by Beth Connolly on July 19, 2012
“Accepting oral representations that repetitive compliance problems will be remedied is a questionable practice,” the CFTC said in an otherwise generally positive report of the NFA’s practices. The report was released ten years ago, in 2002, Reuters reports. And the CFTC’s criticism is prescient, but was not effective in helping the NFA detect the deceit practiced by PFGBest CEO Russell Wasendorf Sr.
“NFA’s failure to obtain documentation demonstrating that member firms had corrected compliance problems identified during audits and investigations, or at least written agreements to correct violations, is troubling,” the CFTC wrote in the report, according to Reuters.
A spokesperson for the NFA told Reuters that after the report, the agency began requiring written documentation confirming that member institutions planned to address the issues brought to their attention by the NFA.
A more recent CFTC review, conducted in 2010, “…flagged concerns that the NFA had no procedures for validating firms’ addresses and proper legal names,” said Reuters.
Although the CFTC report on the NFA is a decade old, some of the shortcomings highlighted in the report arguably go to the heart of the NFA’s oversight of Peregrine, also known as PFGBest.
The NFA and the CFTC over the years have both filed various enforcement actions against Peregrine.
One NFA disciplinary case dating back to 1996 alleged that Peregrine failed to properly calculate segregated funds and failed to maintain adequate segregated funds.
The brokerage agreed to settle with a $75,000 fine and did not admit or deny the allegations.
More recently, in February this year, the NFA fined PFGBest and several of its principals $700,000, alleging supervisory failures over guaranteed introducing brokers, which were used by PFGBest to help conduct its retail business.
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