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.

FX FOREX LIQUIDITY LLC.

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 :

http://www.cftc.gov/files/tm/fcm/tmfcmdata0703.pdf

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:

http://www.cftc.gov/files/tm/fcm/tmfcmdata0704.pdf

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

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12 Responses

  1. Excellent Post…

    @Jason…. can you contact me hyipmyths [at] yahoo.com

    @Jay … check your mail.

  2. Check this out, these guys are ahead of the pack.

    Capital Blu issues Audited Financial Statements !!!

    Capital Blu Management LLC has published audited accounts on the performance of its FX options offering, in an effort to comply with corporate governance and calls for greater transparency by investment houses.

    Capital Blu Management LLC has contracted the services of Chawla Group CPAs of Chicago to examine the trading performance for the period March 1,2008 through to May 31,2008.

    According to the Chawla Group for the month of March 2008, Capital Blu’s total actual assets under management for the FX Options was US$1million. By May the assets under management increased to US$ 1,703,563. With additional redemptions and subscriptions at the end of the third month, Capital Blu traded and made an 85 per cent return. Its monthly rate of return for March of this year was 1.19 per cent climbing to 14.81 per cent in April. The following month (May) saw returns climb a whopping 59.70 per cent!

    ” How much did O the top trader return for May, I think it was in the order of 5%”.

    http://www.jamaicaobserver.com/magazines/Business/html/20080627T000000-0500_137185_OBS_CAPITAL_BLU_PUBLISHES_AUDITED_STATEMENTS.asp

    Now there will be some folks who will be quick to point out that, ” Hey see Capital Blu is making a killing, so the “O” can more than make what its said to be making”.

    The difference here is that we seem to have independent verification of the companies accounts, which is something NO other forex trading outfit has ever done.

  3. Am I to assume that Capital Blu just recently ( march ’08 ) started their FX option? If so, do they have any track record with other FX scheme prior March ’08?

    I guess I find their audited statement a bit suspicious, since it only covers three months and started with a balance of $1 Million.

    Audited statement and the company doing the auditing are two important factors to consider. Who the hell is “Chawla Group CPAs of Chicago”? Remember, some of these Ponzi schemes have been known to setup fictitious accounting firms (paper companies) and have them issue accounting/audited statement.

    Isn’t Capital Blu based out of Florida…why go with a Chicago outfit to do your auditing for a three month period?

  4. @Jason, check your mail

    @DaveSin

    Does that accounting firm exist? Can anyone in Chicago find out and give us some contact information for them

  5. JohnDoe,

    So far my checks have been unable to identify that accounting firm, still searching.

  6. Chawla Group CPAs is indeed a licensed accounting firm!!!

    https://www.idfpr.com/dpr/licenselookup/results.asp

  7. I see nothing at that link. Post the link again

  8. The link post will not show the licensing info.

    However, if you use link:

    https://www.idfpr.com/dpr/licenselookup/default.asp

    and input the license number “066004071” under license number and the search it should show the information.

  9. Davesin,
    Good job there. Lets continue to keep the great information that is being posted on this site.

    As we continue our quest to provide valuable information which appears to be missing from most other blogs, I have included some additional information for those persons who either:

    a) Are involved in managed Forex accounts
    b) Planning to get into managed forex accounts.

    Before you invest I would suggest you visit the NFA site(recall I gave the CTFC site a few days ago), to see if your broker had any disciplinary action pending or already taken against them.

    Link is here :
    http://www.nfa.futures.org/news/newsActionsList.asp

  10. Chawla & Associates CPA’s
    2120 Lindsay Dr
    Naperville, IL 60564
    Phone 630-629-8660
    Fax 630-629-8662
    roger@chawlacpa.com
    http://www.naperville-il.com/scatpage.php?cat=2&scat=27

    or

    10252 S Bode Rd
    Plainfield, IL 60585
    Phone (630) 922-8600
    http://www.yellowpages.com/name/Chicago-IL/Chawla-Associates/category-Accountants-Certified-Public

    I guess those who want, can e-mail or telephone.

    @Jay & DaveSin good pieces of information.

  11. THe only thing that the regulator – the FSC has done is to make life diffcult for OLINT . It was irresponsible in how it carried out it’s work and its actions have brought about no amount of problems for the tightly knit club. The club never had the amount of problems that it had before the authorities came in. In a way it was a strategy to make life difficult for Olint and its affairs. If the regulator was serious about regulating then it would do what regulators ought to do …inform and educate. FSC’s action s were not about that. It was dishonest. It is a dishonest government authority which needs to be properly investigated.
    By the way speaking of regulatory disclosure:
    (1) Have you ever seen the FSC accounts published in the public domain?

    (2) Did the FSC ever notify or inform people that they cannot ask anyone to invest thier money for them and that they use US Law to interpret the Laws of Jamaica?

    Regulation is for entites that want to be regulated. Nothing is wrong with people exercising thier right to risk.

  12. Miracle Worker, I totally agree with you. Investors need to exercise responsibility when getting into any kind of plan, whether it be FOREX, 401K or whatever. It is a good idea to never risk more than you can afford to lose and assess the investment and make sure it is in line with your tolerance for risk.

    When we think about it, do we really even understand what we have our 401K in. We faithfully contribute every pay period hoping that in 30 or so years we will have a golden egg…and of course that company match is hard to give up. But really, I can’t say I understand squat of the annual reports that these funds send.

    OLINT has presented an opportunity for a lot of people to achieve certain financial goals they were unable to reach before. I cannot say whether the company is good or bad as I have no idea what goes on there…the same can be said of scores of companies in my retirement portfolio…hence why we diversify.

    Whatever happens, I have to take responsibility for my actions as an investor to a certain degree. Just don’t risk more than you can afford to lose.

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