At over 2300 pages in length, not many people have read (let alone understand) the ramification for the Wall Street financial reform act.  The over-the-counter gold and precious metals trading industry (metals leverage companies) are not even aware of this law.  Most importantly, penalties for non-compliance of this law include felony charges which may result in a ten year jail sentence and $10 million in fines plus restitution.

We are most concerned with section 742 of the Dodd-Franklin Act (  This part of the new law does not allow anyone, including companies, to enter into or even offer to enter into a transaction in any commodity with a person that is ineligible contract participant of commercial entity, on a leveraged or marginal basis.  One intent of the act is to expand the little known “Zelener fix,” introduced within 2008’s Farm Bill.  The Farm Bill authorized and encouraged the CFTC to pursue anti-fraud actions involving rolling spot transactions and/or other leveraged forex transaction without the need to prove that they are futures contracts.

The wording of section 742 on the Wall Street Reform Act that stands out the most is under its first section {(a).(2).(D).(II)}.


(i) APPLICABILITY.—Except as provided in clause (ii), this subparagraph shall apply to any

agreement, contract, or transaction in any commodity that is—…

(II) entered into, or offered (even if not entered into), on a leveraged or margined basis, or financed by the offeror, the counterparty, a person acting in concert with the offeror or counterparty on a similar basis.”

This section  clearly states that any leveraged or financed metals contract will no longer be legal, unless it is traded through the commodities market by a licensed commodities broker.

the bottom line;

Dodd-Frank’s section 742 now increases the authority of the NFA and the CFTC to include almost all retail cash commodity market products involving leverage or margin – in other words, precious metals leverage.

We highly recommend that you contact your attorneys about an exit strategy from the precious metals leverage arena.