NFA Ignored Warning Signs On PFGBest. What a Surprise!

The National Futures Association (NFA) is the private industry association that directly self-regulates the Futures Broker industry.

I would imagine that the NFA had not taken any of the tips or warning signs about PFGBest too seriously. Up until last week, Mr. Wasendorf, the CEO of PFGBest, was prominently listed as a member of their advisory board.

And as you may recall, a few days ago I posted an article from Atlas Ratings that had placed PFGBest in their lowest 5% of brokers because of their odd financials.

PFGBest had just been given a clean bill of health by NFA in January, in the so-called rigorous industry review inspired by the spectacular failure of MF Global in November.

From their website:

"National Futures Association (NFA) is the industrywide, self-regulatory organization for the U.S. futures industry. We strive every day to develop rules, programs and services that safeguard market integrity, protect investors and help our Members meet their regulatory responsibilities.

Managing risk by trading futures and options on futures contracts is a vital component of the global economy. Every business day tens of millions of futures contracts are traded on an increasingly broad spectrum of products, including agricultural commodities, oil, precious metals, equities, treasury bonds, financial indexes and foreign currencies.

Investor confidence is crucial to the success of the futures markets, and the best way to gain investor confidence is to ensure that the highest levels of integrity are demanded of all market participants and intermediaries.

Membership in NFA is mandatory, assuring that everyone conducting business with the public on the U.S. futures exchanges-more than 4,200 firms and 55,000 associates-must adhere to the same high standards of professional conduct.

NFA is an independent regulatory organization with no ties to any specific marketplace. We operate at no cost to the taxpayer. We are financed exclusively from membership dues and from assessment fees paid by the users of the futures markets."

And in related news, Customer Dodged Bullet, Tranferred Account From MF Global Just Before It Collapsed (wait for it) and put it into PFGBest, where it is now being liquidated/frozen.

I genuine feel sorry for anyone who is taken in by these crooks.  It is a terrible thing to see.  The markets are rigged against the private investor from top to bottom by the big Banks and trading desks.  And if you do occasionally win, the money and assets are squandered and embezzled by sociopathic insiders.

Regulations?  We don't need no stinking regulations.  Let's strike them all down, and let the devil have his day.

Do you think Wall Street is trying to send you a message?    G-E-T  O-U-T!

NYTimes
At Peregrine Financial, Signs of Trouble Seemingly Missed for Years
BY AZAM AHMED AND PETER LATTMAN

CEDAR FALLS, Iowa —...

As the founder Russell Wasendorf lies in critical condition in an Iowa City hospital, Peregrine’s angry customers are asking, How could futures industry regulators have missed another potential fraud? The scandal comes just months after MF Global , the defunct futures brokerage firm, lost more than $1 billion in clients’ money.

It now appears that regulators missed the red flags for years.

In 2004, a Peregrine client sent a letter to the National Futures Association, the firm’s primary regulator, and the C.F.T.C., asking it to intervene to prevent it from misusing customer money, according to a person with knowledge of the correspondence and a copy of the letter obtained by The New York Times. Five years later, a tipster wrote to the N.F.A. asking it to review Peregrine’s bank account information for accuracy, according to people briefed on the matter who spoke on the condition of anonymity because the investigation was private. The tip was anonymous, and it is unclear how serious the N.F.A. took it.

The auditor for Peregrine was a one-person shop run out of the accountant’s home in Glendale Heights, Ill., a Chicago suburb. As part of its investigation, the C.F.T.C. is looking into the role that the individual played, according to a person with knowledge of the case.

After the collapse of MF Global, the C.F.T.C. ordered a review of all futures firms to ensure the safety of customer money. The N.F.A. gave Peregrine a clean bill of health in January.

Government regulators are examining whether Mr. Wasendorf doctored bank statements provided to the N.F.A., according to people briefed on the matter who were not authorized to speak publicly because of the investigation. Authorities are also expected to question officials at U.S. Bank, which held the client’s money.

“The entire industry is outraged that it happened the first time, let alone a second time,” said Michael V. Dunn, a former commission of the C.F.T.C., referring to the collapse of two brokerages. “We need to do something about this.”

The N.F.A. declined to comment. Calls to Peregrine’s auditor were not immediately returned...

Read the entire article here.

PFGBest: F to the R to the AUD - Wasendorf 'Faked Bank Records For Years'

"The commercial world is very frequently put into confusion by the bankruptcy of merchants, that assumed the splendour of wealth only to obtain the privilege of trading with the stock of other men, and of contracting debts which nothing but lucky casualties could enable them to pay; till after having supported their appearance a while by tumultuary magnificence of boundless traffic, they sink at once, and drag down into poverty those whom their equipages had induced to trust them."

Samuel Johnson: The Rambler, January 7, 1752

The regulators are clueless and conflicted, the self-regulators are careless and complicit, the industry is enmeshed in cronyism, and fraud is broadly tolerated as way of doing business, a droit du seigneur of the elite over customer funds and assets, pricing and all other forms of news and information.  It has every character of an advanced form of control fraud.

And as for the politicians, one might conclude as the Parliament had done with Mr. Bob Diamond, that they are either incompetent or indirectly complicit as well, in the manner of a credibility trap.   It seems hard to explain it any other way.

The culture of privilege and corruption through the mispricing of risk and outright fraud in the Anglo-American financial system is pervasive, stuffed with phony paper. No outrage seems too extreme, too great, and therefore nothing can be said to be safe.

Reuters
Exclusive: Iowa futures broker forged bank records for years - source
By Ann Saphir

Jul 10, 2012 7:23pm EDT

CHICAGO (Reuters) - Russell Wasendorf Sr., the sole owner and chairman of stricken futures broker Peregrine Financial Group, Inc., intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, a person close to the situation told Reuters.

The National Futures Association on Monday froze the funds of the Iowa-based brokerage, which does business as PFGBest, after discovering an estimated $220 million shortfall in PFGBest's customer accounts. The NFA had said in an affidavit that Wasendorf "may have falsified bank records."

Wasendorf, 64, is reported to be in a coma after a suicide attempt Monday morning, according to a complaint filed by the Commodity Futures Trading Commission on Tuesday that accuses Wasendorf and Peregrine of fraud.

The source offered new details on how Wasendorf allegedly carried out the deceit, which involved the forging of confidential documents that the NFA uses to verify a broker's cash balance with its depository institution.

Wasendorf intercepted these documents after they were mailed by the NFA, the broker's first-line regulator, to U.S. Bank, where PFGBest had said it had well over $200 million on deposit, the person said. The NFA has said the account actually held just $5 million this week.

Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank.

The post office box was neither in Wasendorf's name nor registered to the bank, the second person said.  (That is, it was a 'blind PO box, something that would not be acceptable to even eBay. - Jesse)

Wasendorf then forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said.

Calls to spokespeople for PFGBest and NFA were not returned. A woman who answered the phone at the home of Wasendorf declined to comment...

Read the rest here.

PFGBest Is MF Global All Over Again: Gambling and Living High With Customer Funds

And another failure of self-regulatory industry groups and the inept CFTC.

Once again I must turn to Lauren Lyster on RT for the in depth look into US financial fraud coverage.

The mainstream financial news networks in the States are an extended infomercial for Wall Street. And their coverage of economic news and issues might make even Rupert Murdoch blush.

And so many watch these official Wall Street channels with the volume turned low, for just the numbers and any headlines, and turn to alternative sources for the real news, judging from the ratings reports.

Increasingly surreal, as life imitates Orwell.