A TALE OF TWO SETTLEMENTS
While the settlement announcements of Vision and the NFA hit on many of the same facts there are some key differences.
Vision stated that it agreed, without admitting or denying the allegations, to accept findings it violated certain NFA rules, to pay a fine of $1.5 million and to withdraw its FCM registration upon the transfer of its FCM business to a newly registered FCM under common control with Vision. It also stated that “this settlement forecloses any issue with respect to open NFA inquiries involving Vision’s activities as an (FCM).”
The NFA decision states, “…should Vision reapply for NFA membership after it has withdrawn, NFA may use the Business Conduct Committee's Complaint and the Hearing Panel's Decision as the sole basis for denying Vision's application.”
The NFA decision also notes that, “Respondents neither admitted nor denied the allegations made against them in the Committee's Complaint; however, Vision agreed to the entry of findings in this decision that it had violated NFA Compliance Rules 2-4,2-10 and 2-9(a)." Those violations include failure to observe high standards of commercial honor and just and equitable principles of trade, failure to maintain adequate records and make appropriate inquiries and failure to diligently supervise certain aspects of [it's] operations.
The Vision announcement indicated the withdrawal of its FCM membership is tied to a transfer into a new FCM but it is clear in the decision that there is no condition on the withdrawal and there is no guarantee a new membership would be granted. AN NFA spokesperson says the NFA would conduct its usual “rigorous fitness screening procedures” on any application looking at a firm’s risk controls. ”There is quite a bit of hard work to get [an FCM] approved. It is a long disciplined vetting process,” the spokesperson says.
If the planned new FCM, High Ridge Futures LLC., does become registered, Vision's track record will move with it. The settlement release stated, "If the firm becomes registered, NFA will ensure that any customer who inquires about High Ridge through NFA's BASIC system will be provided with information about all of Vision's disciplinary actions."
The affiliation between Vision and Ace and Yu-Dee Chang has been a long one. Futures first reported on this in 2004-05 when Vision rolled out a controversial marketing plan to raise assets for Ace. It stated that introducing brokers could earn $130,000 in 90 days on a $1 million allocation. They could earn this by a very high fee structure that allowed for a 10% IB management fee (in front of the typical CTA management and incentive fees as well as other fees) or by charging $55 per roundturn. Vision was promoting Ace’s three-year track record averaging nearly 100% per year. A close look at that track record showed that Ace had only listed assets of $0.1 million during that period of strong returns.
In a January 2005 article, Futures calculated the breakeven cost of an investment in Ace using this fee structure to be roughly 25.6%. Vision later would be required by the NFA to include a breakeven analysis with all of its CTA marketing materials.