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Re: CFTC Case Update



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Roger D. Rines wrote:
> 
> Some of you know that there has been a move afoot by the CFTC to
> regulate all individuals, businesses, developers, newsletters,
> subscribers, web sites and mailing list (including this one) that
> discuss matters pertaining to trading and futures.
> 
> ...........


My opinion is that the CFTC/NFA shouldn't regulate what writers say, but
should mandate the inclusion a much more illustrative brochure on the
hazards of
trading.  I know that all but a few of the newest traders on this list
know the risks and steps to take to minimize them.  However, the mass
mailing dream merchants continue to sell people on making a fortune
starting with 1-5 grand.  Here again, I believe everyone should get to
do what they want *if they understand the risks*
(and assuming the brokerage feels secure taking the account).  When a
"course" encourages opening a $2500 account, not listening to brokers
(warnings), teaches little or nothing about $management, shows few or no
losses in 15 months in the newsletter, assures the reader that his
method will put them in the 10% winner group, discourages other sources
of learning other than his own add-on courses what do you think the
results are?  Ken Roberts sells something like 20,000 of these courses
per year.  If 15,000 people open $2500 accounts, how many are trading a
year later?  

I strongly believe in free speech.  But I have conflicting impulses
here.

What are the analogs?  Many professionals have to be licensed if they
practice their prof. on individuals (or their houses, etc.).  It makes
sense that money-managing CTAs be licensed.  Publishers/programmers do
not typically provide *individual* advice.  Therefore I have come to the
conclusion they should *not* have to be licensed.

But there are other analogs.  Kellogs cannot state that eating a box of
Frosted Flakes a day will prevent cancer unless it has some evidence
that it will do so.  I can't sell you concentrated hydrochloric acid as
a cheap drain cleaner without an MSDS at a minimum and I'm not sure I
could sell it to the average consumer at all.

Therefore I believe that publishers/programmers should be subject to:
	1. truth in advertising claims restrictions
	2. mandatory warnings about risks involved

Anyone should be able to say corn is going to go up.  anyone should be
able to say buying corn at 2.00 with a stop at 1.90 would be a cool
trade.  However, their advertising about their newsletter should be
truthful.  In addition I don't think it would be intrusive or a
violation of free speech to require that if you state the profits per
year, you also state the account size required and average drawdown
since publication began.  This would be similar to the standardized
nutrition guides put on foods (which I think is a good idea - I look at
the fat number all the time in choosing what to buy).

With commodity courses, I think it not unreasonable to mandate
warnings.  Most do put in the boilerplate warnings but many have content
that contradicts it.  Many many people read 180 pages of Ken Roberts
first course, most of which say how sure-thing trading is (with a
$1000-$5000 account!).  His advertising materials state this is a good
thing for struggling families to try.  In the course, money management
isn't mentioned, losses don't appear in the newsletter, it's suggested
you trade after 3 months of paper trading, ignore non-KR methods, ignore
your broker even though you're paying Mainstreet $100/RT.  

With the courses, the gov't could try to enforce a "balance risk reward"
standard (I think the NFA might actually do this to members).  However,
instead of interfering with the writing in the course which raises free
speech issues, I think the best bet is to mandate that a
industry-approved brochure be included with the ads and with the
course.  I think it needs to be more dramatic than the "black type"
warnings at the bottom of most ads.  A brochure with a graph of the
average return in the first year for $2500 accounts might bring people
back to earth long enough to evaluate critically what the course is
trying to tell them.

I don't think this would be a free speech violation.  Instead may the
"side" (nfa or the course) that presents the best case in the written
materials win!  That's what free speech is about in fact.  

Most subscribers on these lists are experienced traders.  Some are in
fact the writers or programmers whose rights are being trampled on.  Yet
let's not forget the people who have never heard of futures, and who
just got an ad for a course that says it will help them get out of debt
and be rich if only they can scrape together $2500.  I don't know if
this is the motivation for the cftc or not.  I do think maybe they are
off course.  OTOH, I believe truth in advertising and a revamped,
mandated warning would not infringe unduly on free speech but rather
serve as needed regulation.
  

Conrad Bowers