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

Tyler Durden's picture

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

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Goatboy's picture

Great way to stifle metals. No legislation is needed, just rumors.

ackerrj's picture

I have searched dodd-frank here:

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

And there is no reference to "gold", "precious", or "over the counter"

that I can locate in the legislation.  Therefore without some further explanation

I consider this post bogus & misinformation.  

 

Anyone got anything to show otherwise?

 

ackerrj's picture

So it appears that you and your wife together have to have a net worth

of 1 million USD (not counting personal res) to trade precious metals on an exchange, or 

you take actual delivery within 28 days.  This is not exactly a 

free market, but it is not a prohibition either.

 

What am I missing?

trav7777's picture

A predeliction toward hysteria maybe?

It also clearly says on margin.

It does not in any way pertain to coin dealers

Quixotic_Not's picture

Sheeple seem prone to hysterics, they also seem to crave tyranny as well.

A calm person can see, that at the moment, physical possession is still legal - If they read & can comprehend the relevant portion of the Act.

Of course, that could change overnight if 'MeriKans vote to expand the (D) & (R) Free Shit Empire™ in 2012, as it would only take an executive order to shift the paradigm...

All I can say is prepare accordingly.

soccerballtux's picture

"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."

So in other words if you are just having them hold gold that you bought, there is an enforceable obligation to deliver between the seller and the buyer (you).

I fail to see what the big deal is? This act just means you can't play with gold on futures. But you can still buy it online and have it held online. No?

beanieville's picture

They should make gold trading illegal.  Why be cancerous and hurt your fellow man?  It takes being an arse to go all-in gold and silver:

http://bit.ly/iHPEJD 

 

 

Harlequin001's picture

"Why be cancerous and hurt your fellow man?"

Because I really can't afford to wait until I retire to discover that my life savings are worthless and I can't afford to feed myself...

Ahmeexnal's picture

If this is true, then millions of illegal alien gardeners/cooks/busboys/nannies/maids/construction workers/produce pickers/etc are now elligible to become PM financial custodians. Hope you have treated them well.

MarketTruth's picture

"Never forget that everything Hitler did in Germany was legal." -- Martin Luther King, Jr.

"But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty.
--- Howard Buffett (Warren Buffett's father and former U.S. Congressman)
READ MORE at: www.fame.org/PDF/buffet3.pdf

equity_momo's picture

Damn shame his son is a total douchebag , the little guy could use a multi-billionaire on their side...

Quixotic_Not's picture

They should make reproduction of mouth breathing, inbred mongrels illegal too.  Why be a parasite and suck the blood of your fellow productive man?  It takes being a psychopathic narcissist to go full retard.

Good luck with your position as a political commissar during the great purge of 'MeriKans...

mr_T's picture

Just bought a lot more gold and silver coins from APMEX.. They ship to my home in Spain... Coins are the best...buffalos.. left the country USA with a bunch of them.. they are valued at their face amount $50.. so u can take a lot before u reach 10k usd limit..t

equity_momo's picture

T , APMEX will ship intl?  And are you sure customs value gold at face , not current market value?

mr_T's picture

Yes.. I am sure about the face value.. I asked for a private screening when they scanned bags.. If I knew it would be so easy I would have changed more to pm.. I don't want usd nor euros not going down with da ship... Yes.. APMEX ships int ..

Clampit's picture

I'm 100% certain customs value gold at face - just the other day I tried to pay duties on a shipment with Buffalo's ...

Guy Fawkes's picture

So there was no issue leaving the USA with gold? Its based on the face value and not spot?

And the receiving country has no issue of import?

mr_T's picture

No problems with coins with face values minted in the states.. buffalos and liberties.. no problem if its investment grade... Bullion... Depends on the country u go to... no prob in euroland.. check customs laws for each country

barkster's picture

mr-t,

 

Did you carry them on the plane with you?

 

Were they in your luggage?

 

Did they want to look at theM?

 

Isn't a u.s. customs form required to be filled out? If so, who did you give the customs form to?

 

I have been trying to find this out and having a devil of a time getting the info!

thanks in advance for any info.

Hremas's picture


It sure seems that laws like this will cause people to forego the whole process of converting PMs to fiat and allow PMs to just resume their historical roles are currency. Likely, it'll be street trading and UTC (Under-The-Counter) taking the lead in such a move, but it will become more mainstream over time...until the thugs crack down on it hard.

Interesting times dead ahead!

Libertarians for Prosperity's picture

<snort> <snort>

This done fired me up! Damn guuubbermint trying to take my guns and gold. <snort> Ain't no guuubermint MF'er gonna take my shit. I'll pump 'em with lead quicker than the speed of dark. Fuck'N A, I will.  You best watch...

<libertarian retard voice>

CSA's picture

Either you're drunk or 12 yoa.  Your wit is horrendous.

Prometheus418's picture

Personally, I'm Reaaaaaaaaaaaaaaaaaal drunk.  It's Saturday night though, and the god-awful economy has left no other viable options.  I will, however, attempt to refrain from seeming as though I am twelve years old- that would be unseemly.

*stumble*

 

omi's picture

<Vomits on someone else's shoes> is a trully admirable action.

Hremas's picture


A lot of trading fx desks will be obliging delivery with cash settlements, because the paper trading houses hold no bullion whatsoever. The COMEX or an ETF may be able to oblige with physical.

So you might actually see a stampede out of these speculative positions and into either physical, over-priced ETFs trading at a premium to NAV, or mining assets, which have traded on an under-valued basis against gold for years.

HungrySeagull's picture

Bitterly clinging to Bible, Religion and Guns.

 

That will go down in infamy along with "We have a dream" "Ask what you can do for your country" etc

robobbob's picture

are you serious?

the modern control matrix of prohibiting something is to leave it technically legal, thereby diffusing anti-tyranny opposition, but bury the actual activity in so many regulations, fees, and licenses, as to make it virtually impossible for a person of average means, knowledge, motivation, and connections, to conduct it with any level of enjoyment, profit margin, or benefits.

Founders Keeper's picture

[the modern control matrix of prohibiting something is to leave it technically legal, thereby diffusing anti-tyranny opposition...]---robobbob

Thanks, robobbob. Yours is an astute observation.

I can think of another application of your observation that may help others to see your point:

Keep gun ownership legal, but regulate the manufacture, purchase, and transport of guns and ammunition so cost prohibitive as to make "gun ownership" effectively impossible.

 

SoNH80's picture

And, theoretically, we can still apply to the U.S. Treasury for a Marihuana Tax Stamp for our back 40 crop, but don't actually try it.  If there is a fog of prohibition over something, it's prohibited, as far as Federal agents are concerned. 

tgatliff's picture

Just for clarification.  That is technically not true...

The MTSA of 1937 was repealed by the CDAACA* of 1970.  Also, the intent (at the time) was to try to hold down drug related crimes which was perceived as hurting "productive" business commerce.  Today, these types of laws are much more about justifying law enforcement budgets than anything else.  

*Comprehensive Drug Abuse Prevention and Controls Act of 1970

Rynak's picture

Heh, in fact, this IS how it has been done in germany. Even though "in theory" you can own a gun here, there are almost no people legally owning guns in germany - reason is that the requirements and bullying is so high, that almost no one bothers. To pick just one example out of many: Here, if you own a gun, the police may at any time for no reason demand to search your home, to check if you comply with the regulations - and you need to pay them for the search. Yes. They can thus basically make you pay as often as they want, for no reason, legally.

Manzilla's picture

Wow Rynak, that is some horse shit! That is truly scary that they can do that over a silly firearm. That sure sounds like a good way to keep people from owning them.

nmewn's picture

Sounds like you need to just "borrow" one...indefinitely ;-)

Ahmeexnal's picture

What's wrong with building your own?

nmewn's picture

Not being a German citizen, I think ownership is the key here, not possession, from what I gather from his comment.

If it is ownership, they don't know where to look unless its declared. If its possession, it was taken away from the criminal who broke down my door and is laying dead in the hall right there, officer ;-)

A human right as basic as self defense doesn't need any declaration or licensing or explanation in my book.

equity_momo's picture

Europe doesnt care about your book though nmewn.  In Europe , if you so much as verbally abuse a home invader , expect the european court of human rights to bang you up.  The only difference i can tell between the US and Europe right now is this : gun ownership.   And the USSA Police State are working on that : check the militarization of the Police force and raping of the constitution for evidence.

barkster's picture

while visiting relatives in Mississippi I read in the local paper about two robberies where the business owners killed the criminals and were not sentenced. One criminal tried to rob a gold and silver store. The other stole a case of beer at a convenience store and the owner followed him out and shot him in his car as he sped away. The former was not charged. The latter was sent to trial but found not guilty under Mississippi's Castle Doctrine.

A Castle Doctrine (also known as a Castle Law or a Defense of Habitation Law) is an American legal doctrine arising from English Common Law[1] that designates one's place of residence (or, in some states, any place legally occupied, such as one's car or place of work) as a place in which one enjoys protection from illegal trespassing and violent attack. It then goes on to give a person the legal right to use deadly force to defend that place (his "castle"), and any other innocent persons legally inside it, from violent attack or an intrusion which may lead to violent attack. In a legal context, therefore, use of deadly force which actually results in death may be defended as justifiable homicide under the Castle Doctrine.

Founders Keeper's picture

[Even though "in theory" you can own a gun here...]---Rynak

Hi Rynak.

Thanks for your post. Gives us in the U.S. a glimpse of what we can expect.

 

John Rotten's picture

That is why you move to Switzerland.  A former employer of mine did just that (although I don't think that was the motivating reason).

equity_momo's picture

Unless you are seriously loaded , forget about moving to CHF.  Read up on how difficult it is for a foreigner to simply own real estate in Switzerland and then let me know how wealthy your former employer was. I have to give them credit , the Swiss want no truck in our problems - unless you have alot to offer them , you aint getting a pass. Thats the way any sovereign state should be to be honest. Europe , the UK and now the US have not only been weakened by Wall St predators , unchecked immigration and a soft touch welfare state for those deemed "needy" are every bit as culpable.

Ahmeexnal's picture

Yes and no.

The other way is to apply for assylum. Wear a burkha to the interview. Always works.

Prometheus418's picture

Rynak, you need some gun shows.

Even though we've been soft-sold into psuedo-slavery here in the US, I can tell you with absolute certainty that we can still buy whatever lead-delivery system we like with no paper whatsoever.

Here's an example, and I'm not afraid of saying it online, because it's a fractional revelation.  I bought a 30-30 with a Bushnell firefly scope a few years ago with the "Bush rebate check" from a private party- no paperwork at all, cash transaction.  This year, I traded the scope plus two silver peace dollars for a new Remington 870 12-ga pump from a gun show.  Those are the two I have on hand- but there are more, and more, and more, and more.

Molan Labe- I've got all kinds of other tricks buried and ready for Project Mayhem fun.  Sure, I'll give you my cowboy gunz, officer.

Cash and carry, bitchez.

Buck Johnson's picture

You are correct, what they are doing is obfuscating the laws and make it hard to have a good fight against it because as you said it's still technically legal but you have to jump through so many hoops that they have made it almost impossible.  This why they can take the gold and say you violated this and other laws and by the time you get to court and at some finish, it would be a moot point.  Did Frank give a reason or Dodd why it's so important for this one provision?  They are getting the pieces together for the move when this whole game comes down, and they need to quickly take and move things around.