a faded-pink color, in Glendale Heights, some 30 minutes outside of Chicago.
Jeannie Veraja-Snelling has been certified in the state of Illinois since 1999.
However, she does not list having any public company clients in her 2011 annual filing with the PCAOB.
On Tuesday night, she came to the door wearing a green sleeveless shirt and blue denim shorts. A stack of cardboard filing boxes was sitting just inside the door.


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 aligator 
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Just thinking out loud.

If Jr on the 6th thinks things are suddenly looking better, do you think that Sr was lying to him?

I can't believe that Jr. was not involved. The whole family had invested heavily in energy projects in Iowa, and with the economy and such, the whole thing must have gone busted.

The entire Board must have been into this.

The memo on July 6 leaves no time for anyone to react considering the Monday's event. IMO, the e-mail was an informal way to thank everyone and say goodbye, and the then a fake suicide to get police protection.

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my partner did received the letter, but not much assurance. RCG was audited by McGladrey & Pullen and McGladrey appeared to be involved before with other ponzi's scandal and the failure to audit . Difficult to trust anyone nowadays. Bank Balance must be electronically verified, thats the key to this fiasco.

CFTC Charges National Accounting Firm McGladrey & Pullen, LLP, and Partner David Shane with Failure to Properly Audit One World Capital Group, a Former Registered Futures Commission Merchant

https://www.futuresmag.com/2011/09/22/cftc-national-accounting-firm-failed-at-oversight

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 aligator 
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The difference is that yes they do post their audited financials and they do show where your money is....

Yes, so did PFGRuss, and he was a committee member and adviser to the regulators. I am sure MFG had auditors also as a public company.

So far, all I have seen in 30 some years of trading is that the fox is watching the hens.

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 TrendTraderBH 
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My point was that whether or not there is a policy, or what it covers should not be the major concern ....

The main issue is ... do you feel it is prudent to continue trading or does the situation warrant standing aside until things become more clear .

I just hate seeing traders losing their hard earned money due to no fault of their own.


Yes, I prefer to lose money trading due to fault on my own lol

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 liquidcci 
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Matt at Optimus sent this out to customers today. I attached the pdf he references. Good info in the PDF for Optimus customers.

Dear Customers,

Please find attached a letter from Howard Rothman, the president of our FCM, Vision Financial Markets. Mr. Rothman wrote this letter in reaction to the MF Global fallout back in November of 2011. We are sending this letter to our customers because there has been some fearful discussion regarding the PFG fallout and everything in this letter is still relevant. Mr. Rothman wrote this letter to ensure both investors and brokers of the financial health and stability of Vision Financial Markets.

I invite you to take some time to visit their website and the CME's website for additional financial information and disclosures.

If you have any questions or concerns please feel free to contact me at 561-367-8686 or toll free at 1-800-771-6748.

Thank you for your business and trust.

Best regards,



Matt Zimberg

President

Optimus Trading Group

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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 ThatManFromTexas 
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marks View Post
Bank Balance must be electronically verified, thats the key to this fiasco.

@marks

PFGBest Allegations Shake Industry, Raise Regulatory Questions - WSJ.com

Regulators said Tuesday Mr. Wasendorf had deceived authorities to hide his misuse of customer money for more than two years before the alleged fraud was exposed. Problems were uncovered only after a regulator moved to start verifying customer assets electronically, rather than relying on paper statements that authorities now believe Mr. Wasendorf used to cover the misappropriation, according to people familiar with details of the investigation.


aligator View Post
Yes, so did PFGRuss, and he was a committee member and adviser to the regulators. I am sure MFG had auditors also as a public company.

So far, all I have seen in 30 some years of trading is that the fox is watching the hens.

@aligator

Some members of Congress are calling for less government regulation of the financial markets .... unbelievable



TrendTraderBH View Post
Yes, I prefer to lose money trading due to fault on my own lol

@TrendTraderBH

The market will always accommodate you

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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 SeeTrader 
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Here's an interesting email I got this morning...




----- Original Message -----
From: Ron Rabune
To:
Sent: Thursday, July 12, 2012 4:07 AM
Subject: Try BESTDirect Powered by PFGBEST


Jeremy,




I invite you to test our BESTDirect trading platform with a 30 day demo.

REGISTER for a 30 day BESTDirect demo

The BESTDirect trading platform allows execution on futures, futures options and forex contracts with a surprising list of features, including:

· Trailing stops and profit targets

· OCO orders

· Depth of Market Trading Panel

· Trade window with complete positions summary, trade panel, order history, and real-time account status

· Strategy window

· Immediate access to your existing PFGBEST trading account or demo account

· Sortable order management panels that can be filtered by product or by order status

· Flexible workspace that lets you build the trading environment you are most comfortable using



In addition to BESTDirect, PFGBEST also offers execution on all of the most popular third-party trading platforms. If you’re interested in a demo of a specific trading platform, please let me know.

Please contact me via email or by calling 1.800.553.1711 / 319.553.2100 Monday – Friday from 7:00 A.M. – 4:00 P.M. (CST).


BEST Regards,

Ron Rabune, Director Wealth Management Group
One Peregrine Way
Cedar Falls, Iowa 50613
WMG@PFGBEST.com
Phone: 1.800.553.1711 Toll Free / 319.553.2100 | 319-277-0880 fax




There is a substantial risk of loss in futures, futures options and forex trading!

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  #374 (permalink)
 djkiwi 
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Hi guys, I've conducted my own due diligence of IB, TD and Tradestation after phone discussions with all 3 firms this morning to decide what I'm going to do with my own accounts. I've written a fairly detailed summary of notes in a new thread if anyone is interested. I spoke to the following people at the firms:

1. TD- Manager of the Trade desk,
2. IB - Margin desk manager
3. Tradestation - Senior account rep.



Cheers
DJ

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 kevinkdog   is a Vendor
 
 
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kevinkdog View Post
Since I got a different answer directly from TS (via e-mail), it is obvious that they don't even know. Great.

Latest e-mail from Tradestation...bottom line - no extra protection...


"Dear Mr. Davey,



I apologize for the confusion. Since the wording on our website is not perfectly clear, I spoke with our compliance department to verify the interpretation. In the Account Security Statement posted on our website, which can be found on the Other Information page, it is stated that the Lloyd’s of London policy covers “securities brokerage accounts the custody and clearing of which are handled by TradeStation Securities”. While futures accounts are held by TradeStation Securities, futures contracts are not securities, so the policy will only cover equities accounts. For futures accounts, TradeStation segregates customer funds and maintains adequate capital to meet its regulatory obligations, but there is no additional policy that covers futures accounts in the unlikely event of our financial failure, resulting in loss of customer assets. Please let me know if you have any further questions or concerns.



Sincerely,




Contact Team Manager"

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 Midas 
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Latest Info from NFA here.

Important Message for Customers of Peregrine Financial Group and Peregrine Asset Management - Updated on July 12, 2012

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 liquidcci 
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djkiwi View Post
Hi guys, I've conducted my own due diligence of IB, TD and Tradestation after phone discussions with all 3 firms this morning to decide what I'm going to do with my own accounts. I've written a fairly detailed summary of notes in a new thread if anyone is interested. I spoke to the following people at the firms:

1. TD- Manager of the Trade desk,
2. IB - Margin desk manager
3. Tradestation - Senior account rep.



Cheers
DJ

Problem is all of these are so so for trading futures. Depends how you trade I guess.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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 cory 
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kevinkdog View Post
Latest e-mail from Tradestation...bottom line - no extra protection...


.... For futures accounts, TradeStation segregates customer funds and maintains adequate capital to meet its regulatory obligations, but there is no additional policy that covers futures accounts in the unlikely event of our financial failure, resulting in loss of customer assets. ....

Sincerely,

Contact Team Manager"

at least this guy makes it crystal clear 'no protection' instead of sugarcoating it.

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 Cloudy 
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Peregrine Financial Fallout - CNBC
Peregrine Financial Fallout - CNBC
PFG Collapse From a Broker's View - CNBC

PFGBest chief: Prickly Iowa hero met stiff welcome in Chicago - Yahoo! Finance

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 Big Mike 
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Embedded:

 
 
 
 

 
 
 
 

 
 
 
 


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 djkiwi 
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liquidcci View Post
Problem is all of these are so so for trading futures. Depends how you trade I guess.

@liquidcci

That's true. Most of my trades now are fairly relaxed semi algo 50 -100 tick swing trades using limit orders or stop market orders queued well in advance. Slippage on triggered stops seems in line with the norms for the liquid instruments I trade.

The IB feed is poor so I use AMP's zenfire which I'm completely satisfied with. For executions I've noticed no difference between AMP and IB. I used to use TOS for options which was erratic but seems to have become stable under TD ownership. Wally said the executions are good at TOS. I've read your posts on how being close to the exchange helps quite a bit with latency and see how this would be important for shorter time frame traders using predominantly market orders.

Cheers
DJ

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 Big Mike 
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Source: Peregrine Customers? Claims Priced at 25 Cents on Dollar - Bloomberg


Quoting 
Customers’ claims on Peregrine Financial Group Inc., whose founder is accused by regulators of misappropriating more than $200 million, may fetch less than a quarter of their value in the wake of the firm’s bankruptcy, a trader said.

Quotes of 22 cents on the dollar to 25 cents were given to half a dozen Peregrine customers yesterday who called CRT Capital Group LLC, which buys and sells distressed debt, said Joseph Sarachek, managing director of claims trading. He is being “deluged” by calls today, he said. By comparison, bankrupt MF Global Inc.’s U.S. claims have always sold in the high 70s, he said.


July 11 (Bloomberg) -- Scott O’Malia, a commissioner on the U.S. Commodity Futures Trading Commission, talks about its lawsuit against Peregrine Financial Group Inc. for an alleged $200 million "shortfall" in client funds, and the outlook for further regulation in the futures industry. O’Malia speaks with Stephanie Ruhle and Erik Schatzker on Bloomberg Television’s “Market Makers.” (Source: Bloomberg)

Peregrine filed for bankruptcy July 10 after the U.S. Commodity Futures Trading Commission sued alleging the brokerage and its founder, Russell Wasendorf Sr., “used customer funds for purposes other than those intended by its customers, and consequently, have misappropriated these funds.” False reports on customer funds were also filed with the CFTC, the regulator said.

“This is much messier than MF Global because it appears there is fraud involved, based on the CFTC complaint,” Sarachek said.

A judge ordered a freeze of Peregrine’s assets at the CFTC’s request. The brokerage offered futures, cash, foreign exchange and options on futures trading.

Steeply Discounted

The missing money is about half of Peregrine’s customer funds, according to regulators. The steeply discounted prices for claims show uncertainty about how long it will take to get paid whatever money can be recovered, said Brian Coppola, a trader of distressed debt at hedge fund Fulcrum Capital in Austin, Texas.

“You have to figure out how many cents are going to come back to the estate and how long it will take,” he said. “Even if you can see 50 cents coming back, it could take five years. There are going to be lawsuits that hold up the distributions.”

Fulcrum, which is looking for larger Peregrine claims, is quoting prices in the low 20s, Coppola said. Most of the claims up for sale now have a face value of less than $200,000, he said.

Bank Records

Peregrine reported about $400 million in customer- segregated funds around June 29, of which $225 million was on deposit at U.S. Bank, according to the National Futures Association. The regulator said it learned that Peregrine’s chairman “may have falsified bank records” after finding only $5 million on deposit.

Peregrine is being probed by the U.S. Federal Bureau of Investigation, said Sandy Breault, a spokeswoman for the agency’s Omaha, Nebraska, office.

MF Global (MFGLQ)’s failure was the first time a futures brokerage’s collapse led to the loss of customer money, which is supposed to be segregated in separate accounts, according to futures industry leaders. Parent company MF Global Holdings Ltd. filed the eighth-largest U.S. bankruptcy last year with debt of almost $40 billion after making $6.3 billion in bets on sovereign debt and getting margin calls. A $1.6 billion shortfall in customer funds remains.
The Peregrine bankruptcy case is Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The CFTC regulatory case is U.S. Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12-cv-5383, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

Mike

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 ddnut 
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Big Mike View Post
Just thinking out loud.

If Jr on the 6th thinks things are suddenly looking better, do you think that Sr was lying to him? But that still leaves the whole shotgun wedding (presumably to protect assets) with a bad taste, I mean why the shotgun wedding, and the rush'd POA, if things were peachy?

But why would Jr send an email telling everyone things are peachy and they are getting their salary cuts back, hurray, if things were not good... I mean it would just be implied that the prior cuts would remain in effect, no email was necessary...

Just .... interesting.

Mike

Yeah, I noticed the strange timing on the Power of Attorney mentioned in the bankruptcy filing - it was dated July 3rd. Sr knew that the regulator was getting suspicious about PFG not using electronics verification and she would finally pick up the phone and call the bank to confirm funds. BTW, the NFA regulators were not concerned about verifying funds via snail mail to a major bank that uses a PO Box in Cedar Falls, Iowa?

The facts are pointing toward Sr committing fraud for two years, but could he do so without Jr's being aware? If Jr was involved, how could they expect to get away with this scheme? Their records won't be audited by a one person firm operating out of a spare bedroom, now will they?

Jr: "Gosh, I had no idea at all - in fact I sent our employees a glowing letter just one day before the ."

Interesting indeed.

EDIT: Add link to Rueters story: https://www.reuters.com/article/2012/07/11/us-broker-pfgbest-idUSBRE86A1AK20120711

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 ddnut 
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I wonder how they will divide up the assets between futures accounts and forex accounts. In the discussion regarding Tradestation insurance, their statements were that for futures accounts TS was required to maintain segregated accounts and reserve, while the forex section only mentioned the reserve requirement. Are forex funds required to be maintained in segregated accounts as well? If not are the futures traders in a slightly better position? Damn! How far down does this rabbit hole go?

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Silence Exp
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ThatManFromTexas View Post

The difference is that yes they do post their audited financials and they do show where your money is....

McGladrey & Pullen operates in an alternative practice structure with RSM McGladrey.

I think their 2011 RCG financial statement should be carefully read. It's public so I can attach. RCG drown 25 million from the line credit (for what ?). RCG had proprietary trades losses. Finally what is written in the notes .4 (page 11) is somewhat ambiguous. I am not a statement expert but many here know how to read it between the rows.

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 traderwerks 
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ddnut View Post
I wonder how they will divide up the assets between futures accounts and forex accounts. In the discussion regarding Tradestation insurance, their statements were that for futures accounts TS was required to maintain segregated accounts and reserve, while the forex section only mentioned the reserve requirement. Are forex funds required to be maintained in segregated accounts as well? If not are the futures traders in a slightly better position? Damn! How far down does this rabbit hole go?

I am not up on the latest regs, but forex is un regulated for the most part. They do not have central clearing so the broker just needs to keep enough to satisfy the CFTC (RFED )and the banks that they are trading with.

Math. A gateway drug to reality.
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 ThatManFromTexas 
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Silence Exp View Post
I think their 2011 RCG financial statement should be carefully read. It's public so I can attach. RCG drown 25 million from the line credit (for what ?). RCG had proprietary trades losses. Finally what is written in the notes .4 (page 11) is somewhat ambiguous. I am not a statement expert but many here know how to read it between the rows.

Unfortunately this is the internet where professional credentials and backgrounds are not required to offer profound accounting and legal opinions ad nauseum ....

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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  #388 (permalink)
karoshiman
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I know how to solve this problem.

We organize a mass campaign with thousands of retail traders and schedule a week (across all known forums), in which we all pull out all our money out of our brokerage accounts (whether futures, securities or forex) and transfer it to our regular bank accounts.

That way, the weak brokers and the fraudulent ones will probably collapse and the good and strong ones are filtered.

Though, I don't know whether one week is enough for this, but I'm sure that this would have an impact. At least, the companies would start to take their self-regulation finally serious. I would be willing to do this even for a month (take a holiday, do something else in the meantime... I know, this might be difficult for some ).

What do you think?

I mean, what else can we do?

The suggestion to spread your capital across many brokers in order to spread your risk might make sense from an individual point of view. But in the aggregate, that way the weak and fraudulent ones are only kept alive longer, as they get also money from new accounts opened by traders from other brokers.

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 Big Mike 
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karoshiman View Post
I know how to solve this problem.

The problem with that, is that one medium sized hedge fund probably has an account balance equal to 1,000 well funded typical retail traders.

And they aren't going to do as you suggest, because they need to be in the market every day.

So in other words, the impact of retail money alone wouldn't be enough.

I think, first and foremost, don't over-react.

Put pressure on your FCM but I would put just as much, if not much more, pressure on your Congressman. Because that is where the real solution needs to come from, in terms of SIPC type insurance for futures accounts.

Mike

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karoshiman
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Big Mike View Post
The problem with that, is that one medium sized hedge fund probably has an account balance equal to 1,000 well funded typical retail traders.

And they aren't going to do as you suggest, because they need to be in the market every day.

So in other words, the impact of retail money alone wouldn't be enough.

I think, first and foremost, don't over-react.

Put pressure on your FCM but I would put just as much, if not much more, pressure on your Congressman. Because that is where the real solution needs to come from, in terms of SIPC type insurance for futures accounts.

Mike


You are right Mike with the hedge funds. On the other hand, brokers which have also a decent amount of hedge fund money, and hence, are not impacted by such campaign, might be the more secure brokers anyway.

I assume that the smart money is not only smart when it comes to participation in the markets but also when it comes to broker selection. At least smarter than we retailers are...

I would have agreed to your statement to not over-react after the MF Global incident, but now, from my point of view there can be no such thing as over-reaction.

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 Big Mike 
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karoshiman View Post
I would have agreed to your statement to not over-react after the MF Global incident, but now, from my point of view there can be no such thing as over-reaction.

If it is a major concern, stop trading futures and just trade equities and ETFs with SIPC coverage. In other words, you have a choice, it is up to you.

Mike

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karoshiman
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Big Mike View Post
If it is a major concern, stop trading futures and just trade equities and ETFs with SIPC coverage. In other words, you have a choice, it is up to you.

Mike


Yep, I'm considering this already.

But first, I will check futures regulation in other jurisdictions.

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 traderwerks 
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karoshiman View Post
You are right Mike with the hedge funds. On the other hand, brokers which have also a decent amount of hedge fund money, and hence, are not impacted by such campaign, might be the more secure brokers anyway.

I assume that the smart money is not only smart when it comes to participation in the markets but also when it comes to broker selection. At least smarter than we retailers are...

I would have agreed to your statement to not over-react after the MF Global incident, but now, from my point of view there can be no such thing as over-reaction.

Not only hedge funds, but hedgers. The hedgers that use the markets to manage their risk. We often forget about them, but they are the reason that speculators are needed to provide liquidity.

There are a lot of farmers that use to markets to hedge part of their risk and they need to be in the market everyday with overnight margin. Not to mention all the other users for futures contracts, like transportation companies, manufacturers and exporters..

Math. A gateway drug to reality.
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  #394 (permalink)
karoshiman
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traderwerks View Post
Not only hedge funds, but hedgers. The hedgers that use the markets to manage their risk. We often forget about them, but they are the reason that speculators are needed to provide liquidity.

There are a lot of farmers that use to markets to hedge part of their risk and they need to be in the market everyday with overnight margin. Not to mention all the other users for futures contracts, like transportation companies, manufacturers and exporters..


That's right. These are the only ones who have to be in the markets.

Though, in financial futures it's mutual funds and similar participants who are the hedgers.

And by the way, the hedge funds can only keep staying in the markets as long as their investors don't put pressure on them. I'm sure one or the other investors will at least ask their hedge fund manager or CTA questions about their funds security, if not pull money out until the situation in the US becomes safer as it is now.

Just remember rule number one in trading: Protect your capital at all times! For me, this means also staying out of the market, if there is a risk I cannot fully assess...

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 ThatManFromTexas 
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Big Mike View Post
The problem with that, is that one medium sized hedge fund probably has an account balance equal to 1,000 well funded typical retail traders.

And they aren't going to do as you suggest, because they need to be in the market every day.

So in other words, the impact of retail money alone wouldn't be enough.

I think, first and foremost, don't over-react.

Put pressure on your FCM but I would put just as much, if not much more, pressure on your Congressman. Because that is where the real solution needs to come from, in terms of SIPC type insurance for futures accounts.

Mike

Congress will not do anything before the presidential election. (Except vote to repeal Health Care ... 33 times so far ... sheesh)

I'm just a simple man trading a simple plan.

My daddy always said, "Every day above ground is a good day!"
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 Serninja 
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I just thought about the NFA Assessment Fees and charges and ordered fines they receive.

The NFA assessment fee, payable by FCMs with respect to futures contracts, is $.02 per side, invoiced to customers.

After taking a short look at the publications of the CME regarding just of their futures volume, these numbers made me really dizzy.

With due regards to these huge sums, shouldn't be indicated that "someone" audit the NFA too; simply put are they have been audited? Then also, do they release figures or balance sheets to the public? What happens with all the monies?

I then took a look at the current Opportunities for carreers at NFA. Either they just started now to raise the requirements for positions or they maybe aren't able to hire the right people. A Bachelor's degree in Accounting requires also the ability to anticipate and respond to suspicious practices and analytical and communication skills. At least the latter requirements weren't available at that time. Nobody was able to "anticipate" that this theoretically could be possible and no one also had the "communication skills" to pick up the phone to verify the statements. Seemingly it doesn't matter if it's a top-tier company with triple digit millions of customer assest or a little rat-shop-broker in a one-horse town.

I mean this task could have done the customer himself. Just asking the broker to provide a statement of the bank who helds the segregated accounts, that there is everything in line. Would have this made the customer feeling more reassured? No one pays the customer for that, why would he pay some one else for the same? Only if one can go beyond that, right?

In relation to that, insurance companies send investigators across the states for claims that are one-thenth of a percent and a lot of them have by far less revenues then the NFA.

I think insurance could help, because it's in the interest of the insurance company to prevent the insurance case. Let them do the job when it comes to risk analysis. Therefore they would do very much more, for less premium to audit the way it has to be done. Just one condition of insurance: "If the customer can't withdraw his money due to regulatory actions, this case is coverd by the insurance." Plain and simple.

I've read that it could be more complicated than MF Global because it appears there is fraud involved, based on the CFTC complaint. But this frees the regulators only, if they did everything, I mean at least everything one avarage simple-minded person would do in a regulatory position. If not, there could be possibly someone else to sue with at least sufficient estate to fully satisfy claims...

There have to be made deeply changes in the system, now an immediately. But foremost, the customers have to be compensated to restore the trust!

Just my opinion...

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 Big Mike 
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Serninja View Post
I just thought about the NFA Assessment Fees and charges and ordered fines they receive.

The NFA assessment fee, payable by FCMs with respect to futures contracts, is $.02 per side, invoiced to customers.

After taking a short look at the publications of the CME regarding just of their futures volume, these numbers made me really dizzy.

With due regards to these huge sums

I believe that most members, institutions etc are exempted from the NFA fee. Not sure if it is just equity/clearing members or all rule 106 firms.

Mike

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 brevco 
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karoshiman View Post
I know how to solve this problem.

We organize a mass campaign with thousands of retail traders and schedule a week (across all known forums), in which we all pull out all our money out of our brokerage accounts (whether futures, securities or forex) and transfer it to our regular bank accounts.

That way, the weak brokers and the fraudulent ones will probably collapse and the good and strong ones are filtered.

Though, I don't know whether one week is enough for this, but I'm sure that this would have an impact. At least, the companies would start to take their self-regulation finally serious. I would be willing to do this even for a month (take a holiday, do something else in the meantime... I know, this might be difficult for some ).

What do you think?

I mean, what else can we do?

The suggestion to spread your capital across many brokers in order to spread your risk might make sense from an individual point of view. But in the aggregate, that way the weak and fraudulent ones are only kept alive longer, as they get also money from new accounts opened by traders from other brokers.

The problem with this is if the account is in an IRA (individual retirement account)......you pull the money out and the tax man penalizes you 10% of it.

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 TradeFlightPlan 
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This is what I learned regarding how futures accounts are not/are protected at TDA/TOS:

"So, futures accounts do not have any sipc coverage of any kind. That's industry wide. What we do is we do sweeps from our omnibus account into your brokerage account daily of excess funds. The funds swept into the brokerage account are then covered. Also, we have an omnibus account with Penson. This basically means that we have an account with penson, not you. Say we have 3,000 clients all with 10k margin reqs. We need 30 mil. in our account overnight to cover this. If something goes wrong at penson, we can move our account to another futures broker as the account is an omnibus account at a brokerage level. There is separation of client funds and the clearing firms funds regulation, we monitor this on our account also.

We obviously have a good relation with Penson, and I don't want you to view any of the above as anything negative on their end but we do have our own risk department that monitors all of this stuff."

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 Big Mike 
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TradeFlightPlan View Post
Say we have 3,000 clients all with 10k margin reqs. We need 30 mil. in our account overnight to cover this.

This is false based on my understanding. If 1,500 people are long ES and 1,500 short ES, as an example, then those 3,000 customers have posted full margin (lets pretend it is 10k margin, so 30 mil in his example).

But the FCM's net exposure is 0, and the margin required by the clearing firm will be minimal in that scenario.

That leaves a lot of money "available" in those segregated accounts...

Mike

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