The value of regulation and disclosure

Some folks have sought to use the failures of a number or prominent companies to downplay the importance of the financial data produced by these companies.

They have even sought to suggest that the information is meaningless and will not help you to determine if the company is failing.

I know I have never sought to suggest that this published data and regulation will not prevent a company failing; instead I have maintained that they can help in identifying potential failure before it actually occurs.

Take a look the information, I have provided below.

Here is a company, which has been registered with both the NFA – National Futures Association as well as the CFTC – Commodities Futures Trading Commission.


The company was brought before the courts by the regulatory agency – the CFTC, for falsification or misrepresentation of its financial records. The company was found to be undercapitalized from March 2007, but provided data to show otherwise.

What “saved” investors from greater losses were:

  • The fact that they were regulated
  • They had to produce financial data
  • The regulator looked at the financial data and picked up that something was wrong.

See the following links

March financial data :

Then take a look at April data, and you will notice a big jump in the capitalization of the company( turns out to be a big fat lie).

April financial data:

CFTC takes action against FX FOREX LIQUIDITY.

Check this link for the complaint

Check this other link for the actual enforcement order(PDF)

Next: The receiver report

In addition a receiver was brought in at a later stage and what he found was a tale of woes at the company, ranging from poorly kept records to down right fraudulent conversion.

Stay tuned