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

[BrianSNJ]

Thanks for this great thread FS. I appreciate your updates!!!

[Gptobm]

u r so kind!!!thank you sincerely!!!u helped me avoiding the fake and unsafe brokers!

[forex savior]

After years of fraud and malfeasance perpetrated by Bernie Madoff style Swiss forex brokers the retail forex business in Switzerland is on the verge of going legit as all Swiss brokers must either get a banking license or close up shop. However, these changes are still months away and thus many Swiss forex brokers continue to operate without a license.

But the good news is that the legit brokers are making themselves known. MIG Investments has just issued a press release stating that they have formally submitted their banking license application to the SFBC. This is no small feat and MIG should be congratulated on taking this first step:
MIG Investments SA - Press Releases

Other Swiss brokers are moving in the same direction as well. However, one broker may be hitting a road block; Crown Forex. A disturbing report over at Forex Peace Army indicates the broker appears to be having difficulties making good on customer withdrawal requests

Now it should be noted that Forex Peace Army isn’t exactly The London Times and thus this report comes with a pretty big grain of salt. Forex Factory has since dumped the thread into the recycling bin:

Extracted Post (promotion)

Crown Forex has been notified about this report and been given an opportunity to respond by Forex Factory and rest assured their response will be included on this thread once it is given. Also, Crown Forex has announced that they plan on having 15 million Francs on hand to meet the SFBC’s capital requirement according to this recent press release: Francesc’s Weblog » Crown Forex increases its Share Capital

But the numerous instances detailed in the Peace Army report about Crown Forex not making good on customer withdrawals is very troubling and something traders should be aware of.

Again, the Savior’s advice is to wait until these brokers actually gets their banking license before opening an account with any broker based in Switzerland.

[forex savior]

It appears the Peace Army’s muck raking was well founded in regards to Crown Forex. Kudos to Pharoah for being ahead of the curve:

Extracted Post (promotion)

Swiss banking regulators have launched an investigation of Crown Forex and appointed several care takers to administer the firm’s last rites. Here is the official announcement from the SFBC (rough translation from Google):

https://www.shab.ch/shabforms/COMMON...sultDetail.jsp

The Federal Banking Commission has appointed Laurent Winkelmann, of Geneva, Chêne-Bougeries and Philippe von Bredow, Lausanne, in Celigny responsible investigation Crown Forex SA. Laurent Windelmann and Philippe von Bredow are authorized to bind the Crown Forex SA by individual signature. It is forbidden for bodies Crown Forex SA to carry out any legal act without the agreement of the responsible investigation.

For breaking news on the investigation of Crown Forex check this thread here which recently posted an alleged letter from the SFBC regarding their investigation of Crown Forex:

Crown Forex anyone?

Dear (name omitted)

In response to our e-mail dated 16 December 2008, we would like to present to you the following information:

As already informed, the Crown Forex SA, Bassecourt has no authorization by the Swiss Federal Banking Commission (SFBC) for an activity in the financial sector in Switzerland.

To clarify the existence of the authorization requirements, in cases of suspected law violations or suspected pursuit of activities without proper authorization and in danger of insolvency, the SFBC investigators have to clarify the facts to use.

For the SFBC, acting in such cases, a superprovisional decision is available for use of an investigation officer. These investigators are charged with the investigation of the business activities of the company and are to report to the SFBC. The investigation officers are equipped with all necessary power and as such they appear in the commercial registry. They can act now on behalf of the firm. That is the case for the Crown Forex AG with superprovisional order as of 9 December 2008 (published in the Gazette on 18.12.2008) were Mr. Laurent Winkelmann, Chêne-Bougeries and Mr Philippe of Bredow, Célignym, investigators to the Crown Forex SA, were appointed.

On the basis of the report of the investigation officers the SFBC will make a decision and, where appropriate, publish it on its website. At the moment we can offer no further details. You or your contacts in the U.S. are invited to contact us again at a later stage.

Yours sincerely

Secretariat
SWISS FED. BANKING COMMISSION

I’ve said it before and I’ll say it again. DO NOT TRADE with a Swiss forex broker UNTIL they get a banking license. There are plenty of decent brokers that are regulated all around the world from Australia to the UK to the U.S. Crown Forex is just the latest example of what can happen when you trade with an unregulated broker.

[forex savior]

Just received this update from someone who has been involved in the controversy at Crown Forex. This would explain the withdrawal difficulties customers have been experiencing.

The skinny at Crown. Wanted to let everyone know what's really going on with Crown. First of all the people who were having problems withdrawing were carry traders who were not paying any interest with Crown. Crown realized some of these guys were holding GBP/JPY long term and not paying the normal fee for doing so. As a result they froze the accounts and tried to retroactively charge the clients a fee. The clients were not willing to pay it and complained to the Swiss authorites. I was able to negotitate the return of all my client's money so that he would not pay any fees. He was the biggest carry trader over there and one of the guys on FPA. Well they started to pay him but the investigation he helped get launched now will prevent him or anyone else from getting any money out of Crown at all intll the investigation finishes. So it's a lose lose for everyone involved.

Scott Kuehne
FX Traders Inc.

Developing...

[forex savior]

In light of the government takeover of Crown Forex I am once again being asked, “which specific broker do you recommend?” That is not for the Savior to say. Different brokers have different products and all traders should conduct a regulatory background check and thoroughly demo test a broker’s platform before opening a live trading account.

That said there are many solid brokers in the market place who are regulated and unlikely to go under anytime soon. Here is the Savior’s list of approved brokers:

U.S. Based Brokers

1. Oanda
2. FXCM
3. Gain Capital
4. GFT Forex
5. FX Solutions
6. Interbank FX
7. CMS Forex

European Based Brokers

1. Saxo Bank
2. IG Index
3. CMC Markets
4. MF Global
5. City Index

Banks

1. DBFX
2. CitiFX

I have omitted smaller based U.S. brokers who have yet to meet the $20 million capital threshold, Swiss brokers who have yet to get a banking license and any offshore broker hiding out in shady jurisdictions such as Cyprus or Belize.

Of course, any of the brokers on the Savior’s list of “approved” brokers could run into trouble in the future. If Lehman Brothers and Bear Stearns can vanish overnight no financial institution is immune from insolvency. Already, I have reported on the financial troubles of both Saxo Bank and CMC markets in the last few months. But even taking into consideration the mass layoffs at both firms neither is likely to go belly up and take customer deposits with them.

In addition most of the U.S. based brokers on my list have had various regulatory actions taken against them (none of them however were charged with any financial violations and were related to marketing practices, which doesn’t interest me.)

I’m sure there are readers thinking to themselves, “that broker on your list is a crook and a cheat so how can you approve them?!” Simple, because those who feel one of these brokers has cheated them always has the option of filing a complaint with the appropriate regulator and have your day in court. But if you are trading with an unlicensed broker you’ll be lucky to even get a customer service agent on the phone to complain to in the first place let alone actually have an arbiter hear your case.

In short, I would feel comfortable opening an account with any of these brokers. Hence the reason they have been given “The Forex Savior Seal of Approval.”

[Pip Machine]

Forex Savior – I have a few questions that I hope you and others here will help me with. I have been investigating trading forex for about 3 months and I’m now looking for a broker to open an account. I saw somewhere that NickB uses GFT. I also saw that they are well-capitalized (in your posts). So at first they were my first choice.

In doing my due diligence I found some complaints about GFT. People complain that money disappears out of their accounts and they didn’t know why. Digging further I found that GFT has a policy that when a trader closes a trade, it is apparently not fully settled for a couple of days due to international exchanges, and GFT will charge the trader for two days of currency movement after a trade has been closed. Here is an excerpt from a post explaining the reason for this policy:

"Let's say you have a base currency of USD and want to take a buy position on EUR/JPY, this means, you're converting your USD to JPY, then selling that JPY to buy EUR. So if you close this EUR/JPY position, it means you're selling the EUR you bought earlier to buy JPY again. Now your profit is in JPY and would normally take 3 days to be converted back to USD which is your base currency.

"If this is clear, then have you ever thought of how this happens, by just clicking a button? This process goes through a clearing that usually takes 3 days, and you know price is not stable."

The complaint, including several posts discussing the situation, the above quote and a copy of a chat session with a GFT person, can be viewed in this link: GFT Forex Reviews | GFT Forex Ratings | Ulrich Dietz| gft.com review and ratings by Forex Peace Army

My question is this: In your experience is this policy of GFT’s a standard operating procedure among forex brokers? Any comment would be greatly appreciated.

I also checked into Oanda, and found what appears to be a well-researched post on google answers.

My only concern here is that Oanda looks like a very small company (so I’m worried about customer service), and that my account will not be insured in any way.

Question: is this, too, standard procedure among forex brokers, not to insure the clients’ accounts?

Last question: In my overall research, so far the biggest complaint is slippage – I’ve read about spreads jumping up to 30 pips in some posts! Can you experienced traders reading this tell me which brokers you think are the best to trade with as far as the least amount of slippage? Or at least the most consistent spreads? I’ve done a lot of googling, and I’ve found some broker comparison sites, but I’ve found nothing in-depth enough to really help me make a decision. Anyone know of such a website?

Thank you, Savior, for posting the broker capitalization lists every month and all the other information you share. As a forex noob, I’m more than a little paranoid about learning too much of this the hard way. Your posts give me a little insight into how this all works. I greatly appreciate any comments on this.

[Pip Machine]

It looks like the links did not copy correctly into my post. I'm going to try to put them here. In case it still doesn't work, you can google "GFT forex complaint" you'll see a link to the forexpeacearmy article. Google on "Is Oanda reliable?" and you'll see the link to the oanda article.

Thanks!

[forex savior]

Originally Posted by Pip Machine

Forex Savior – I have a few questions that I hope you and others here will help me with. I have been investigating trading forex for about 3 months and I’m now looking for a broker to open an account. I saw somewhere that NickB uses GFT. I also saw that they are well-capitalized (in your posts). So at first they were my first choice.

In doing my due diligence I found some complaints about GFT. People complain that money disappears out of their accounts and they didn’t know why. Digging further I found that GFT has a policy that when a trader closes a trade, it is apparently not fully settled for a couple of days due to international exchanges, and GFT will charge the trader for two days of currency movement after a trade has been closed. Here is an excerpt from a post explaining the reason for this policy:

"Let's say you have a base currency of USD and want to take a buy position on EUR/JPY, this means, you're converting your USD to JPY, then selling that JPY to buy EUR. So if you close this EUR/JPY position, it means you're selling the EUR you bought earlier to buy JPY again. Now your profit is in JPY and would normally take 3 days to be converted back to USD which is your base currency.

"If this is clear, then have you ever thought of how this happens, by just clicking a button? This process goes through a clearing that usually takes 3 days, and you know price is not stable."

The complaint, including several posts discussing the situation, the above quote and a copy of a chat session with a GFT person, can be viewed in this link: GFT Forex Reviews | GFT Forex Ratings | Ulrich Dietz| gft.com review and ratings by Forex Peace Army

My question is this: In your experience is this policy of GFT’s a standard operating procedure among forex brokers? Any comment would be greatly appreciated.

I also checked into Oanda, and found what appears to be a well-researched post on google answers.

My only concern here is that Oanda looks like a very small company (so I’m worried about customer service), and that my account will not be insured in any way.

Question: is this, too, standard procedure among forex brokers, not to insure the clients’ accounts?

Last question: In my overall research, so far the biggest complaint is slippage – I’ve read about spreads jumping up to 30 pips in some posts! Can you experienced traders reading this tell me which brokers you think are the best to trade with as far as the least amount of slippage? Or at least the most consistent spreads? I’ve done a lot of googling, and I’ve found some broker comparison sites, but I’ve found nothing in-depth enough to really help me make a decision. Anyone know of such a website?

Thank you, Savior, for posting the broker capitalization lists every month and all the other information you share. As a forex noob, I’m more than a little paranoid about learning too much of this the hard way. Your posts give me a little insight into how this all works. I greatly appreciate any comments on this.

Hi Machine. In answer to your questions:

1) Most brokers have some kind of policy in regards to trade adjustments. I'm not familiar with GFT's but I do know that these kind of adjustments are about to come to an end as the NFA has just put new rules in place severly curtailing post-trade adjustments by forex brokers.

2) Customer insurance is not really available in the U.S. for retail forex trading. If you are concerned about safety of funds best to open in the U.K. where the government requires by law that brokers segregate customer and company funds.

3) Slippage is a way of life trading any financial instrument, including forex. On this one you just have to experiment with different brokers. It will be very hard piecing together which firms have best execution just reading comments on the boards.

[forex savior]

ACM is officially closing their U.S. office and retreating back to Switzerland after failing to make any headway in the U.S. Of course the Savior has long suspected this Swiss broker wouldn’t last very long on this side of the pond in light of the increased capital requirements. Furthermore, I was right on the money in stating they clearly didn’t due their homework before opening an office here. The company was a registered NFA member for less than 12 months. What a wretched waste of money, time and man hours to set up an overseas office and then close it down in less than a year. This is not the sign of a company with a master plan. If they were publically traded I’d be shorting them with the intensity of a day trader dealing in shares of General Motors. Here is the official statement from ACM which you can find on the front page of their website: Forex - Currency Trading - Forex Broker - ACM (USA) LLC

ACM USA's white-label licensor, ACM – Advanced Currency Markets SA (“AC-Markets”), announces another milestone in its already impressive and successful history: the formation and creation of ACM Bank. The ACM Group proudly announces the planned reorganization of the ACM Family under the new ACM Bank.

In an effort to ensure greater security, safety, and enhanced banking and investment services to their clients, ACM Group is in the process of applying for its Swiss banking license.

As a result, for the short term ACM USA will no longer be an active NFA member. This means that ACM USA will no longer act as a counterparty to forex positions and will not continue to service client accounts. Instead, ACM USA will remain a licensed office to AC-Markets assisting in the opening of forex trading accounts directly with AC-Markets and in the future with ACM Bank. AC-Markets is not a National Futures Association (“NFA”) member firm and cannot accept U.S. customers until the approval of its Banking license.

Please note the coming date which is of importance to your ACM USA forex trading account.
• On January 8, 2009 at 9:00 a.m. EST, all open forex positions and accounts will be closed at the prevailing market price.

You may continue to trade or close your ACM USA account until the above mentioned date. However, should you not take any action before the above mentioned date, your account will be closed and the account balance will be returned to you by check.

I love how these brokers close up shop and give their customers barely any notice before their positions are forcibly liquidated. One day you are trading with a long term strategy waiting for a position to retrace and the next your broker sticks a fork in your positions and blows up your account. And ACM celebrates this as a “Milestone,” to be ranked right up there with the invasion of Normandy and the first man landing on the moon perhaps. This is why it is so important for traders to make sure their broker is around for the long haul. And as the record shows, Swiss brokers are anything but safe long term bets.

We’ll be waiting to see if you get that bank license guys but as of now ACM is an unregulated Swiss broker and should be avoided until they once again submit themselves to real regulation.