Are Your Funds Safe? NFA to Shut down small forex fcms

[forex savior]

Bad News for the folks over at Easy Forex. Not only are they below the $5 million capital requirement about to go into effect but now they are being sued by an angry customer who lost their shirt.

Of course, lawsuits from failed traders against forex brokers are a dime a dozen. But this case does not appear to be your ordinary frivolous lawsuit filed by some crank on a vendetta. Here are the details as reported in a major Israeli newspaper:

Globes Online – Israel business news – Israel economy – Israel banks – Tel Aviv Stock Exchange – Israel stocks - Shekel – Israel technology – Israel real estate – Israel defense companies - Globes [online] - Suit alleges Easy Forex rewards brokers fo

Suit alleges Easy Forex rewards brokers for client losses
Easy Forex: The plaintiff is a client who lost heavily; we don't want to judge him harshly.
Globes correspondent 19 Nov 07 09:55

A lawsuit has been filed against online foreign currency brokerage Easy Forex by one of its customers, alleging that the company paid its brokers incentives when investors lost money and fined them if they made a profit.

Easy Forex said in response that the customer had lost heavily, and it did not want to judge him harshly. It added that as part of its compliance with international standards, it warns customers, both orally and in its literature, of the risks inherent in foreign currency trading.

"All the allegations will be clarified in court," it said.

The claim followed a report on Channel 10 in which an Easy Forex broker was heard saying, "I had this evil grin on my face one day, when a client lost $35,000 in a quarter of an hour. A guy gets wiped out - I get my commission. A guy comes up a winner and turns a profit - I pay."

What jumps out is the line from the Easy Forex broker who brags on television to a news reporter that "a guy gets wiped out - I get my commission. A guy comes up a winner and turns a profit - I pay." I have heard of market makers running amok and giving customers bad order execution for their own benefit but I have never heard of an introducing broker getting compensated only when their customers lose.

So I did some digging to try and find this video. Here it is in all its glory:
ðòðò 10 - çãùåú - ëúá úáéòä çîåø ðâã çáøú ääù÷òåú "àéæé ôåø÷ñ"

Unfortunately, you need to speak Hebrew, which most of us don't. But a friend translated for me and the gist of the interview is that Easy Forex actually compensates these brokers everytime their customers LOSE money. Talk about being underhanded. Aren't introducing brokers usually compensated with a portion of the spread? Not here. Apparently these brokers would go into the religious community where the regulatory oversight is scant and get these guys to open accounts knowing they would get creamed.

Looks like all those critics of market makers have some new ammunition to fire away with in the great ECN vs. Market Maker debate.

By the way, beware forex brokers with evil grins...

[coscorp]

Hi,

interesting post...stregthens my inclination towards a segregated account..but I can't seem to find anything on FXDD...do you have any info on them please?

[maxiFX]

Originally Posted by coscorp

Hi,

interesting post...stregthens my inclination towards a segregated account..but I can't seem to find anything on FXDD...do you have any info on them please?

I think the reason for that is that they are not regulated...I would stay far away from them if I were you. I agree that segregated accounts are much better, that is what I have also. I'm just surprised that these shady unregulated brokers even have clients!!!! So shady....

[juxtatrader]

As of right now a brokerage firm does not have to be regulated to be open. Some firms have decided not to become regulated until the NFA comes down with their exact ruling. Because of no exact ruling from the NFA it has cost some firms lots of money tryin to get regulated and then get slapped with fines that cost them even more money.

As far as FXDD their parent company is regulated and have heard from reliable resources their reasons for not being regulated and have to say they have a valid reason for not doing so yet.

[loveforex]

Being regulated is great, but NFA will do nothing should you have a problem with a broker. They are just a membership body doing business by charging registration fees.

Everything seems to be over regulated in USA and in favor of multi million giants as if to indicate that higher capital = safety.

America no longer offer equal opportunity. More money more equal. Notice how all small mom and pops stores disappeared and owners now all work for big co. that "closed" them down. The same will happen with fx brokers.Traders will have no choice but to deal with giants, and when competition narrows guess who is in trouble? Traders, of course.

Also, just because someone have a Swiss address and a Swiss phone number does not mean they are Swiss co. and located in Switzerland.

Most of them are not actually Swiss, but based right in here ..USA.

Good day.

[forex savior]

Originally Posted by juxtatrader

As of right now a brokerage firm does not have to be regulated to be open. Some firms have decided not to become regulated until the NFA comes down with their exact ruling. Because of no exact ruling from the NFA it has cost some firms lots of money tryin to get regulated and then get slapped with fines that cost them even more money.

As far as FXDD their parent company is regulated and have heard from reliable resources their reasons for not being regulated and have to say they have a valid reason for not doing so yet.

FXDD is completely unregulated because they are taking advantage of their affiliation with Tradition. Trading with FXDD is EXTREMELY RISKY as you are not in the least bit protected by any regulatory authority. Avoid them at all costs.

[forex savior]

A few months ago PFG announced that it had purchased American National Trading Corporation.
PFGBEST.com - Press Room

However, that hasn't stopped the NFA from rubbing out its former executives in a ruling that has banished several former principals of ANTC to the futures equivalent of Siberia. Did PFG buy a pig in the poke?

Here is the NFA's decision:
BASIC Case Summary

On November 29, 2007, ANTC was permanently barred from NFA membership and from acting as a principal of an NFA Member. Varden was ordered to pay a $40,000 fine and Zummo and Roy were ordered to each pay a $20,000 fine. Varden and Zummo were each barred from acting as a principal of an NFA Member until May 11, 2009. If, after May 11, 2009, Varden or Zummo becomes a principal of an NFA Member, then during the time he is a principal of such Member, he will cause such Member to be subject to the enhanced supervisory requirements of NFA Compliance Rule 2-9. After a Member, of which Varden and/or Zummo is a principal, has been subject to the enhanced supervisory requirements of NFA Compliance Rule 2-9 for at least 18 months, then Varden and/or Zummo will be permitted to make an application with NFA's Waiver Committee for a waiver of the enhanced supervisory requirements with respect to such Member.

What did they do? They were charged with "deceptive, misleading and high-pressure sales tactics." And "poor supervision." Eh, what else is new. Poorly capitalized firms that do a poor job supervising their employees are a dime a dozen as Easy Forex so amply demonstrated. Just more evidence for traders to beware poorly capitalized firms.

[muddbuddha]

I just wanted to comment that this is an excellent thread and is very well done. I've read all of it and have appreciated the lack of biased broker bashings.

You've presented the evidence soundly and clearly concerning the brokers that are at risk.

More importantly, you've presented in the best possible forum as this is exactly what new traders need to know.

A trader wants to know that his funds are safe as his account grows. Fortunately I've never had an account with any of the risk brokers, but have had accounts with several of the well funded brokers....good choices on my part. But others may not be as lucky.

Personally, I hope this does get passed as this sort of thing is needed to mature the Fx market, which will in turn bring more money into it and provide more volatility.

Good work....and many thanks!!

[maxiFX]

Originally Posted by juxtatrader

As of right now a brokerage firm does not have to be regulated to be open. Some firms have decided not to become regulated until the NFA comes down with their exact ruling. Because of no exact ruling from the NFA it has cost some firms lots of money tryin to get regulated and then get slapped with fines that cost them even more money.

As far as FXDD their parent company is regulated and have heard from reliable resources their reasons for not being regulated and have to say they have a valid reason for not doing so yet.

That's nice that you have heard why they are not regulated and that it is an alleged legitimate reason but as far as I and everyone else is concerned that's hearsay. Sure it costs time and money to become regulated but that's the point. Brokers who have chosen to go through the process think it is worth investing money into their regulation. Why? Because it gives their clients transparency and a forum to voice their complaints to a regulatory body. Does this protect a firm from going under? No but it sure is a step in the right direction. A step FXDD has not yet made which is why I wouldn't trade with them. So what if their parent company is regulated? That's not good enough for me. I want to know their net excess capital and to make sure that they can maintain a certain standard. If you feel comfortable keeping money with a firm like that then fine but I certainly don't.

[juxtatrader]

Its easy for people to say what makes a good brokerage firm. I personally work with two different brokerage firms one is registered and one is not. I don't feel any more comfortable with the one that is registered due to the fact that to me with the NFA not being consistent with their rulings causes me to not put much stock in the whole process.

Even the OP has shown how they change multiple times on their regulations and what they are requiring. I have seen IB's get audited from them and have things they needed change from one day to another.

I place my money after doing my own due diligence and not by what other traders have to say. We tend to believe the bad before we will believe the good in what we read! If you have something bad to say I have no idea what the other side to the story is and what is really the truth. I see people every day get mad at others and put the blame on others when its their own lack of knowledge and experience in this market that has really burned them not the brokerage firm. This is just my opinion and I encourage others to check on your own before you make a decision.

Originally Posted by maxiFX

That's nice that you have heard why they are not regulated and that it is an alleged legitimate reason but as far as I and everyone else is concerned that's hearsay. Sure it costs time and money to become regulated but that's the point. Brokers who have chosen to go through the process think it is worth investing money into their regulation. Why? Because it gives their clients transparency and a forum to voice their complaints to a regulatory body. Does this protect a firm from going under? No but it sure is a step in the right direction. A step FXDD has not yet made which is why I wouldn't trade with them. So what if their parent company is regulated? That's not good enough for me. I want to know their net excess capital and to make sure that they can maintain a certain standard. If you feel comfortable keeping money with a firm like that then fine but I certainly don't.