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Foreign Exchange

NFA takes emergency action against FDM

US regulator National Futures Association took an emergency enforcement action this week against a forex dealer member (FDM) called Nations Investments.

As a result, the firm, which is based in Fort Lauderdale, Florida, is prohibited from accepting any additional customer accounts or funds, accepting or placing trades for any customer accounts except for the liquidation of existing customer positions, and from acting as a counterparty to any FX transactions. The NFA says the action also prohibits Nations from distributing, disbursing, or transferring any funds, including to existing customers, without NFA approval.

The firm was given a day to liquidate all of its positions. The NFA says it took the action because: “Nations failed to demonstrate that it meets NFA’s capital and financial requirements. Nations indicated to NFA that they are currently under the minimum adjusted net capital by approximately $3.5 million. The action is deemed necessary to protect customers because the firm does not have sufficient assets to meet its $5 million obligation to its customers.”

The NFA recently sent out a draft proposal to FDMs to raise their net capital requirements (see  Proposed NFA rules seen as catalyst for consolidation in US retail). This latest case illustrates that the NFA is probably right to be taking this course – if ratified, the proposal will help clean up the US retail FX industry.

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