Compliance

01:01 PM
Phil Albinus
Phil Albinus
Commentary
Connect Directly
Twitter
RSS
E-Mail
50%
50%

The CFTC Sniffs Out Another Bad Broker

It's an evergreen of TV news: At least twice a year, the FBI, ATF, DEA or Coast Guard capture huge bales of cocaine and marijuana coming into the US from Mexico. The booty is lined up on a table next to a podium for the beaming government official to declare that the cartels are on notice.

It seems that every one of these press conferences heralds this haul as the largest drug seizure on history.

Check out Wall Street's 9 Worst Bets Ever.

If that were only the case. Every drug expert knows that the supply of drugs into the US is continuing unabated. These seizures may be impressive from a law enforcement point of view -- the $3 billion War on Drugs is working! -- but in terms of the overall flow of narcotics, it's the tip of the iceberg. These mounds of drugs maybe destroyed later on but the pipeline keeps flowing.

This depressing image came to me when the CFTC announced that they caught discrepancies within Peregrine Financial Group, the unit inside Iowa broker PFGBest. So far, the estimated shortfall of the broker's client funds is around $200 million.

This recalls when the CFTC approached MF Global for their suspicious use of customer funds to hedge bad trades. Sure, we shouldn't live in an age when we commend federal agencies for doing their job but this is the age we live in: Competency is a rare thing. Many people saw the major Wall Street firm about to fall off the cliff but no one spoke up. If they did, they were summarily ignored.

But this does beg the question, that brings us back to the mountains of illegal drugs that still make it into our cities, suburbs and country counties: What is the CFTC and the SEC missing? For every MF Global, JP Morgan's London Whale, Bernie Madoff and Peregrine, what are other investment firms -- large and small -- hiding and getting away with?

And the second question is: Will we ever know?

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
Chief Data Officers: Organization Strategy & Cultural Change
Chief data officers are new to the financial services C-suite, but they are facing a number of challenges, including the need for new data governance and execution strategies, staffing, and new organizational structures to enable cultural change.
New York FinTech Innovation Lab Calls for New Entrepreneurial Applicants
Wells Fargo joins 14 other major financial institutions providing mentoring and guidance to the six chosen startups.
Micro Data Challenges in an Era of Macroprudential Regulation
Research and statistical analysis experts at central banks are tasked with developing sophisticated forecasts and models to identify systemic risk. Yet they are spending most of their time acting as data entry clerks, rather than developing these models.
The Perks of 'SmartSourcing' Shared Services in Financial Industry
A breadth of vital but undifferentiated business processes are still being replicated across the industry. They are all candidates for centralization.
Managing Social Media Risk Strategy: Technology Can Only Go So Far
Advanced analytical technologies are an important part of a social media risk management strategy, an Accenture report says, but the technology must be balanced with training and procedures.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.