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.
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.
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.
President INO.com and co-founder of MarketClub.com