This has been a busy week at the US Commodity Futures Trading Commission (CFTC). On Thursday (May 23, 2017, Judge Kenneth Marra of the US District Court for the Southern District of Florida entered a Consent Order for more than $1 million against Guardian Asset Group, LLC of West Palm Beach, FL, and owner/principal Andrew Kurzbard.

Overstepping without oversight

At issue is that Guardian and Kurzbard “acted as a Futures Commission Merchant without registering,” engaged in “illegal, off-exchange transactions in precious metals with retail customers on a leveraged, margined, or financed basis,” and never delivered the goods. The two entities are required to pay restitution of $434,413.54 and a civil monetary penalty of $651,620,31 and permanently barred from trading and registration.

The underlying issue, however, is one of misleading marketing and lack of oversight. Guardian employees, Kurzbard included, solicited retail customers and realized commissions of more than $434,000 from those sales.

Mis-marketing

A day earlier, another Consent Order was entered by Judge Bruce Jenkins in the US District Court for the District of Utah against Kimball Parker of Lehi, UT, and his company MakeYourFuture, LLC, for repayment of nearly $1.25 million in restitution and penalties to defrauded investors. This hand slap follows an earlier judgment of nearly $2 million ordered against the Florida-based sellers of Parker’s futures trading systems, Timothy Baggett of Lakeland, FL and his companies Changes Worldwide LLC and Changes Trading LLC.

Besides the cash, the Judge prohibited all parties from, among other things, “directly or indirectly controlling or directing trading for or on the behalf of other persons, soliciting or accepting funds for trading, and seeing registration in any capacity, acting in any capacity requiring registration or exempted from registration, or acting as a principal of any person registered, required to be registered, or exempt from registration. Basically, the defendants are barred from doing much more than breathing!

Misleading marketing message pain

According to the Court, the defendants falsely represented that the trading systems, marketed under the names “MakeYourFuture” and “Changes Trading,” had “never had a losing month,” and generated “300% annual returns.” The defendants also posted so-called ” documented and verifiable results” on their websites showing returns of between 11% and 68% each month from January through December 2014. However, they did no such trading and Parker and Baggett consistently lost money trading futures in their personal accounts (as did customers using their system).

But what about the good actors?

Being a “good” person is no guarantee of regulatory security. Preparation is.

Regulation is not going away. Really. It is not. No matter how much you wish it would. The two CFTC actions this week follow on early May Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission’s (SEC) fine, censure, and ban activity.

This week it’s more than $3 million in fines from the CFTC. Last week it was $23 million in fines courtesy of FINRA. Prior to that, the SEC hit 27 firms with fraudulent marketing and poor oversight… all of which begs the question that with all the affordable regulatory compliance tools currently on the market, why not just do the right thing? Fines and suspensions are expensive. Compliance is cheap!

Procrastination is not a compliance strategy

Waiting for the rules to change…waiting for the regulatory shoe to drop — that is not a compliance strategy. Ask yourself: Why risk even the smallest fines when compliance is so much cheaper? Especially when companies like Patrina are offering comprehensive compliance solutions and compliant data capture, file storage, and records archiving specifically designed for the financial services community.

It’s so inexpensive to do the right thing. So why don’t you? Be ready. Be compliant. Let’s talk (212-233-1155). Don’t be pennywise and pound foolish. Be safe, secure, and compliant instead.