NEX Capital Management LLC , a registered commodity trading advisor, and Jacob Wohl, an associated person and principal of Nex Capital, were permanently barred from being members of the National Futures Association or from acting as principals of an NFA member for failing to cooperate with an NFA examination. According to an NFA Hearing Committee panel, an NFA examination team attempted to visit Nex’s office – apparently in a residence – on two days in June 2016. However, on each occasion, no one from Nex responded to the team’s telephone calls or ringing of a buzzer outside the firm’s designated address. On one occasion, however, the NFA team said it observed two persons viewing them from the second floor of the residence. The NFA team also could not access Nex at other locations identified by the firm in its registration information or through email. The NFA, however, received emails from David Wohl who identified himself as an attorney, threatening NFA with criminal and civil court “action” for stalking and vandalism. NFA endeavored to commence its review of Nex after receipt of a customer complaint that suggested the firm had managed customer funds prior to the its registration as a CTA as well as from an individual who claimed he had received less money than he believed he had made through Nex. Nex withdrew as a CTA and NFA member, and Jacob Wohl was terminated as an AP and principal on July 25, 2016.
Compliance Weeds: Hide and seek is not a good game to play with regulators. However, determining when there is an event that requires an “immediate,” “same day” or “within 24 hours” notice filing to the Commodity Futures Trading Commission, the Securities and Exchange Commission or both by a futures commission merchant, futures-industry introducing broker or a broker-dealer often requires quick judgments under highly pressured circumstances. Unfortunately, material facts may sometimes be assessed incorrectly in the heat of a moment, and after some brief research, a precipitous circumstance may turn out to be a false alarm. Accordingly, it is important that registrants are cognizant of all extraordinary reporting requirements, and when a possible reporting event occurs, first pause (calm the environment), second reflect (understand all available facts), and third, challenge (ensure that a perceived problem is truly a problem). Only after there is confirmation of a problem (or near certain confirmation), however, should a required report be made. By then, the full scope of the problem should be known and hopefully fixed -- at least on an interim basis; however, failure to assemble full information will not excuse a delay in required reporting. To the extent practical, a look-back to consider lessons learned and more permanent fixes to prevent a future occurrence should also occur as soon as possible. If there is ongoing doubt one way or another about the occurrence of a potential reportable event, consider at least an interim, informal report to a relevant regulator to advise it of the potential of a reportable event. (Click here to access a handy chart published by the National Futures Association of Futures Commission Merchant Reporting Requirements, and here for Introducing Broker Reporting Requirements. Click here to access a summary chart of broker-dealer regulatory notification requirements by the Financial Industry Regulatory Authority.)