Tag Archives: cftc

CFTC Uses New Enforcement Authority to Police Forex

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Forex Firm Caught Operating a Ponzi Scheme

The CFTC just announced that it charged a group out of Atlanta with operating a Ponzi scheme.  This is the first action the CFTC has brought against a forex firm for fraud.  At the beginning of last year Congress passed the Farm Bill which provided the CFTC with more authority for regulating the off-exchange foreign currency markets (also known as the spot forex markets).  This action indicates that the CFTC is serious about cleaning up the forex markets.  As we’ve detailed before, forex registration will be coming shortly.  Continue reading →

Commodity Hedge Fund Reminder

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CPOs Reminded to Always File Timely Reports

The following release details the CFTC sanctions against four commodity pool operators (CPOs) for failure to make timely filings with the NFA.  The CPOs failed to make filings of the respective commodity pool annual report.  This report must be provided to all pool participants (investors) and must also be filed with the NFA.  In certain circumstances the NFA will provide extensions to CPOs.  We also note that the filing requirement applies to those CPOs who run hedge fund of funds which are also commodity pools.  Continue reading →

NFA Interpretive Notices on Advertising Practices – Applicable to NFA Forex Members

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Earlier we discussed a release by the NFA in which they expressed the desire to apply the NFA Compliance Rule 2-29 to current NFA Members who are involved in the off-exchange forex markets (see NFA Proposes Rule 2-29 Apply to Forex Members).  We believe that the CFTC will approve the NFA’s request and thus certain aspects of Compliance Rule 2-29 will apply to NFA Members who trade forex.  We also believe that once the forex registration provisions are promulgated by the CFTC, this compliance rule will also apply to those forex managers.  In anticipation of such developments, we’ve summarized below (and linked to) the major interpretive notices that the NFA has released on Compliance Rule 2-29. Continue reading →

Obama Names Future Financial Market Regulators

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President-elect Brarack Obama’s choices for the head of the SEC and the CFTC have been generally well-received.  Mary Schapiro and Gary Gensler have very large jobs ahead of them as Congress is expected to require hedge fund registration with the SEC, and the CFTC also has the mandate to regulate the off-exchange forex markets.  As always we stess that any regulation should be reasonable and considered; knee-jerk legislation will not lead to more fair markets.

The releases below come from current SEC Chairman Cox and CFTC Acting Chairman Lukken. Continue reading →

Another Commodity Pool Operator Fraud – Lesson in Hedge Fund Due Diligence

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We frequently discuss scams involving the investment management and hedge fund industry as a warning to potential hedge fund investors to take the hedge fund due diligence process seriously.  In the CFTC release posted below, we have a classic scam where the sponsors of a commodity/futures fund acted in a fraudulent manner and used the assets of the fund for their own personal reasons.  We have listed the items which the consent order found and how an experienced hedge fund due diligence team could have protected the investor from fraud. Continue reading →

NFA Makes Two Separate Announcements on New Forex Rules

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(www.hedgefundlawblog.com) Today the NFA made two separate announcements regarding proposed new forex rules.  The announcements follow a series of similar announcements last week regarding new forex rules (see NFA Continues to Pursue Forex Regulation for Current Forex Dealer Members).  The first announcement dealt with additions to Compliance Rule 2-36 and related Interpretive Notice Changes.  The second announcement dealt with a completely new forex Compliance Rule 2-43.

NFA Proposes Addition to Compliance Rules 2-36 and Related Interpretive Notices – this announcement contained a hodge-podge of different rules the NFA staff felt needed to be addressed.  The announcement centrally focuses on (i) requirement that forex hypothetical results be subject to the anti-fraud provisions of NFA Compliance Rule 2-29(c),* (ii) require FDMs to have an Associated Person file the required weekly reports, (iii) require FDMs to adopt written policies regarding the calculation of rollover interest charges and payments, and (iv) prohibits FDMs from trading a customer’s account when they are a counterparty to the trade.  Continue reading →

NFA Proposes that all CPO and CTA Disclosure Documents be Filed Online

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CFTC Responds by Proposing Changes to CFTC Regulations Regarding Disclosure Documents

The CFTC recently proposed a change to its regulations based on a request from the NFA.  The proposed regulations would require CPO and CTA disclosure documents to be submitted only online to the NFA for approval.  The CFTC is requesting comments on this proposal which must be recieved on or before December 26, 2008.  The Hedge Fund Law Blog will be sumitting comments on this proposal.  We believe that this is a good change.  We may also ask for clarification to make sure that such requirement will also apply to Forex CTOs and Forex CTAs.  Please let us know if you have any comments to the proposed rules which are reprinted in their entirety below.

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Fraudulent Commodity Pool Operator Issued Injunction

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A commodity pool operator is issued an injunction for fraudulent behavior.  In classic fashion, this fraudster touted performance results which were grossly inaccurate.  The scheme ended earlier this year and investors lost almost $6 million dollars.  As we’ve noted before, hedge fund investors (including those investors in commodity and futures hedge funds) need to make sure to complete due diligence on the hedge fund and hedge fund manager.  The release below details the events and injunction.  Continue reading →

CPOs and CTAs have Until November 30 to update Disclosure Documents if they trade Forex

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As we announced earlier, the NFA promulgated rules which were approved by the CFTC which gave the NFA jurisdiction over retail off-exchange foreign exchange trading by its member firms.  What this essentially means is that if:

(i) you are currently a NFA member (e.g. you have a commodity/ futures pool or direct commodity/ futures accounts) and

(ii) you trade forex in the pool or account, or have an outside pool or account devoted to forex trading,

then you will need to update your disclosure documents with the NFA. The disclosure documents will need to contain all of the information required for non-forex disclosure documents and the update must be completed by November 30.  Please see NFA to Begin Regulating Forex. Continue reading →