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

UPDATED 19-June-2011…

It may not be quite Executive Order 6102 part 2, but it sure sounds like a rather large step toward it. “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.”

Ed note: Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates” by U.S. citizens. The order criminalized the American public’s ability to own gold as an investment vehicle.

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 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, theprivateadviserexemption, 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.

h/t Ryan

Click Here for the original at Zero Hedge.

24 comments to RED ALERT: Trading Of Over The Counter Gold And Silver To Be Illegal Beginning July 15

  • Brian

    I’m somewhat confused by this. Does this supposedly apply to the trading floors? Or is it more widespread? APMEX?…local shops? What is the wider impact of this? Call your heavy hitters.

  • davepa

    How will this effect folks in possession of physical gold and silver? Both are currency, and eliminating them would surely signal the dollar has lost its reserve status.

    Seems the mafia is squeezing the leveraged participants out, in order to start anew gold based system. Are they attempting to eliminate a level of volatility out of their equation to set pricing for the a gold backed system? The present “leverage aspect” is a deal killer if in fact, they are trying to establish a stable price(gold based) backed by some orderly foundation of confidence.

  • Illeagle yes, unlawful no, stay true and stay soveriegn.

    http://www.youtube.com/watch?v=sXXXleoqfo8

    This video is beautiful and I hope it rings true in your heart as it does mine

  • Nathan

    Hey Sean, here’s Jesse’s take on it: thought it would be relevant toward your discussion. Hope it’s helpful!

    http://jessescrossroadscafe.blogspot.com/2011/06/cftc-to-curtail-off-exchange-highly.html

  • Spokoze

    Wasn’t Dodd-Frank passed in 2009?
    Seems like with those two bastages name’s on it everyone missed something significant in it or perhaps someone is over reacting. Bet I can walk in one of my local coin dealers July 18th and pick up an ASE just like always.

  • This has more to do with paper silver trades….I think this will cause more people to get out of paper and buy physical, so this is good news for physical holders. Watch for physical supplies to deminish even more. Remember less paper speculators in the game is a good thing for us silver longs.

  • Forex XAU and XAG Trader

    I have been actively trading with FOREX.COM for more than a year and a half. During most of this time I’ve traded gold and silver via instruments XAU and XAG. FOREX.COM has not contacted me regarding any metals trading. I have just sent FOREX.COM an email so they can clarify this.

    I’ll post what they tell me.

    In the meantime, if there are any other FOREX.COM traders who have received any emails regarding metals trading, please enlighten the rest of us. If there are any other non-FOREX.COM traders who have received a similar email regarding the trading of metals, namely XAU and XAG, please enlighten us as well.

    Thanks.

  • zepster

    Hmmm – I wonder how this will affect the big silver shorts…

  • ML

    SGT, what are you thoughts on this. Will they confiscate next? WHat are you hearing thruough the grapvine?

    • SGT

      I e-mailed our pal Bix Weir who e-mailed me back saying:

      “I have no idea but if OTC gold and silver is being outlawed it’s a good thing. They are just paper derivatives.

      After the crash the COMEX, LME and all paper metal exchanges will most likely be shut down in the trading of gold and silver.”

      We’ll stay on top of this guys! Thanks. ~ SGT

  • gionet

    CAN I BUY OPTIONS GLD .(SPDR Gold Trust)

  • gionet

    i own GLD options what does that mean!!

  • Raymond Reason

    Another step toward making price discover at the futures markets irrelevent.

  • silver eage

    this a nice way for jp morgan to get away from silver/gold delivery…also not to mention that means a big sell off so the price will dive down nicely which is great to stack up more and more…

    Regarding the confiscation; if gov’s plan for it it…it will happen any way and people will fight back to protect their wealth…

    the Real hope for america now is………………….RON PAUL…………….

  • Pat

    Is it possible that this email about illegality starting July 15th is a hoax? If it were real, Forex.com would have the red alert announcement on its web site. Is it not?

  • Forex XAU and XAG Trader

    FOREX.COM just now sent me an email, as I have an account with them, so the original email from FOREX.COM is not a hoax.

    Dear *****,

    Thank you for your email. The email your received was sent to our live clients to make them aware of the upcoming changes to the tradable products.

    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.

  • B.C.

    vote RON PAUL to stop crap like this

  • Ed counts

    Ron Paul our man down town will do away with excessive government

  • Ed counts

    Vote for ron

  • John

    Dodd and Frank the 2 pieces of excrement that allowed anyone who couldn’t afford or qualify to purchase a home in the USA to do so by forcing the banking system to let them buy a home through Sub-Prime, and any other mortgage program they could think up in order to bring down this country, and put us in this Depression, and all the other politicians who allowed or didn’t stop this atrocity to happen “THEY ARE ALL TO BLAME” these people hate this country, and they are bringing it down to its knees.
    We are a Capitalist Society, and a nation founded on Christian principles, they on the other hand are of the Communist Socialist beliefs, and are in the process of taking total control of our lives as long as we maintain the Normalcy Bias (meaning : The normalcy bias refers to an extreme mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster occurring and also its possible effects.)
    Now they are taking control of the Commodity Markets primarily the Gold and Silver market, and the others to follow ALERT: Trading of gold and silver to become ILLEGAL July 15, 2011
    Gold and Silver are real money, and they are now taking control of that also… not his fiat currency that isn’t even worth the ink that is printed on it based solely on a promise. I detest these people, and any true American should also!
    When are we all going to wake up, and put a stop to this, and revolt against this Non-American Minority regime? They are NOT the Majority, they use the Media to pick our president and fraudulently rig the polls by making it so we don’t even have to show Identification before voting… leaving obvious ways to fraud the system.
    We are swiftly becoming ruled instead of governed by our own politicians. The markets are being manipulated along with the media outlets that are all getting more power, and loads of our hard earned money.
    Write to your Congress, and your Senate, and let them know that you have had enough, or you will see what is in store! It has nothing to do with freedom! Your freedom is being taken away every day until it will be too late, and you can one day say welcome to the USSA.

    God Help the USA, once the finest nation on the planet!
    Let’s get it back!!

  • Government could use executive order to deter gold hoarders…

    By GAIL LIBERMANAmid concerns about our economy, should you worry that an order, such as Executive Order 6102, might happen again threatening your U.S. investment in gold?The order, issued April 5, 1933, by President Franklin D. Roosevelt, prohibited…..

  • neha kalanoria

    this is a false news , if this would have actually happen then thr would be uper circutis in gold and silver, all these r manipulated news , plz dont go on false news like this , Believe it wen it is out publically never go for rumors

  • BB en Venezuela

    Thanks for the auspicious writeup. It in fact was once a leisure account it. Glance complicated to far brought agreeable from you! By the way, how could we communicate?

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