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NFA seeks to close the gaps

In testimony yesterday (Thursday) to the US Commodity Futures Trading Commission/Securities and Exchange Commission joint meeting on regulatory harmonisation in the US, National Futures Association chief executive Dan Roth stated that the main issue around customer protection was not multiple regulators, but a clear framework of what exactly they are regulating.

“From a customer protection point of view, I am not concerned when multiple regulators have jurisdiction, I am much more concerned when no regulator has clear jurisdiction,” he said. “There has been confusion over regulatory jurisdiction regarding retail forex trading since the CFTC was created in 1974.”

As a result, Roth says boiler rooms of cold callers selling to retail investors have thrived. The CFTC naturally has tried to clamp down, but its efforts were hampered by a ruling in the Zelener case of 2004. This, claimed Roth, meant, “the form of the written agreement with the unsophisticated customer was more important than the substance of the transaction. Provided that they included certain words in the fine print of their customer agreements, fraudsters could evade CFTC jurisdiction by disguising their off-exchange futures contract as a ‘rolling spot’.”

Roth says fraudsters seized on this opportunity.

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