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PFGBest Accounts Frozen (PFG scandal big thread)
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PFGBest Accounts Frozen (PFG scandal big thread)

  #361 (permalink)
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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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  #362 (permalink)
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Source: News Headlines

The email is attached.

Mike

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This is a rather interesting email.

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  #363 (permalink)
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Big Mike View Post
@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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  #364 (permalink)
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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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  #365 (permalink)
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Private Banker View Post
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...

Mike

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  #366 (permalink)
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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....

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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.

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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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  #367 (permalink)
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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?

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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  #368 (permalink)
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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

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


Last edited by marks; July 12th, 2012 at 04:55 PM.
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  #369 (permalink)
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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....

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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  #370 (permalink)
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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.


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

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