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BEFORETHENATIONALFUTURESASSOCIATION
IntheMatterof:
))
))NFACaseNo.11-MRA-008SCAPITALMANAGEMENTLLC(NFA
10
#422796)
NOTICEOFMEMBERRESPONSIBILITYACTIONUNDERNFACOMPLIANCERULE
3-15
NationalFuturesAssociation("NFA")herebygivesnoticetoTSCapitalManagementLLC("TSManagement"),aregisteredcommoditypooloperator("CPO")MemberofNFA,that,pursuanttoNFAComplianceRule3-15,thePresidentofNFA,withtheconcurrenceofNFA'sExecutiveCommittee,hastakenaMemberResponsibilityAction("MRA")againstTSManagement,whereby:1.TSManagementisprohibitedfromsolicitingoracceptinganyfundsfromcustomersorinvestors,solicitinginvestmentsforanycommoditypoolsorotherinvestmentvehicles,orplacinganytradesonbehalfofcustomers,commoditypools,orinvestorsexceptliquidationorrisk-reducingtrades;2.TSManagementisprohibitedfromdisbursingortransferringanyfundsofcustomers,investors,commoditypoolparticipants,orcommoditypoolsoverwhichitexercisescontrol,withoutpriorapprovalfromNFA;3.TSManagementisprohibitedfromdisbursingortransferringanyfundsfromanybankaccounts,orbrokerage·accounts(bothsecuritiesandcommodities),initsnameorinthenameofanyotherindividualorentityoverwhichitexercisescontrol,withoutpriorapprovalfromNFA;and4.TSManagementisrequiredtoprovidecopiesofthisMRAviaovernightcouriertoallcustomersandparticipantsinanypoolsthatthefirmoperatesorcontrols,includingthefirm'sproprietaryfund,allinvestorsinanyotherfundsorinvestmentvehiclesoverwhichTSManagementoranyofitsprincipalsexercisescontrol,andallfinancialinstitutionsinwhichTSManagementmaintainsanyaccountseitherinitsnameorunderitscontrol.ThisactioniseffectiveimmediatelyanddeemednecessarytoprotectinvestorsincommoditypoolsandotherinvestmentvehiclescontrolledbyTSManagementand/oritsunlistedprincipal,JohnStroud,a/k/aJohnDavidStroudorDavidStroud("Stroud"),becauseoftheirfailuretocooperatewithNFAinits
 
investigationofTSManagementbyfailingtoproducebooksandrecordsandotherinformationthatNFAhasrequestedfromthem.Additionally,TSManagementandStroudhaveprovidedNFAwithfalseandmisleadinginformationduringthecourseofNFA'sexaminationandsubsequentinvestigationofthefirm.Asaconsequence,NFAhasbeenunabletodeterminewhetherTSManagementandStroudhaveactedproperlyintheirdealingswithinvestorsorwhethertheyhavemisappropriatedinvestors'fundsandprovidedfalseinformationtoNFAandtoinvestorsconcerningtheirinvestments.Insupportoftheseactions,NFAhasattachedtheaffidavitofViliaSutkus-Kiela,whoisamanagerinNFA'sComplianceDepartment,andbasedthereonallegesasfollows:1.TSManagementislocatedinAuburn,Alabama,andbecamearegisteredCPOandNFAMemberonAugust12,2010.ThefirmiscurrentlypendingwithdrawalfromNFAmembershipandCommodityFuturesTradingCommission(flCFTC
fI)
registrationandpresentlyhasnolistedprincipalsorregisteredassociatedpersons(flAPsfl).Stroudisthefirm'schiefexecutiveofficerandco-ownsthefirmwithanotherindividual.However,StroudisnotanNFAAssociate,oranAPorlistedprincipalofTSManagement.2.StroudwasformerlyaFINRA-registeredsecuritiesrepresentative.InApril2011,FINRAsuspendedStroudwhichdisqualifiesStroudfromCFTCregistrationandNFAmembership.Stroud'ssuspensionfromFINRAwasapparentlybasedonhisfailuretopaytwoFINRAarbitrationawardsthathadbeenenteredagainsthim-oneforover$620,000andtheotherforover$220,000.3.Earlierthisyear,NFAcommencedanauditofTSManagementand,inSeptember,NFAissuedanauditreporttothefirm.Atthetimeoftheaudit,TSManagementrepresentedthatitwassolelytradingproprietaryfundsandwasnototherwisedoingbusiness.NFA'sauditreport,inpart,citedTSManagementfornotlistingStroudasaprincipalofthefirm.4.TheauditreportalsorequestedthatTSManagementprovideanexplanationforcertaincashtransactions,includinga$50,000deposittoTSManagement'sbankaccount,wherethebankstatementincludedthenotation,"WireTransferJohnCorCynt."AsStroudhadrepresentedtoNFA'sauditorsthatTSManagementwasnotconductinganybusiness,NFAaskedStroudtoexplainthisdeposit.AccordingtoStroud,thebankhadmadeanerrorindescribingthewiretransferandthatthefundsactuallycamenotfrom"JohnCorCynt"butfromtheco-ownerofTSManagement.StroudalsoprovidedNFAwithacopyofaJuly2011e-mailinwhichtheco-ownerpurportedlyconfirmedhehadmadethe$50,000wiretransfer.
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5.NFAsubsequentlylearnedthatStroudhadliedtoNFAaboutthe$50,000deposit.Specifically,onOctober24,2011,theattorneysrepresentingTSManagementandStroudinformedNFAthatStroudwas"incorrect"inhispriorrepresentationtoNFAaboutthesourceofthe$50,000depositandthatthefundsactuallycamefromanotherindividual,nottheco-ownerofTSManagementasStroudhadpreviouslyrepresented.6.Asexplainedinmoredetailbelow,TSManagement'saffiliationwithseveralunregisteredentitiesthatoperateexemptpools,aswellasinformationrecentlyprovidedtoNFAbyinvestorsintheseexemptpools,promptedNFAtorequestadditionalinformationandrecordsaboutTSManagementandtheseaffiliatedentities.Todate,NFAhasbeenabletoconfirmthatTSManagementanditsaffiliatedentitieshaveintheaggregatelessthan$3,500baseduponbankandbrokerageaccountrecordsproducedbyStroudtoNFA.Stroud'sfailuretoidentifythelocationofadditionalassetsisextremelytroublingsinceasrecentlyaslastweekStroudindicatedoneexemptpoolaloneheldlessthan$2million.7.Basedonthisrecentinformation,NFAsoughtadditionalinformationandrecordsfromitsMemberfirm,TSManagement,andStroud.Amongotherinformation,NFArequestedsupportforthefollowingdepositstoTSManagement'sbankaccount,aswellasinformationastothesourceofthefundsforthesedeposits:DateAmountofDeposit
10/7/2010
$10,000.00
10/28/2010
$4,000.00
11/23/2010
$50,000.00
12/22/2010
$3,000.00
4/1/2011
$141.70
4/7/2011
$200.00
5/3/2011
$200.00
5/5/2011
$20,849.01
5/24/2011
$200.00
6/3/2011
$200.00
7/22/2011
$200.00
8/4/2011
$10,000.00
9/13/2011
$400.008.Todate,TSManagementandStroudhavefailedtoprovidesupportforthevastmajorityoftheaforementioneddepositstoTSManagement'sbankaccount,andmaterialinformationastothesourceofthefundsforthesedeposits.NFA'sinvestigationalsorevealedthatTSManagementandStroudhadbeenprovidingfalseandmisleadinginformationtoNFAforseveralmonthsnotonlyinconnectionwithcertaintransactionsinvolvingTSManagement,butalsowithregardtotheactivitiesofits
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