Hetherington: Morgan Financial Services

By This Is Money
Updated: 05:50 EST, 5 February 2009

 

The smart money is backing the euro to appreciate against the dollar. Well, that is what one Financial Mail reader told me, and he got it from Morgan Financial Services, a firm of currency dealing advisors based at 55 NE 5th Avenue in Delray Beach, Florida.

Morgan cold-called him, and the reader, wondering why he had been chosen to benefit from a sure fire tip that could reap a nice profit, called me.

And then I made a few calls myself. The first thing I found was that Morgan Financial Services does not exist. Not really, anyway. According to the Office of the Secretary of State for Florida, it is a 'fictitious name'.

A more polite term might be 'trading name', but the bottom line is that anyone dealing with this firm is really dealing with a company called the Winthorpe Morgan Group, which was set up last October by local businessman Julio Jalil.

And this is not Julio Jalil's first venture in financial services. Turn the clock back a couple of years and he was sole owner and chief executive of a commodity dealing firm called Stonebridge Financial Services.

It was also based at 55 NE 5th Avenue in Delray Beach, Florida, and it attracted the attention of investigators from the watchdog National Futures Association by hiring a number of salesmen who had previously worked for Futuretech Trading, a disreputable investment company owned by Julio Jalil's brother Jimi Jalil.

Jimi had been banned from the industry for six months over offences committed at Futuretech, so the investigators decided to drop in on Julio's firm, Stonebridge, on the off chance that his brother might be there.

And guess what. According to one investigator, when they walked into Stonebridge's offices, 'Jimi Jalil was dressed in a suit and tie, talking on the phone and sitting at a desk in the firm's largest semi-private office.'

Jimi assured the NFA officials that he had just dropped in to see his brother. And Julio agreed, telling them they had just chanced on one of Jimi's rare visits to Stonebridge.

It was a pity, then, that Stonebridge's own employees let the cat out of the bag. One said that the banned Jimi Julil had interviewed her when she applied for a job at Stonebridge. Others described how he led the daily team meeting on sales tactics.

A check of Stonebridge's trading records then told the investigators what they needed to know. Out of 68 clients, five showed small profits while 63 had notched up serious losses. One, Brian Baucham, a 45-year-old trucking company manager, invested $40,000 after Stonebridge sales staff told him to bet on price movements in gasoline, orange juice and the euro.

Thirteen weeks later he had lost $39,140, while Stonebridge had raked in $17,000 from him in fees and commission charges.

The firm was charged with a string of offences including making misleading sales pitches to customers, failing to supervise its sales staff, and involving the banned Jimi Julil in the running of the business.

Last February, the charges were upheld and Stonebridge was expelled from the industry for a minimum of two years. Also charged was Stonebridge's company president Andres Rodriguez.

He was kicked out of the futures industry for one year, and he is now a salesman at Morgan Financial Services, quite possibly not even facing the inconvenience of changing his desk, let alone his work address.

How is it possible for Rodriguez to work and Morgan? And how is it possible for Morgan to call people out of the blue and offer a high risk speculative investment?

The answer lies in a loophole in USA law that allows anyone in America to drum up business for what's called the 'retail off exchange forex market' without any form of registration, authorisation or regulation.

That loophole is about to be closed though. Last May, Congress passed legislation that will require firms and persons in this line of work to register with the government's Commodity Futures Trading Commission and to become members of the NFA.

The rules that will govern Morgan Financial Services are being drawn up right now. Until they come into force though, anyone on the receiving end of a call from Delray Beach would do well to remember that if problems arise, it will be a case of 'Who are you going to call? Er...nobody!'

The Financial Ombudsman will be powerless, and the Financial Services Compensation Scheme will not bail you out. Rather than betting on Morgan's sure fire tips, your best bet will be to hang up.

UPDATE

Four weeks ago I wrote about the collapse of connected companies Yourhealth Plus Limited and Your Health Plus Insurance Services Limited, with debts of £5 million.

I reported that director Wendy Clark had just been banned for the nest 12 years from serving as a company director, and I predicted that the buck would not stop with her alone.

Since then the Insolvency Service has announced a further ban. Janet Wilson, 54, of Wokingham in Berkshire has been barred from boardrooms until December 2020 for her involvement in misappropriation of company funds.