NFA fines and settles case with forex IB Avail Trading Corp for $30,000 for alleged violations

The National Futures Association (NFA) today, December 19, 2016, at an NFA Hearing Panel, issued a Decision accepting Forex introducing broker Avail Trading Corp (Avail Trading) and David Manoukian’s settlement offer and imposed a $30,000 fine to be paid within 30 days.

On June 30, 2016, NFA’s Business Conduct Committee (BCC) issued a Complaint to Avail Trading Corp and David Manoukian (Manoukian).

The basis of the Complaint charged Avail Trading with allowing its forex customers to use a hedging strategy whereby they would take long and short positions in the same currency pair without Avail offsetting those positions which provided no economic benefit to customers but an increase in their trading costs.

Generally, the BCC’s Complaint charged that Avail Trading (1) failed to observe high standards of commercial honor and (2) just and equitable principles of trade and (3) failed to maintain the required minimum adjusted net capital, and also charged that both Avail Trading and Manoukian failed to supervise.

Back in March of this year, LeaRate provided exclusive coverage of the Chapter 11 filing of NFA-regulated FX introducing broker ATC Brokers US and its parent company Avail Trading Corp., LeapRate learned then that FXCM had dropped ATC as a referring broker.

Preceding the above, ATC Brokers and its co-owner David Manoukian both filed for Chapter 11 protection in early February of 2015, after the company and Manoukian lost a lawsuit brought by a client who was awarded more than $1.6 million by a Los Angeles Superior Court judge. You can read more about this in the official complaint response for this particular case below.

To the three violations alleged, Avail Trading provided the following answers:

1. ATC states that in 2011 and 2013 the NFA commenced an examination of ATC. During each of the examinations, the MT4 platform hedging and non-FlFO features were discussed with, and presented thoroughly to, the NFA Auditors. The discussion included the capability of the MT4 offsetting the hedge with each other by utilizing the Close By feature of the platform and the capability of closing each order separately, which were both available to ATC clients in 2011 and 2013 when the NFA commenced an examination of ATC. The aforementioned NFA audits were concluded with no suggested or alleged violation of NFA Compliance Rule 2-36(c). ln 2016, upon instructions by NFA to cease allowing hedging and non-FlFO practices, ATC did so immediately.
2. As to Count ll and the allegations that ATC failed to maintain required
   minimum adjusted net capital, ATC states that on February 9, 2015, ATC filed its chapter 11 reorganization bankruptcy case in order to protect the company and put an automatic stay on the $1.5 million judgment from being entered. Due to the complexity of the situation, multiple discussions occurred with outside counsel, CPAs, the NFA staff and the CFTC staff in regards to the application of Generally Accepted Accounting Principles to disclosure requirements in ATC’s financial statements. ATC ceased doing business as an lntroducing Broker on March 1, 2OL6 until such time as a definitive response was provided by its CPAs. Once ATC was informed by its CPAs that the 1.5 million was to be accrued as a liability, ATC sent the capital deficiency formal notice to the NFA on March 13, 2016.
3. As to Count lll and the allegations that Respondents failed to supervise, the Respondents state that the NFA was informed of the hedging and non-FIFO features of the platform during the NFA’s 2O11 and 2013 examinations of ATC. During the December 2O16 audit, the NFA staff was provided with the complaint folder in the litigation which disclosed that a customer was pursuing legal action against ATC, and the matter was in progress. ln prior NFA examinations, there had been no mention of ATC not having net capital computations available within 17 business days after month end. As an NFA member since 2005, ATC and Dave Manoukian conduct their business with proper supervision and perform its daily operation with the industry’s highest ethical practices.

In December 2015 when the NFA commenced their examination, Avail Trading had 1,200 forex accounts, 900 of which were active, and 400 futures accounts, 200 of which were active.

To read the complaint from the NFA click here, to read Avail Trading’s answers to the complaint click here.

The NFA Decision can be read in full here.