Those who are a few years in this market should remember One World Capital Group which was even registered with the NFA at the time but was shut down as under-capitalized and following numerous complaints.
One World owned the 1world-forex.com domain and was barred by the NFA in early 2009 for failing to cooperate with an investigation for a Complaint launched in 2007 which amongst other things charged One World and its principal John E. Walsh with failing to meet minimum adjusted net capital requirements or maintain current books and records, using misleading promotional material, and failing to adopt and enforce written procedures to supervise the use of promotional material.
Although in 2007 One World settled the Complaint by agreeing to pay a fine of $100,000 and an additional fine of $50,000 unless certain conditions were met, One World has not made any payments till it was barred in 2009.
Today this saga comes close to an end: CFTC today announced that it obtained an order against defendants One World Capital Group, LLC of Winnetka, Ill. and John Edward Walsh, of Lake Forest, Ill., requiring each to pay a $260,000 civil monetary penalty for failing to demonstrate compliance with CFTC net capital requirements.
The Honorable Joan H. Lefkow of the United States District Court for the Northern District of Illinois entered the consent order of permanent injunction on February 25, 2010. The order resolves a complaint brought by the CFTC on December 13, 2007 . The complaint charged One World, a registered futures commission merchant and forex dealer member, and its president Walsh, with inability to demonstrate compliance with capitalization requirements and with failure to maintain required books and records as required by federal commodity laws.
According to the order, Walsh admitted that he could not make the required net capital calculation because he was unable to determine One World’s current liabilities to forex customers or One World’s ability to pay its customer liabilities. The known financial accounts held in the name of One World on December 13, 2007, contained a total of only $639,815, which was at least $9 million short of the claimed liabilities to customers who maintained accounts with One World for the purpose of trading foreign currency contracts. The order also states that One World and Walsh failed to maintain books and records as required by CFTC regulations.
If there’s one thing the CFTC and an NFA are really good at it is monitoring member wrong doing and making sure clients do get paid even if a few years late.
The NFA and CFTC should mandate that Forex Brokers that receive customer funds maintain these funds in a segregated account. Other regulators do this effectively and FCMs that handle futures customers must do this. This would be a more effective tool in preventing fraud.