Trading Of Over The Counter Gold And Silver To Be Illegal Beginning July 15

[charrington]

One small step toward Executive Order 6102 part 2, and one giant leap for corruptcongressmankind.

    From: FOREX.com <info@forex.com>
    Date: Fri, Jun 17, 2011 at 6:11 PM
    Subject: Important Account Notice Re: Metals Trading
    To: xxx

    Important Account Notice Re: Metals Trading

               
    We wanted to make you aware of some upcoming changes to FOREX.com’s product offering. As a result of the Dodd-Frank Act enacted by US Congress, a new regulation prohibiting US residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.

    In conjunction with this new regulation, FOREX.com must discontinue metals trading for US residents on Friday, July 15, 2011 at the close of trading at 5pm ET. As a result, all open metals positions must be closed by July 15, 2011 at 5pm ET.

    We encourage you to wind down your trading activity in these products over the next month in anticipation of the new rule, as any open XAU or XAG positions that remain open prior to July 15, 2011 at approximately 5:00 pm ET will be automatically liquidated.

    We sincerely regret any inconvenience complying with the new U.S. regulation may cause you. Should you have any questions, please feel free to contact our customer service team.

    Sincerely,
    The Team at FOREX.com     

So far we have only received this warning from Forex.com. We are waiting to see which other dealers inform their customers that trading gold and silver over the counter will soon be illegal.

It appears that Forex.com's interpretation of the law stems primarily from Section 742(a) of the Dodd-Frank act which "prohibits any person [which again includes companies]from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis."

Some prehistory from Hedge Fund Law Blog:

    The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”) has changed a number of laws in all of the securities acts including the Commodity Exchange Act.  Two specific changes deal with certain transactions in commodities on the spot market.  Specifically, Section 742 of the Act deals with retail commodity transactions.  In this section, the text of the Commodity Exchange Act is amended to include new Section 2(c)(2)(D) (dealing with retail commodity transactions) and new Section 2(c)(2)(E) (prohibiting trading in spot forex with retail investors unless the trader is subject to regulations by a Federal regulatory agency, i.e. CFTC, SEC, etc.).  According to a congressional rulemaking spreadsheet, these are effective 180 days from the date of enactment.

    We provide an overview of the new sections and have reprinted them in full below.

    New CEA Section 2(c)(2)(D) – Concerning Spot Commodities (Metals)

    The central import of new CEA Section 2(c)(2)(D) is to broaden the CFTC’s power with respect to retail commodity transactions.  Essentially any spot commodities transaction (i.e. spot metals) will be subject to CFTC jurisdiction and rulemaking authority.  There is an exemption for commodities which are actually delivered within 28 days.  While the CFTC wanted an exemption in which commodities would need to be delivered within 2 days, various coin collectors were able to lobby congress for a longer delivery period (see here).

    It is likely we will see the CFTC propose regulations under this new section and we will keep you updated on any regulatory pronouncements with respect to this new section.

    New CEA Section 2(c)(2)(E) – Concerning Spot Forex

    The central import of new CEA Section 2(c)(2)(E) is to regulate the spot forex markets.  While the section requires the CFTC to finalize regulations with respect to spot forex (which were proposed earlier in January), it also, interestingly, provides  oversight of the markets to other federal regulatory agencies such as the CFTC.  This means that in the future, different market participants may be subject to different regulatory regimes with respect to trading in same underlying instruments.  A Wall Street Journal article discusses the impact of this with respect to firms which engage in other activities in addition to retail forex transactions.  The CFTC’s proposed rules establish certain compliance parameters for retail forex transactions, requires registration of retail forex managers and requires such managers to pass a new regulatory exam called the Series 34 exam.  We do not yet know whether the other regulatory agencies will adopt rules similar to the CFTC or if they will write rules from scratch.

Next, from Henderson & Lyman:

    The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business. This may be problematic as in most spot metals trading virtually all contracts fail to meet these requirements. As a result, although the courts’ interpretation of Section 742(a) is unknown, Section 742(a) is likely to have a significantly negative impact on the OTC cash precious metals industry. Here too, it is essential that those who offer to be a counterparty to OTC metals transactions seek professional help to discuss possible operational and regulatory contingency plans.

The actual rule language exempts a transaction if it "results in actual delivery within 28 days or such other period as the Commission may determine by rule or regulation based upon the longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved;" Alas, the commission has decided not to intervene and keep the exemption status window so small as to affect virtually all exchanges which transact in the gold and silver spot market.

More here:

Elimination of OTC Forex

Effective 90 days from its inception, the Dodd-Frank Act bans most retail OTC forex transactions. Section 742(c) of the Act states as follows:

    …A person [which includes companies] shall not offer to, or enter into with, a person that is not an eligible contract participant, any agreement, contract, or transaction in foreign currency except pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe…

This provision will not come into effect, however, if the CFTC or another eligible federal body issues guidelines relating to the regulation of foreign currency within 90 days of its enactment. Registrants and the public are currently being encouraged by the CFTC to provide insight into how the Act should be enforced. See CFTC Rulemakings regarding OTC Derivatives located at the following website address, under Section XX – Foreign Currency (Retail Off Exchange). It is essential that OTC forex participants seek professional help to discuss possible operational and regulatory contingency plans.

Elimination of OTC Metals

As for OTC precious metals such as gold or silver, Section 742(a) of the Act prohibits any person [which again includes companies]from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis. This provision intends to expand the narrow so called “Zelener fix” in the Farm Bill previously ratified by congress in 2008. The Farm Bill empowered the CFTC to pursue anti-fraud actions involving rolling spot transactions and/or other leveraged forex transactions without the need to prove that they are futures contracts. The Dodd-Frank Act now expands this authority to include virtually all retail cash commodity market products that involve leverage or margin – in other words OTC precious metals.

The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business. This may be problematic as in most spot metals trading virtually all contracts fail to meet these requirements. As a result, although the courts’ interpretation of Section 742(a) is unknown, Section 742(a) is likely to have a significantly negative impact on the OTC cash precious metals industry. Here too, it is essential that those who offer to be a counterparty to OTC metals transactions seek professional help to discuss possible operational and regulatory contingency plans.

Small Pool Exemption Eliminated

Pursuant to Section 403 of Act, the “privateadviser” exemption, namelySection 203(b)(3) of the Investment Advisers Act of 1940 (“Advisers Act”), will be eliminated within one year of the Act’s effective date (July 21, 2011). Historically, many unregistered U.S. fund managers had relied on this exemption to avoid registration where they:

(1) had fewer than 15 clients in the past 12 months;

(2) do not hold themselves out generally to the public as investment advisers; and

(3) do not act as investment advisers to a registered investment company or business development company.

At present, advisers can treat the unregistered funds that they advise, rather than the investors in those funds, as their clients for purposes of this exemption. A common practice has thus evolved whereby certain advisers manage up to 14 unregistered funds without having to register under the Advisers Act. Accordingly, the removal of this exemption represents a significant shift in the regulatory landscape, as this practice will no longer be allowable in approximately one year.

Also an important consideration, the Dodd-Frank Act mandates new federal registration and regulation thresholds based on the amount of assets a manager has under management ("AUM"). Although not yet underway, it is possible that various states may enact legislation designed to create a similar registration framework for managers whose AUM fall beneath the new federal levels.

Accredited Investor Qualifications

Section 413(a) of the Act alters the financial qualifications of who can be considered an accredited investor, and thus a qualified as eligible participant (“QEP”). Specifically, the revised accredited investor standard includes only the following types of individuals:

1) A natural person whose individual net worth, or joint net worth with spouse, is at least $1,000,000, excluding the value of such investor's primary residence;

2) A natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 in each of those years and a reasonable expectation of reaching the same income level in the current year; or

3) A director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, executive officer, or general partner of a general partner of that issuer.

Based on this language, it is important to note that the revised accredited investor standard only applies to new investors and does not cover existing investors. However, additional subscriptions from existing investors are generally treated as requiring confirmation of continuing investor eligibility.

On July 27th, 2010, the SEC provided additional clarity regarding the valuation of an individual’s primary residence when calculating net worth. In particular, the SEC has interpreted this provision as follows:

    Section 413(a) of the Dodd-Frank Act does not define the term “value,” nor does it address the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth calculation…Pending implementation of the changes to the Commission’s rules required by the Act, the related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded. Indebtedness secured by the residence in excess of the value of the home should be considered a liability and deducted from the investor’s net worth.
Continued...
http://www.zerohedge.com/article/trading-over-counter-gold-and-silver-be-illegal-beginning-july-15

[charrington]

The Dodd Frank Bill

http://www.gpo.gov/fdsys/pkg/BILLS-111hr4173enr/pdf/BILLS-111hr4173enr.pdf

[infowarrior_039]

WHAT !!!!!!!!!!!!! THIS IS MASSIVE NEWS !!!!!! WHEN DID THIS HAPPEN ?? GOD IM TOO POOR AND IVE SOLD OF MY SILVER. CRAP !!!!!!!!!!!!!!!!!!!!!!! i need money FAST crap ....

[charrington]

Obama Threatens Forex; Says Goodbye to OTC Gold Trading 2010
On July 21, 2010, President Obama signed into law the “Dodd-Frank Wall Street Reform Act” (the “Dodd-Frank Act” or “Act”). The Dodd-Frank Act most likely will bring about sweeping regulatory changes within the financial services industry. However, at over 2,300 pages in length, few people have read this legislation in its entirety. Of those individuals who have read the Act, few can comprehend the implications of such sweeping reform. As a result, I have teamed up with attorney Nicole Kuchera, from Chicago’s Henderson & Lyman, to review the content of the Dodd-Frank Act. Through this process we were able to identify some areas of the Act that are most likely to affect Commodity Futures Trading Commission (“CFTC”) regulated entities and National Futures Association (“NFA”) member firms.

The impact of the Act on commodity futures, over-the-counter retail foreign currency (“OTC forex”), and over-the-counter retail precious metals (“OTC metals”) transactions has been largely ignored by the media to date. Although the Dodd-Frank Act has been championed as a victory for consumer protection and rigid Wall Street reform, there is little actual clarity with respect to its practical implications. Since being signed into law, FCMs, IBs, CPOs, and CTAs have reached out to us regarding the vast amount of regulatory uncertainty now present in the financial industry. To assist commodities firms in complying with and understanding the Dodd-Frank Act, we have attempted to identify several of its most sweeping provisions. Our thoughts do not constitute legal advice and should not be relied upon in particular circumstances. We recommend that you contact competent counsel or a legal professional before taking any action in this complex area.

That being said, based on the current language of the Act, the following four areas are likely to have the most significant implications for commodity futures, OTC forex, and OTC precious metals market participants:

Elimination of OTC Forex

Effective 90 days from its inception, the Dodd-Frank Act bans most retail OTC forex transactions. Section 742(c) of the Act states as follows:

    …A person [which includes companies] shall not offer to, or enter into with, a person that is not an eligible contract participant, any agreement, contract, or transaction in foreign currency except pursuant to a rule or regulation of a Federal regulatory agency allowing the agreement, contract, or transaction under such terms and conditions as the Federal regulatory agency shall prescribe…

This provision will not come into effect, however, if the CFTC or another eligible federal body issues guidelines relating to the regulation of foreign currency within 90 days of its enactment. Registrants and the public are currently being encouraged by the CFTC to provide insight into how the Act should be enforced. See CFTC Rulemakings regarding OTC Derivatives located at the following website address, under Section XX – Foreign Currency (Retail Off Exchange). It is essential that OTC forex participants seek professional help to discuss possible operational and regulatory contingency plans.

Elimination of OTC Metals

As for OTC precious metals such as gold or silver, Section 742(a) of the Act prohibits any person [which again includes companies]from entering into, or offering to enter into, a transaction in any commodity with a person that is not an eligible contract participant or an eligible commercial entity, on a leveraged or margined basis. This provision intends to expand the narrow so called “Zelener fix” in the Farm Bill previously ratified by congress in 2008. The Farm Bill empowered the CFTC to pursue anti-fraud actions involving rolling spot transactions and/or other leveraged forex transactions without the need to prove that they are futures contracts. The Dodd-Frank Act now expands this authority to include virtually all retail cash commodity market products that involve leverage or margin – in other words OTC precious metals.

The prohibition of Section 742(a) does not apply, however, if such a transaction results in actual delivery within 28 days, or creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver, and accept delivery of, the commodity in connection with their lines of business. This may be problematic as in most spot metals trading virtually all contracts fail to meet these requirements. As a result, although the courts’ interpretation of Section 742(a) is unknown, Section 742(a) is likely to have a significantly negative impact on the OTC cash precious metals industry. Here too, it is essential that those who offer to be a counterparty to OTC metals transactions seek professional help to discuss possible operational and regulatory contingency plans.

Small Pool Exemption Eliminated

Pursuant to Section 403 of Act, the “privateadviser” exemption, namelySection 203(b)(3) of the Investment Advisers Act of 1940 (“Advisers Act”), will be eliminated within one year of the Act’s effective date (July 21, 2011). Historically, many unregistered U.S. fund managers had relied on this exemption to avoid registration where they:

(1) had fewer than 15 clients in the past 12 months;

(2) do not hold themselves out generally to the public as investment advisers; and

(3) do not act as investment advisers to a registered investment company or business development company.

At present, advisers can treat the unregistered funds that they advise, rather than the investors in those funds, as their clients for purposes of this exemption. A common practice has thus evolved whereby certain advisers manage up to 14 unregistered funds without having to register under the Advisers Act. Accordingly, the removal of this exemption represents a significant shift in the regulatory landscape, as this practice will no longer be allowable in approximately one year.

Also an important consideration, the Dodd-Frank Act mandates new federal registration and regulation thresholds based on the amount of assets a manager has under management ("AUM"). Although not yet underway, it is possible that various states may enact legislation designed to create a similar registration framework for managers whose AUM fall beneath the new federal levels.

Accredited Investor Qualifications

Section 413(a) of the Act alters the financial qualifications of who can be considered an accredited investor, and thus a qualified as eligible participant (“QEP”). Specifically, the revised accredited investor standard includes only the following types of individuals:

1) A natural person whose individual net worth, or joint net worth with spouse, is at least $1,000,000, excluding the value of such investor's primary residence;

2) A natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 in each of those years and a reasonable expectation of reaching the same income level in the current year; or

3) A director, executive officer, or general partner of the issuer of the securities being offered or sold, or a director, executive officer, or general partner of a general partner of that issuer.

Based on this language, it is important to note that the revised accredited investor standard only applies to new investors and does not cover existing investors. However, additional subscriptions from existing investors are generally treated as requiring confirmation of continuing investor eligibility.

On July 27th, 2010, the SEC provided additional clarity regarding the valuation of an individual’s primary residence when calculating net worth. In particular, the SEC has interpreted this provision as follows:

    Section 413(a) of the Dodd-Frank Act does not define the term “value,” nor does it address the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth calculation…Pending implementation of the changes to the Commission’s rules required by the Act, the related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded. Indebtedness secured by the residence in excess of the value of the home should be considered a liability and deducted from the investor’s net worth.

Seek Guidance Now

As is evident from reading the provisions detailed above, President Obama’s sweeping reform is far from simple. At the present date, the Dodd-Frank Act offers up more questions than it provides answers. One thing is certain though; in time there will be significant implications for the financial industry as a whole.

Nicole Kuchera is an associate in Henderson & Lyman's Financial Services Practice Group. She concentrates her practice on transactional and litigation support for securities, futures, and derivatives industry clients. Presently Ms. Kuchera counsels clients regarding a wide range of compliance and regulatory matters involving rules and regulations of SEC and CFTC, as well as self-regulatory organizations and exchanges. She also represents financial services industry clients in a ...

Continued...
http://seekingalpha.com/article/218529-obama-threatens-forex-says-goodbye-to-otc-gold-trading

[charrington]

WHAT !!!!!!!!!!!!! THIS IS MASSIVE NEWS !!!!!! WHEN DID THIS HAPPEN ?? GOD IM TOO POOR AND IVE SOLD OF MY SILVER. CRAP !!!!!!!!!!!!!!!!!!!!!!! i need money FAST crap ....

IT says on margin -- nothing about coin dealers... for now. Long run it will just cause the metals to go up.

[CheneysWorstNightmare]

Okay. Am I to assume silver prices to immediately drop?

[zdux0012]

There is something we are missing here, this would never fly, as to your question, if anything silver would explode

[infowarrior_039]

yeah its not coins now probably but its getting close if their adjusting the Executive Order 6102, which was the original gold and silver confiscation order. i think this is huge news. and it will crash gold and silver prices. crazy these bankers and globalists have so much power.  

[charrington]

There is something we are missing here, this would never fly, as to your question, if anything silver would explode

All metals would - it might cause the metals to go offshore bad for USA but great for metals.

[CheneysWorstNightmare]

This is wild.  I've been on zerohedge.com and reading the comments.

Some say metals are going up, but others are saying they are going down.

infowarrior_039 says down, but charrington says up.

[charrington]

It's going to evolve into people not being able to own gold or silver - that's the end game.

[CheneysWorstNightmare]

It's going to evolve into people not being able to own gold or silver - that's the end game.

Yes.  Confescation of PMs around the corner.

[charrington]

This is wild.  I've been on zerohedge.com and reading the comments.

Some say metals are going up, but others are saying they are going down.

infowarrior_039 says down, but charrington says up.

It can do both -- I'm not saying it wont dip again but in the long run it has to go up. I can see $19.00 silver now but I can also see it $80.00 not too far off in the future. The net worth will get the small investors out of the market - then the rich get richer and the price of silver / gold will go up.

I think what really concerns me about this is they are just looking for more ways to control individuals and keeping the wealth distribution on their side. So the poor get poorer and the rich get richer. Just another scam intended to break Americas back financially.

And you can see that Obama created this in 2010 -- so this is a plan and has been a plan all along.

[charrington]

Something else to think about,  is that other countries can still trade -- as you know there are overseas trusts and brokers that deal in overseas trusts so it's not like you still can't get what you want somewhere else.

Question is how long will it be before it moves to EU etc....


This guys comment is a dose of reality:

Each US person with a financial interest in or signature or other authority over any financial account in a foreign country must file an FBAR if the aggregate value of all such accounts exceed $10,000 at any time during the calendar year.  The FBAR must be filed on or before the June 30 after the calendar year in which the relationship existed. The FBAR is required in addition to the reporting obligations with respect to foreign accounts on Form 1040, Schedule B.[16]

http://www.lewissaret.com/2010/03/foreign-bank-account-report-td-f-90-22...

This is NOT an IRS requirement. It is a DHS requirement and the penalties are massive if one doesn't file and is caught.

Unfortunately vehicles such as GoldMoney are considered to be a financial account. Rule...if your investment has a number attached with your name then you must file this TD F-90-22.1

I told you all to leave the USA but you all think the problem will go away LOL, yeah just like Hitler went away AFTER the country was destroyed

[infowarrior_039]

actually you may be right, if thier is a stoppage of sales and even consification, it could go up in the sense that it is rare on the market. (underground) however they can really fix the prices where ever they want i guess its hard to guess commodity prices actually.

[charrington]

actually you may be right, if thier is a stoppage of sales and even consification, it could go up in the sense that it is rare on the market. (underground) however they can really fix the prices where ever they want i guess its hard to guess commodity prices actually.

Exactly -- BUT we know either way the dollar is history and that will go down...

[Guns Equal Freedom]

If history is any indication. When a country is in a deep economic crisis. They start to crackdown on gold and silver transactions. And who is to say it has to be the same way Franklin Delano Roosevelt did it in the 30's and 40's gold and silver confiscation. History is basically the same story, but a different way of telling.

[Goldman]

In Utah gold and silver is money, so the Feds are going to have a battle.

[Kilika]

Correct me if I'm wrong, but it appears to me that they are taking away "day trading" for the average joe off the street, to which I think makes sense. I've notice the day trade mentality creep into commodities, which it started in the stock market. It doesn't belong in commodities, because because most of the movement is based on emotions and reactions over a few milliseconds of electrinic data, not hard facts over time. The prices bouncing up and down over a day's time isn't a real reflection of the commodity in the world, as life doesn't move that fast. It's just intentional manipulation of the market for the sake of having volitility, which is the only way they make money on margins-type investing. It's legal gambling.

This seems to only affect "paper trading", not the physical transactions of buying and selling gold bullion itself on the street.

[Goldman]

It is confusing, but that is what they want

[Paranoid Puppet Master]

Another Broker Halts Trading In Gold And Silver Products
Submitted by Tyler Durden on 06/19/2011 23:35 -0400

Australia Commodity Futures Trading Commission OTC


CMC Markets, a broker out of Australia which offers Contracts For Difference (CFDs), has just formally joined the increasingly larger group headed by Forex.com (discussed on Saturday) which is now advising customers that gold and silver trading will be prohibited in a month. Specifically, CMC has said that beginning July 29, it will no longer offer nor roll any of its existing gold and silver CFDs. What is curious is that unlike Forex.com, which advised clients it is halting comparable trading on July 25 as pertains to spot OTC products (XAU and XAG), CMC's halt is impacting gold and silver futures. While we still are not confident we understand precisely what span of products is prohibited by Dodd-Frank, it appears that ever more brokers are interpreting the law loosely enough to where practically all gold and silver products will soon be removed from retail participation. Readers, however, can rest assured that the CFTC, which is urgently delaying any of the Frankendodd provisions that impair Wall Street bottom lines, will not move a finger to address or resolve this issue which will suddenly affect millions of retail investors in the US, and around the world.

From CMC Markets:



http://www.zerohedge.com/article/another-broker-halts-trading-gold-and-silver-products

[charrington]

Foreboding news. It wont be too much longer before it expands. A couple of twists in the docs and selling Coins could become illegal - very easy to do.

[Satyagraha]

Has Alex mentioned this on his show? I haven't heard in the past few days...
Also checked the Midas Resources website and no mention of this. Odd.
http://www.midasresources.com/

Celente is on today; perhaps this will come up.

[CheneysWorstNightmare]

Bob Chapman was on "The Power Hour" yesterday.  He says what is happening with FOREX is nothing to be concerned about.

[charrington]

Bob Chapman was on "The Power Hour" yesterday.  He says what is happening with FOREX is nothing to be concerned about.

That's a pretty interesting statement.

[Kilika]

Am I wrong in thinking this just concerns the buying and selling of "paper"? I'm not seeing how this affects the sell of physical gold or silver by or to the individual.

[CheneysWorstNightmare]

That's a pretty interesting statement.

Here ya go, bro.

http://www.youtube.com/watch?v=O4jBvx9gfoQ

[charrington]

Am I wrong in thinking this just concerns the buying and selling of "paper"? I'm not seeing how this affects the sell of physical gold or silver by or to the individual.

Right -- they don't want the avg Joe to make or be able to make gains in the market over the counter gold / silver - They are basically saying it's the small investor that is causing a problem. Upped the reqs and that also will change.

Of course they are boiling the frog slowly it starts here and of course moves to Comex etc.. etc... That is the plan as stated but I don't think anyone is really watching what is happening.