NFA Press Release (January, 31, 2013).: National Futures Association adopts recommendations from an independent analysis of NFA's Peregrine Financial Group audits.

For Immediate Release

For More Information Contact:
Karen Wuertz (312) 781-1335, kwuertz@nfa.futures.org
Larry Dyekman (312) 781-1372, ldyekman@nfa.futures.org

National Futures Association adopts recommendations from an independent analysis of NFA's Peregrine Financial Group audits

January 31, Chicago - The National Futures Association announced that at a special meeting of its Board of Directors today, the Board voted to accept the recommendations made by Berkeley Research Group (BRG) as part of its independent analysis of NFA's audits of Peregrine Financial Group, Inc. NFA staff will shortly develop a plan to act on the recommendations. The Board will also appoint a special committee to oversee the timely implementation of the recommendations.

According to BRG, its 21 recommendations are "designed to improve the operations of NFA audits" based on the results of its analysis. The recommendations cover a wide range of topics, including auditor hiring, training, supervision and continuing education. In particular, the report recommended that NFA enhance its training and procedures to ensure a greater sense of professional skepticism among its audit staff.

In addition, BRG recommended that NFA conduct more testing of Members' internal controls, the qualifications of outside auditors and the sources of firm capital contributions. BRG also recommended that NFA take steps to better identify potential risk factors in futures commission merchant (FCM) operations.

"BRG conducted an independent, thorough, and accurate review of NFA's audits of Peregrine Financial, and identified areas in which NFA could have been more inquisitive," said Todd Petzel, chairman of a Special Committee comprised of NFA's Public Directors that retained BRG in August 2012. "Its recommendations are smart and appropriate. With the full backing of the Board, management will implement these recommendations and we expect the result will be improved regulation and oversight and a stronger, more secure industry."

BRG found that, overall, "NFA audits were conducted in a competent fashion and the auditors dutifully implemented the appropriate modules that were required in the annual audits" following the standards set by the Joint Audit Committee, a representative committee of the Audit and Financial Surveillance departments of U.S. futures exchanges and regulatory organizations.

BRG also found that, unlike in the Madoff Ponzi scheme, there were no complaints from customers or attempts at whistleblowing regarding Wasendorf's fraud. BRG concluded that Wasendorf "was able to conceal his fraud meticulously by providing numerous convincingly forged documents to NFA and others."

"NFA has already taken steps to address some of the issues highlighted in BRG's recommendations," said NFA President Dan Roth. "For example, we have expanded our use of Certified Fraud Examiner training for our audit staff, increased our recruiting of experienced supervisors and directed our managerial staff to spend more time in the field during audits. NFA and CME Group have created a process to receive daily confirmations from all banks holding customer segregated funds. The segregation confirmation system will perform an automated comparison of that information with the daily reports filed by the FCMs and generate immediate alerts for any material discrepancies."

"Our primary goal is to thoroughly review the BRG report and develop a plan to implement its recommendations," said Mr. Roth. "We will present our plan to the Board in the near future. We are confident that the actions already taken by NFA and other regulators, along with the recommendations proposed by BRG, will help us to create a stronger regulatory environment and a better industry."

The BRG Investigative Team conducted a comprehensive review of NFA's audits of PFG from 1995 through 2012. BRG examined over 190,000 NFA documents containing over 3 million pages, including over 166,000 emails and related attachments. BRG also conducted interviews of 32 individuals with knowledge of the factors or circumstances surrounding NFA's audits of PFG, including 25 current or former NFA employees and 5 former PFG officials (including former PFG CEO Russell Wasendorf, Sr.).

BRG's Recommendations Report and Report of Investigation are available on the NFA website at www.nfa.futures.org.

NFA News Facts Actions (January 31, 2013).: A letter from NFA's CEO and Chairman

January 31, 2013

A letter from NFA's CEO and Chairman

Dear Members,

We wanted to send you a personal update on all that has happened in the months following the collapse of Peregrine Financial Group Inc. (PFG), and let you know that we have taken steps to refine and improve our regulatory practices and better protect you, your customers and the industry in the wake of this tragic situation.

As you know, in July 2012, PFG filed for bankruptcy following the attempted suicide of its former president and CEO Russell Wasendorf, Sr., and subsequent discovery that he had defrauded PFG customers by using segregated funds for his personal gain and submitting falsified records to NFA and the Commodity Futures Trading Commission (CFTC).

Shortly after we uncovered the PFG fraud, a Special Committee of NFA's public directors commissioned an independent review of our audit practices and procedures by Berkeley Research Group (BRG). As part of the review, BRG analyzed the execution of those audit procedures specifically in relation to PFG to ensure we followed the audit steps set forth by the Joint Audit Committee, a representative committee of the Audit and Financial Surveillance departments of U.S. futures exchanges and regulatory organizations, and were consistent with CFTC regulations.

During its investigation, BRG conducted a comprehensive review of NFA's audits of PFG from 1995 through 2012. BRG examined more than 190,000 NFA documents containing over 3 million pages, including more than 166,000 emails and related attachments. BRG also conducted interviews of 32 individuals with knowledge of the factors or circumstances surrounding NFA's audits of PFG, including 25 current or former NFA employees and five former PFG officials (including Russell Wasendorf, Sr.). The results of BRG's analysis and a list of recommendations were presented to the Board late last week.

Earlier today, we convened a special meeting of our Board of Directors, during which the Board voted to accept BRG's recommendations. NFA staff will soon develop a plan to act on the recommendations and present it to the Board. The Board will also appoint a special committee to oversee the timely implementation of the recommendations.

BRG's review found that, overall, "NFA audits were conducted in a competent fashion and the auditors dutifully implemented the appropriate modules that were required in the annual audits" following the standards set by the Joint Audit Committee.

The review also found that, unlike in the Madoff Ponzi scheme, there were no complaints from customers and no whistleblowers stepped forward to call attention to Wasendorf's fraud. BRG specifically concluded that Wasendorf "was able to conceal his fraud meticulously by providing numerous convincingly forged documents to NFA and others."

BRG also put forth a list of 21 recommendations, which it says are "designed to improve the operations of NFA audits" based on the results of its analysis. The recommendations cover a wide range of topics, including auditor hiring, training, supervision and continuing education. In particular, BRG suggested that NFA enhance its training and procedures to ensure a greater sense of professional skepticism among its audit staff. We feel that, once implemented, BRG's recommendations will make us a more-effective regulator. We also believe that these suggestions will prove helpful for any regulatory organization, especially in the continual struggle to overcome a "check the box" mentality.

Additionally, BRG recommended that NFA conduct more testing of Members' internal controls, the qualifications of outside auditors and the sources of firm capital contributions. BRG also suggested that NFA take steps to better identify potential risk factors in FCM operations.

NFA already has taken significant steps to address some of the issues highlighted in BRG's recommendations. For example, we have expanded our use of Certified Fraud Examiner training for our audit staff, increased our recruiting of experienced supervisors and directed our managerial staff to spend more time in the field during audits.

As noted in previous Member communications, NFA and the CME Group have implemented a system to receive daily confirmations from all bank depositories holding customer segregated funds in 2012. The system will be expanded to include all segregated depositories in 2013. The segregation confirmation system will perform an automated comparison of that information with the daily reports filed by the FCMs and generate immediate alerts for any material discrepancies.

We understand the default of PFG caused tremendous pain and financial distress not only to you, our Members, but also to the industry and—most significantly—PFG's customers. In response to this, we are confident that the actions already taken by NFA and other regulators, along with the recommendations proposed by BRG and the Special Committee, will help us to create a stronger regulatory environment and a better industry.

Daniel J. Roth President & CEO	Christopher K. Hehmeyer Chairman of the Board

To read the complete version of BRG's Recommendations Report and Report of Investigation, click here.

NYT | Global Update (January 31, 2013).: Hagel's Views Come Under Harsh Scrutiny by Republicans

January 31, 2013
Compiled 21:45 GMT

Global Update

TOP NEWS Hagel's Views Come Under Harsh Scrutiny by Republicans By ELISABETH BUMILLER Chuck Hagel, President Obama's nominee to be secretary of defense, met with sharp and sometimes angry questions on a wide range of issues at his Senate confirmation hearing. At War Blog: Chuck Hagel and the Wisdom of Grunts Syria's Confirmation of Strike May Add to Tension With Israel By JODI RUDOREN Experts said Israel's refusal to confirm its Wednesday attack was part of a strategy to give targets face-saving ways to avoid escalation. But Syria may have undercut that effort.  Video: Israel's Airstrike Near Damascus Iran Said to Be Set to Hasten Uranium Enrichment By ALAN COWELL Tehran has told the United Nations nuclear watchdog of plans to install new equipment at the Natanz plant, a diplomat said. Global Edition Home Page »

Technology Video: A Cyberattack From China TimesCast: Chinese hackers infiltrated The New York Times's computer systems, getting passwords for its reporters and others. Related Article Opinion Latitude Medals and Memories By OLIVER BULLOUGH The more distant World War II becomes, the more Russians seem to commemorate it. Comment

WORLD Syrian Opposition Leader Says He's Open to Talks, With Conditions By HANIA MOURTADA and RICK GLADSTONE Sheik Ahmad Moaz al-Khatib expressed a willingness for the first time to talk with government representatives. Photographs: Intense Fighting in Damascus Video: Watching Syria's War At War Blog: The Battle for Minakh Air Base Egypt Rivals Hold Rare Meeting and Call for Dialogue By KAREEM FAHIM, NICHOLAS KULISH and ALAN COWELL Prominent secular opponents of President Mohamed Morsi gathered with the Egyptian leader's Islamist allies on Thursday after days of political chaos threatening the transition to democracy. The Lede Blog: Germans Press Morsi on Slurs Against Jews as Berlin Marks Somber Anniversary Hackers in China Attacked The Times for Last 4 Months By NICOLE PERLROTH The timing of the attacks coincided with reporting for an investigation that found that the relatives of China's prime minister had accumulated a fortune worth several billion dollars through business dealings. More World News » BUSINESS European Officials Say Drug Makers Paid to Delay Generic Version By JAMES KANTER and KATIE THOMAS Johnson & Johnson and Novartis were accused of colluding to delay the availability of a less expensive version of a pain medication for cancer patients. DealBook Justice Dept. Seeks to Block $20 Billion Merger of Brewers By MICHAEL J. DE LA MERCED The United States is arguing in a lawsuit that Anheuser-Busch InBev's proposed deal to buy control of Grupo Modelo of Mexico would hurt competition in the American beer market. DealBook Deutsche Bank Posts Surprise $3 Billion Loss By JACK EWING The fourth-quarter loss shows the challenges confronting the new co-chief executives, Jürgen Fitschen and Anshu Jain, as they seek to reconfigure Germany's largest bank. More Business News » TECHNOLOGY Amid Long Odds, BlackBerry Maker Unveils New Line and New Name By IAN AUSTEN The company introduced a new operating system and a new generation of phones, along with a new corporate name, with the hope of restoring its products' status as a symbol of executive cool. BlackBerry 10 Critical to Its Maker's Future DealBook: Wall Street Prepares to Crack BrickBreaker Habit Facebook's Solid Results Are Greeted Cautiously By SOMINI SENGUPTA Even with a strong earnings report, the company's stock dropped after hours before recovering. Ericsson Sales Rise on Spending to Upgrade Mobile Networks By KEVIN J. O'BRIEN The Swedish company Ericsson, the world's largest maker of cellphone network equipment, took a big charge on its smartphone joint venture with ST Microelectronics. More Technology News » SPORTS Beckham Back in Europe, at Paris Saint-Germain By ROB HUGHES Almost six years after departing mainstream soccer to join the Los Angeles Galaxy, David Beckham flew to France to be presented as the latest luxury item purchased for the French club. Real Madrid Defender Offers Glimpse of Glorious Future By ROB HUGHES Raphaël Varane is only 19, but on multiple occasions, he proved the difference as Real Madrid salvaged a 1-1 draw with Barcelona. For Lions Hopefuls, a Chance to Impress in Six Nations By EMMA STONEY For players from Ireland, Wales, Scotland and England, playing well in the Six Nations tournament will be the best way to ensure selection for the famed British and Irish Lions team later this year. More Sports News » U.S. NEWS Law Schools' Applications Fall as Costs Rise and Jobs Are Cut By ETHAN BRONNER Applications are headed for a 30-year low, reflecting increased concern over soaring tuition, crushing student debt and diminishing prospects of lucrative employment upon graduation. Judge in 9/11 Case Orders End to Outside Government Censors By CHARLIE SAVAGE The order from the judge, Col. James L. Pohl of the Army, followed a mysterious interruption on Monday of a feed from the military tribunal courtoom in Guantánamo Bay. Tense Negotiations in Alabama Kidnapping By ROBBIE BROWN and KIM SEVERSON A man with a history of violent behavior and a 5-year-old boy he abducted from a school bus on Tuesday remained holed up in a bunker in rural Alabama on Thursday morning. More U.S. News » OPINION Op-Ed Contributor Victims, Victims Everywhere By DANIEL LANSBERG-RODRÍGUEZ The riot in a prison in Venezuela reflects a culture of victimhood under Chávez. Op-Ed Columnist Meet the Champs By NICHOLAS D. KRISTOF Our national high school chess champions are the unlikeliest bunch of middle schoolers. See what a little help can do for bright kids? Columnist Page | Blog Op-Ed Columnist Take a Bow, H.C. By GAIL COLLINS After 956,733 miles and 570 airplane meals and 112 different countries and 1,700 meetings with world leaders, Hillary Clinton deserves a break. Or at least a nap. Columnist Page More Opinion »

Money Show Investors Daily Alert (January 31, 2013).: Surfing the Investment Zeitgeist

INVESTORS DAILY ALERT

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A Buy and Hold Gem, Timothy Lutts

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GURUS' VIEWS & STRATEGIES

Kick the Can and Hope for Change, Genia Turanova

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IDEAS FROM AROUND THE WORLD

China Can't Get Enough Silver, Tony Daltorio

Today's Featured Videos & Exclusive Interviews

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Covered Calls for Conservative Investors, Mike Scanlin

The Economist | Business this week: Highlights of news coverage from January 26th - February st. 2013

» After 13 consecutive quarters of growth America's economy contracted by 0.1% at an annual rate in the last three months of 2012, according to a first estimate. One of the factors behind the surprising stumble was a 15% fall in federal spending. GDP grew by 2.2% for the whole year, compared with 1.8% in 2011. The poor quarterly figure took the shine off data that showed American home prices rising in November by 5.5%, the fastest pace since August 2006. See article»

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Happy slashers

» Britain's economy also shrank from October to December, by 0.3%. Britain has recorded negative growth in four of the past five quarters. The government said it would plough on with its austerity plan, though some, notably at the IMF, have urged it to ease the pace of cuts.

» The Reserve Bank of India reduced its main interest rate for the first time in nine months, to 7.75%. The move was expected after inflation fell to a three-year low.

» Stanley Fischer said he would retire as governor of the Bank of Israel in June. A former chief economist at the World Bank, he was appointed to the job in 2005 and is credited with helping Israel avoid the worst of the financial crisis. Its budget deficit, however, is now growing much faster than the government had expected.

» The Obama administration nominated Mary Jo White to be chairman of the Securities and Exchange Commission. A former federal prosecutor, she secured a conviction against John Gotti, an infamous New York mobster. Her appointment sends a clear political message about cracking down on financial crime, though some worry about Ms White's lack of experience on Wall Street. See article»

» The court of the European Free-Trade Association ruled that Iceland does not have to reimburse British and Dutch savers who lost their deposits at an online bank operated by Landsbanki, which collapsed in 2008. The EFTA court's decision cannot be appealed. See article»

» Moody's completed the review it started last autumn of six Canadian banks and downgraded the credit ratings of all of them because of mounting levels of consumer debt as a result of rising house prices. Toronto-Dominion, hitherto the only Canadian bank to retain a triple-A rating, was one of the six.

» Deutsche Bank reported a €2.2 billion ($2.9 billion) quarterly loss, mostly related to its restructuring effort.

» Caterpillar, one of the world's biggest makers of heavy machinery, booked a $580m write-down because of "accounting misconduct" it uncovered at a Chinese supplier of coalmining equipment that it had taken over last year. Caterpillar has sacked the senior managers at the Chinese firm it says were responsible for the misdeed.

---

After earthquakes and floods

» Toyota reclaimed the crown of world's biggest carmaker, selling 9.7m vehicles last year. General Motors sold 9.3m and Volkswagen 9.1m. Meanwhile, carmakers warned of more pain in Europe. Ford said it would lose $2 billion from its European operations, and Fiat, which has seen sales slump in Italy, its home market, ditched its 2012 dividend to preserve cash. It is also hoping to buy the remaining 41% stake in Chrysler that it doesn't own.

» Aubrey McClendon decided to step down as chief executive of Chesapeake Energy, a big natural-gas producer. One of America's most colourful energy bosses, Mr McClendon helped found Chesapeake in the 1980s and was an early champion of shale gas. Last year it emerged that he had secured loans against his stakes in the company's wells (an internal review has so far found no "improper conduct"). He admits to "philosophical differences" with the board, though he is leaving on "amicable" terms.

» Anglo American became the latest mining company to write down assets, disclosing a $4 billion impairment charge on its Minas-Rio iron-ore project in Brazil. Production at the mine has been disrupted by licensing injunctions, delaying the site's first delivery of iron ore until the end of 2014.

» Facebook posted a 41% rise in quarterly revenue, which included a big jump in sales from mobile advertising, a part of its business that is seen as crucial to its future growth.

---

Something old, something new

» Research In Motion at last released its whizzy BlackBerry 10 mobile operating system and new smartphones. The company hopes the BB10 platform will claw back some of its lost market share. It slipped out of a ranking of the world's top five smartphone-makers at the end of last year, according to IDC, a market-research firm. RIM declares that this is its "new era", and has changed the company's name to BlackBerry. See article»

The Economist | Highlights of News Coverage from January 26th - February 1st 2013

» Clashes between opponents of Egypt's Islamist government and the security forces left at least 50 people dead in the cities of Cairo, Suez, Port Said and Ismailiyah. President Muhammad Morsi invited the opposition to engage in a "national dialogue". The opposition called for a government of national unity. Some of the country's generals warned that the state could collapse unless the violence stopped. See article»

» French troops in Mali captured Gao, Kidal and Timbuktu, the three main towns in the north. The jihadists who had occupied them for the past ten months scattered without a fight, but they may revert to guerrilla warfare from their Saharan redoubts. See article»

» Lakhdar Brahimi, the envoy of the UN and Arab League to Syria, told the UN Security Council that the country is being destroyed "bit by bit". The UN's refugee agency reckons that more than 700,000 Syrians have fled abroad and 2m more have been displaced within the country. See article»

» Reports claimed that Israeli jets had hit an arms shipment in Syria that was bound for Hizbullah in Lebanon. Syria's state media said they had attacked a scientific research complex outside Damascus. See article»

---

Break for the border

» The prospects improved markedly for immigration reform in America this year. A bipartisan group of senators unveiled its far-reaching proposals and Barack Obama presented a competing set of ideas; both plans envisage a path to some sort of legal status for illegal migrants. Any bill will be hotly contested in Congress, with improvements to border security being one of the main sticking points. See article»

» A federal appeals court in Washington ruled that Mr Obama acted unconstitutionally by bypassing the Senate when the chamber was in recess to appoint three people to the National Labour Relations Board. If it stands, the decision could be one of the biggest judicial curtailments of presidential powers in years. See article»

» The Senate approved John Kerry's nomination as secretary of state. Mr Kerry replaces Hillary Clinton, who is leaving after four years in the job. See article»

» Tom Harkin, a Democratic senator from Iowa, said he would not seek a sixth term, the latest in a number of retirements announced by senior senators that widens the battleground for the Senate in the 2014 mid-terms. Another of those who is leaving, Georgia's Saxby Chambliss, says he is frustrated with gridlock; he was one of the Gang of Six, a bipartisan group who proposed a deficit-reduction plan.

---

Journalistic hacks

» The New York Times accused Chinese hackers of infiltrating its computer system using methods "associated with the Chinese military". The newspaper said the attacks coincided with its report about the finances of the family of Wen Jiabao, the prime minister.

» South Korea launched its first satellite into orbit, which will collect climate data. In December North Korea dispatched its own satellite for the first time, which suggested progress towards building a nuclear ballistic missile. See article»

» Australia's prime minister, Julia Gillard, set September 14th as the date for an election. Her proclamation comes far in advance of when the poll legally has to be called. See article»

» Japan's defence ministry said its spending would increase by 0.8% this year. It is the first increase in Japan's defence budget in 11 years, and comes amid a territorial spat with China over some uninhabited islands in the East China Sea.

» Singapore's ruling party suffered an unusual defeat in a by-election. It also laid out plans to increase the city-state's population by 30% by 2030, which might allay concerns about economic growth, but will do nothing to quell irritation at overcrowding. See article»

» Appalling air pollution in China broke records for the second time in two weeks. Dense smog forced the cancellation of flights at Beijing's airport just as the Chinese new year was about to start. In response the government shut some factories and cleared fleets of government cars from the streets.

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A night out ends in tragedy

» In Brazil's most lethal fire in 50 years, 235 people died when a blaze started in a packed nightclub in the southern city of Santa Maria. President Dilma Rousseff promised to improve fire-safety standards, and to enforce them. See article»

» A judge in Guatemala ordered Efraín Ríos Montt, the country's military dictator in 1982-83, to stand trial on charges of crimes against humanity for the killing of 1,771 Mayans during his rule. See article»

» The WTO authorised Antigua to sell downloads of American media products without payment, in compensation for the United States having blocked Americans from using betting websites based in the Caribbean country. Meanwhile, the Bahamas ordered an end to illegal betting in "web shops" after voters rejected a plan to legalise gambling.

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At the highest levels

» A court in Ukraine sentenced Oleksiy Pukach, a senior police official, to life in prison for the slaying in 2000 of Georgy Gongadze, a journalist who investigated corruption.

» Milos Zeman, a former prime minister, won the Czech Republic's presidential election. It was the first time the country's president was elected by direct popular vote. Mr Zeman got 55% in the poll, beating Karel Schwarzenberg, the foreign minister. See article»

» The county council in Cumbria, in Britain's north-west, voted down a plan to store nuclear waste underground at a local site. The decision delighted greens but is a setback for the nuclear industry, which is building a new generation of power stations. The search is on for an alternative site.

» Tens of thousands of pro-gay marriage supporters demonstrated in Paris, shortly before the French assembly began discussing a bill to legalise same-sex weddings. The crowds were smaller than those at an anti-gay marriage protest a few weeks ago, though polls show most people in France support the bill. See article»

» Silvio Berlusconi, Italy's former prime minister, caused outrage when he made a favourable comment about Benito Mussolini at a ceremony commemorating victims of the Nazi Holocaust. It later turned out that Mr Berlusconi had not even been invited to the ceremony. See article»

BIV Today's Business News (January 31, 2013).:Energy companies join forces to plan new LNG facility in B.C.

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