First, let's look at the charge against MF Global (Man)...

 

http://www.nfa.futures.org/basicnet/Case.aspx?entityid=0266826&case=07-04&contrib=CFTC

Release: 5294-07

For Release: February 20, 2007

Man Financial Inc. Sanctioned for Failing to Supervise Former Employee Who Fraudulently Solicited Customers:

CFTC Orders Man Financial to Pay a Civil Penalty and Restitution Totaling $316,000 and Imposes a Trading Ban and Penalty on Former Man Employee Steven M. Camp

Washington, D.C. - The U.S. Commodity Futures Trading Commission (CFTC) announced today the issuance of an order filing and simultaneously settling charges against Steven M. Camp of Chicago, Illinois, and Man Financial Inc. (Man), a registered futures commission merchant. The order charges Camp with fraudulently soliciting customers to open commodity futures and options on futures accounts at Man, and charges Man with failing to diligently supervise Camp. During the time of the misconduct, Camp was a registered Associated Person of Man.

Now, let's look at the NFA release concerning disciplined firms...

Effective Date of Amendments to NFA Interpretive Notice Regarding Enhanced Supervisory Requirements

NFA has received notice that the Commodity Futures Trading Commission ("CFTC") has approved a revised version of NFA's Interpretive Notice entitled "Compliance Rule 2-9: Enhanced Supervisory Requirements" ("Interpretive Notice") as well as a technical addition to NFA Compliance Rule 2-9(b). The changes to the Notice and Compliance Rule 2-9(b) will become effective on November 1, 2007.

The revised Interpretive Notice reorganizes the current version of the Notice to keep related topics in proximity to each other, and makes several technical adjustments to the Notice. It also, however, includes two new provisions which potentially expand the number of Members that may be impacted by the Interpretive Notice's triggering criteria beginning on November 1, 2007.

First, a new provision in the revised Interpretive Notice expands the definition of a Disciplined Firm beyond Members that have been permanently barred from the industry as the result of formal actions by either the CFTC or NFA for the use of deceptive telemarketing practices or promotional material. The new definition of a Disciplined Firm now also includes Members that have been sanctioned in any way by either the CFTC or NFA due to deceptive telemarketing practices or promotional material within the preceding five years.

It is important to note that a Member added as a Disciplined Firm based on this expanded definition will not itself be subject to the Requirements merely because they are now categorized as a Disciplined Firm. Rather, the effect of the change would be that if another Member firm employs an AP or lists a principal from a Disciplined Firm, then those APs and principals would be counted by the Member firm as having worked at a Disciplined Firm for purposes of determining whether the Member's employee mix triggers an obligation to adopt the Requirements.

So, how does this happen?

Only my opinion, of course, but that "free-pass" must have cost them a bundle. 

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Statement from Dennis Stahr:

I have been questioned about this by many Introducing Brokers and at least two FCMs.  I don't have the answer, but have to feel it is really unfair and does show favoritism to the larger firms.

Additionally, since the (defined) purpose of the NFA is to protect the investor, you, as an investor, should be able to see if the firm you are considering working with is a "disciplined" firm.  However, that is not the case.  The NFA does not make the disciplined list available to the general public.  Not sure what message that sends, but it doesn't look like investor protection to me. 

If you have a question about whether the firm you are considering is disciplined or not, call me and I will tell you, and explain how the firm got disciplined and whether or not it was legitimate.  I and Investment Reference have been involved with investor protection for over 25 years, in our many years of complaint free trading for customers, our Series 3 courses, our audits, our public appearances, our consulting and especially in our (NFA accepted) ethics training course.