Okay, it's time for a rant.
We recently received the email below from one of our valued INO.com users, and it really brings to light a fundamental question and something that really bothers me and many in our industry.
It's about regulation and the folks who regulate.
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Subject: INO.com Support General
Date: Tue, 10 Jul 2012 21:02:39 -0400 (EDT)
From: <[email protected]>
To: [email protected]
Dear INO,
I have followed your website for several years and there is one topic I would love to see someone address and that is the topic of crooked brokers!!!! I had an account at Mother Fuc%#& Global and we all know what they did to their so called clients. What was left of my account was transferred by the people controlling the MF debacle to PFG Best. I left the funds there while I started a new job and got settled with steady employment again with the goal of trading again in the future when all of the sudden I get notified that PFG Best just screwed their customers (myself included) out of their so called segeregated funds! WHO THE HELL IS POLICING THE DAMN FUTURES INDUSTRY???? What is someone who truly believes that the markets are truly a viable way to make a living to do? I can't access the markets without a broker and there is not one damm broker I would trust right now. Are there any brokers who only provide access and don't trade?? What is the industry going to do about this? After all I always hear that it is all the little guys who provide the liquidity but it is those guys who are getting screwed. I am astonished at the lack of response from the industry as it's reputation is taken back 75 years to just a gamblers market where your guaranteed to lose. Unfortunetly I have lost more money with my funds stationary in "segregated accounts then I did trading the markets!!!!! And this is not just the futures markets, when is everyone going to find out that a Chase or Merril Lynch used segregated funds from IRA's or pensions to try regain their horrible losses? I have absolutely lost all confidence in all the people that make up the markets for not being more vocal about what is going on and trying to stop it. Thank you for reading. If you only had a triangle for brokers.
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Yes, we have regulators both in stocks and in commodities. And yes, they are supposed to regulate the brokers and safeguard the customers against fraud and misuse of funds. IT REALLY BOTHERS ME WHEN THEY DON'T DO THE JOB THEY ARE PAID TO DO!!
When they don't regulate and things go south, the regulators are not held accountable!! No one loses their job. No one ever admits they made a mistake or screwed up. That would never happen in the real world.
I mean, it's unbelievable, here we have the Commodity Futures Trading Commission (CFTC), but all the recent problems with MFGlobal and PFG have to do with segregated customer funds! When I was in the industry as a broker, handling customer accounts, segregated funds were sacrosanct. That means they were beyond reach and a company did not touch them under any circumstances. Recently it seems, some folks do not respect the sacrosanct nature of segregated funds. Jon Corzine of MFGlobal is one such fellow. Politically well-connected Jon Corzine, former Governor of New Jersey, money bundle-er for President Obama. (Video proof? http://www.youtube.com/watch?v=buRO9TSlScQ , http://www.youtube.com/watch?v=xm3VMrKqJSA) He should go to jail for what he did. No excuses. No pardons. Just hard time.
The latest guy to allegedly get his hand caught in the segregate funds cookie jar comes from PFG. His name is Russell Wasendorf Sr. Recently Mr. Wasendorf tried to take his life when the $200 million he dipped into went missing. In Japan committing "Seppuku" is a ritual suicide by self disembowelment on a sword. It is the honorable thing to do if you screw up or cause your company a major embarrassment.
I guess they started out by saying they were only borrowing the money. I think that's how it happens, they borrow the money to cover company trading losses or a cash squeeze thinking it will get better, and I'll pay the money back then. Well, you can't do that with segregated funds, PERIOD!! Not only is it illegal, it is just ethically and morally wrong, wrong, wrong.
While not everyone is a bad egg, my biggest beef is against the regulators. They are supposed to do their work and they don't. There are not that many FCMs (Futures Commission Merchants) or clearing houses to regulate, but what do they do? They crackdown on the small fry, usually one-person operations. Yet it seems when it comes to a bigger company, like MF Global, they sort of blank out and are either intimidated or just plain stupid. I think it's a combination of both, but does any regulator ever get fired? Does any regulator ever take the blame? Does any regulator take responsibility for their actions? It's enough to make you sick and tired of these incompetent regulators.
I'm sure you remember the Madoff scandal, that massive Ponzi scheme that robbed thousands of institutions, nonprofits, and individuals of their life savings and funds. Well, the real culprit behind that fiasco was the Securities and Exchange Commission (SEC). How did they miss it? Not one regulator asked the basic questions and made confirmations to connect the money to the trades to the market. No one did this, even though they were given a blueprint pointing out that Madoff's scheme was in fact a Ponzi scheme!
I would suggest to "Mr./Mrs. Regulator" either do your job and hold staffers accountable or relinquish the title of industry regulators. Trust and competency is everything. If you cannot be trusted to regulate the industry, then trust from investors will rapidly disappear, if it hasn't done so already. Investors need to have the confidence to place their funds in a brokers hands knowing that their nest egg is safe and is not going to be stolen on misused. It is your job to make sure that happens. If you don't do this, you won't have an industry left to regulate. It will also throw thousands and thousands of industry professionals to the unemployment lines.
But why would you care? Your job is guaranteed for life as no one ever gets fired from any agency that regulates any industry here in these United States.
We would appreciate your comments on this subject, as we feel it is an important one for investors and the entire securities industry.
Adam Hewison
President INO.com and co-founder of MarketClub.com
No trading account at the current time and no risk capital to open one in the near future. BUT, I have to comment on Jeff.
You honestly think "stronger" regulations are the problem here? It is illegal to use customer funds. AND, it has been illegal for a loooooong time. You are a moron (and I mean absolute moron) if you think the issue is regulation. The issue is enforcement as Adam stated in his article.
Wolves are watching the hen house as you state. Another word for the wolves is regulator. So, tell me Mr Double Standard Jeff, how would more wolves with more teeth help the hens? Do not blame the investor class for this and the MF Global debacle.
Dear Everyone,
Start making noise, or start getting used to it, because there is a lot more to come--and, it is just around the corner. I told you QE3 wasn't coming to save you, until Ron Paul and Mitt Romney begged Bernanke to do it, but no one listened. You--are suppose to keep track of your money. If you had bought government bonds, you would probably still have your money now. If you kept it in cash, you would still have most of your money now. People are in cash and bonds because this very thing is happening.
Something to think about, Cherubim
A day or two before Elliot Spitzer's sexual dalliances became public knowledge, he had published an article which referenced the "collusion" of the government regulators (so-called) and Wall Street regulat-ees. COLLUSION. In the context of LIBOR, of MBS's, of Gold, of Silver, of Oil, of Nat Gas, does anything more really be said?
I would like to echo [email protected]'s comments.
The same thing happended to me !!!
You could not have expressed my sentiments and the principles involved better.
It's all well and good to sit there and dissect culpability and jurisdictional issues, and imagine a world of pink fluffy bunnies, but in this case I would focus on getting my GD money back. I would make that my mission in life and devote every minute I had to getting justice for myself and contacting others who were robbed. And yes, I would go so far as to try and find out where John Corzine and other company officers at MF Global live and show up at their residences, in the Hamptons, or political fundraisers and make a big effing scene. Why do these scumbags deserve to live their lives in peace? At the very least you can find out who represents the slimebuckets. It's called "self help" and in this case I believe it is more than appropriate.
When you open an account with a broker, any broker, you sign a contract - that would be a legally enforceable document which specifies rights and obligations of both parties and usually tells you what regulatory body has authority over complaints or disputes. I would haul that out and read it. Second, this presents criminal liability and you might be able to reach out to the prosecutor, but that doesn't help you get your money back, now does it? The CFTC is supposed to have additional enforcement capability, but that may mean not getting your money back until all criminal issues are resolved and civil issues are investigated. Finally, MF Global is bankrupt. The bankruptcy courts have power over these guys when there are creditors to pay (you) and those judges are all-powerful (no joke). Have you contacted the bankruptcy court? If not, why not?
Don't get mad, get even.
I hear a lot of people crying about over regulation killing business until the lack of regulation bites them in the rear. More double standards from the investor class.
Regulations must exist and must be stronger in the financial industry as there are many crooks and cheaters out there. But no one wants to pay for it.
They will one way or another.
Wolves have been put in charge of the hen house at the regulating agencies in the past and need to be weeded out.
We have plenty of regulations in place that supposed take care of any and all of this activity. The problem here is lack of enforcement for the Corzines and politicians who are granted financial favors and free mortgages.