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This angered me just reading it so I wrote them. Here is my letter and their response.
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Dear Sirs,
Your website states:
*Strong enforcement authority*. NFA has the authority to take
disciplinary actions against any firm or individual who violates its
rules, ranging from Warning Letters for minor rule infractions to formal
Complaints in cases where rule violations warrant prosecution. Penalties
resulting from Complaints include expulsion, suspension for a fixed
period, prohibition from future association with any NFA Member,
censure, reprimand and a fine of up to $250,000 per violation. NFA often
collaborates with the CFTC, the FBI and other law enforcement agencies
to ensure successful prosecutions.

I read on a forex forum this-
/"In my understanding the horrifying thing ...<snip>... Right there we lost
about 50% of our in trade money, with no way to prevent it./

1) What was the reasoning behind the decision to declare customer
accounts an ASSET of FXLQ ?
2)If this is true, then why should we allow the industry to
self-regulate itself ?

I await your response and I will be contacting Gov. Crist to see if
there is anything we can do to put a stop to the tremendous amount of
scams and lack of regulation the forex market has in Florida and
nationwide.

Sincerely,
Robert M
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Dear Mr. Mc,

As you point out, NFA has the ability to take disciplinary action
against its Members for violations of NFA Rules. As part of an
examination of Forex Liquidity, we learned that the firm had grossly
misrepresented its financial position and had recorded assets that FXLQ
has yet to prove exist. Once this was uncovered by our auditors, we
took steps to immediately curb the business that the firm did, including
prohibiting it from accepting new customers as well as funds or trades
from existing customers.

While it is true that customers could not put on any new positions,
customers were able to liquidate existing positions, or continue to
roll-over trades if they wanted to keep the position on. Therefore, you
did have the ability to keep a trade and close it out when you deemed
that to be appropriate. The receiver appointed by the Federal Court to
take over FXLQ's operations did eventually close out customer positions,
but this was over one month after NFA's Member Responsibility Action was
issued.

With respect to the funds, it is incorrect to say that FXLQ had the
funds available to pay its customers; NFA staff were in FXLQ's offices
every day for over two weeks after the MRA was issued and received
updated financial records each day. During that time period, we
received no information which confirmed that there was, in fact, enough
funds to repay customers. I understand that firm personnel represented
to numerous people that these funds were available; however, firm
personnel also represented that they had $40 million in capital, which
also appears to be a false statement. Additionally, FXLQ had no funds
at Goldman Sachs at any point, although they did have funds at several
other financial institutions.

With respect to the classification of customer funds as assets of FXLQ,
this is a standard accounting issue. For all financial institutions who
hold customer funds (including broker-dealers and futures commission
merchants whose customers trade on-exchange futures), customer funds are
listed on the firm's books as an asset, which is off-set by liabilities
owed to customers. Additionally, U.S. Bankruptcy laws do not allow for
segregation of customer funds the way that they do for exchange-traded
futures, and there is no SIPC protection as there is in equities.
Therefore, customers of FXLQ are afforded no special protection in the
event of insolvency, and FXLQ was prohibited from making any claims to
the contrary. The receiver's most recent report indicates that there is
still a shortfall of approximately $1.8 million in assets.

While it is true that NFA is a self-regulatory organization, we are
subject to oversight by the Commodity Futures Trading Commission and we
are the ones who took immediate action to prevent additional customers
from being harmed and to prevent further losses by existing customers.
The MRA in this case was one of a dozen or so NFA has taken against
Forex Dealer Members, several of which were issued in the past year. We
have had numerous discussions with Congressional staff regarding the
forex industry and the CFTC's jurisdiction over it; we believe that any
steps that Congress can take to strengthen the Commission's ability to
regulate this area as important, and we have spent numerous resources to
ensure that Congress understands our position.

Sincerely,
Jennifer S