The CFTC and NFA have stepped up their momentum in going after FX Money Managers.
On September 17th, the National Futures Association (NFA) announced that it had taken an emergency Member Responsibility Action against registered CTA, Capital Blu Management LLC. The action suspends Capital Blu’s NFA membership and prohibits the firm from soliciting or accepting customer funds, placing trades on behalf of customers or disbursing funds without the NFA’s prior approval.
The CFTC has also stepped up its actions and is actively pursuing investigations into multiple FX Money Managers. This recent activity can largely be attributed to the CFTC’s renewed sense of authority over FX fraud after the elimination of the Zelener loophole with the passage of the CFTC Reauthorization Act of 2008 on June 18th.
Unregistered Money Managers have long been the bane of the Retail FX industry. Largely allowed to run amok due a lack of regulatory oversight, many FX Money Managers have been peddling unrealistic returns while employing dishonest tactics in managing clients’ funds. The Forex industry has long awaited for the regulators to step in and take better control of the situation. I am sure many industry players will be very grateful for the regulator’s stepped up efforts in policing this vital sector of the industry
Over the past couple of years the NFA has put in an immense amount of effort into going after the solicitation of unregistered solicitors. This proved ineffective in curbing FX fraud as many of these solicitors simply introduced clients for self traded accounts. Unfortunately the self regulatory body has largely ignored the more dire problem of unscrupulous Money Managers.
In recent months many legitimate FX Money Managers offering more realistic (if lower) returns, have come forward to voluntarily register with the NFA prior to the enactment of mandatory registration. This has been largely spurred by a move on the part of many U.S. Retail FX Dealers to require registration from Money Managers carrying power of attorney on their clients’ accounts.