I sent the following letter to my Senators and Congressman via
http://letterstocongress.org/l2/ printed service so they get it in two days via Western Union. You can also email your congressman on this service for free so I'd encourage you to do it. If you like my letter by all means use it for yourself.
Dear [Senator's name was inserted here],
As I am sure you know, Refco, the largest commodities and futures sales organization has just filed bankruptcy. As a client of one of the unregulated operating units that filed bankruptcy named RefcoFX Associates, LLC I am apparently getting screwed. I don't understand why there is not regulation in place to protect someone like me.
I didn't invest in the stock of their company. I have a currency-trading (FOREX) brokerage account with them and was using their software and through lots of hard work and study had made some money trading currencies. It appears they may be treating customer accounts as if they were part of their assets with which to pay debts to their creditors...this is wrong. Customer accounts should be held sacrosanct and totally separate from the firm’s operating capital. If they marketed to customers that the customer accounts were separate, which they did, why is it that those accounts now are being used to pay THEIR debts to THEIR creditors? This is clearly wrong.
Following this episode (which is going on as I write this and yet to be resolved by the bankruptcy judge -- I really can't believe that there is anything to deliberate on this -- customer account money should be customer account money, PERIOD) I have started investigating where my money is safe and have found that Canadian investors and FOREX traders like myself are completely safe if they use Canadian accounts that are backed by the Canadian Investor Protection Fund (see
http://www.cipf.ca) -- they are protected up to 1 Million Canadian if a firm goes bankrupt. As an example the same company RefcoFX that I have been describing has a Canadian division -- they are completely safe and ARE allowing customer withdrawals from their Canadian customer accounts unlike their US counterpart RefcoFX Associates, LLC, which is not allowing customer withdrawals since the bankruptcy filing. This is because that division in Canada has better regulation and insurance to protect investors -- why don't we in the US enjoy the same level of protection? Why aren't FOREX trading dealer/brokers regulated here with the same oversight as a stock brokerage? Why isn't there some form of insurance similar to what the Canadians have to protect investors from unforeseen pitfalls like the crooks in Refco.
The one thing that will turn investors, traders and the like away from the US markets in a hurry is not believing their money is safe here; this episode has a lot of people worldwide worried that the US isn’t a safe place to put money and for good reason; they may lose a lot of it because of the fraudulent behavior of the top management of the company. Investor/Trader confidence is paramount to the markets – this completely undermines that confidence in the American markets when this type of episode occurs. CUSTOMERS SHOULD NOT LOSE THEIR MONEY BECAUSE OF THIS! LET THE FIRM PAY ITS DEBTS WITH ITS OPERATING CAPITAL, NOT WITH CUSTOMER CASH ACCOUNTS!
How many investors have to vote with their feet and go to Canada or some other country to have their money adequately protected before it becomes clear that the regulatory oversight of the FOREX market in the USA is wholly inadequate.
Sincerely,
Licensed Brokers
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