If you’ve been thinking about opening a day trading account at SureTrader, you need to think again because SureTrader is closing down.
As of late 2019, the broker-dealer has closed its doors for good. The company had a history of strained relations with securities regulators at home and abroad.
SureTrader quietly shut down its business in November 2019, informing clients they could either transfer securities to F1Trade or liquidate their positions and withdraw funds.
Many clients found this notice only upon logging into their accounts. They were able to place closing transactions only.
The reason SureTrader gave for its demise was a change in the terms with its clearing broker. SureTrader stated its clearing firm’s abrupt move was without “notice and reason.”
Guy Gentile and Swiss America Securities, Ltd.
SureTrader was owned by Swiss America Securities, Ltd., which was controlled by Guy Gentile. Swiss America Securities has since been renamed Mint Global Markets, Inc. Mint Global also operates SpeedTrader, a U.S.-based firm.
Trouble with the Law
Gentile and both his companies have had a checkered past with multiple governments. The State of New Jersey indicted Gentile in 2016 on securities fraud charges. And the U.S. Securities and Exchange Commission has operated an on-going investigation in Gentile’s business ventures for many years.
In a filing in the New Jersey case, Gentile wrote, “I have been under investigation by the SEC for nine years now.” SureTrader’s CEO also complained that the SEC’s investigation into his Bahamian enterprise could spell the end:
“My business in The Bahamas, where I employ 670 individuals, is highly-regulated…. The SEC’s nine-year long investigation of me and my business has caused stigmatisation by inference. Its actions have real consequences. If they continue this never-ending investigation they will eventually succeed in making it impossible for me to continue.”
One of the complaints the U.S. government had against SureTrader was its alleged practice of soliciting American clients. Such a practice from an off-shore broker violates U.S. securities regulations. Both SureTrader and Gentile always denied such allegations.
A Meteoric Rise
SureTrader was set up in the Bahamas in 2012. One of the primary reasons for choosing this location was to avoid America’s pattern day-trading rule. In less than a year, SureTrader was averaging more than 30,000 transactions per day, making it the largest broker-dealer in the Bahamas.
By 2013, SureTrader customers were placing roughly 100,000 trades per market day, dwarfing all other brokerage firms on the island. SureTrader was able to bring in over $25 million in revenue in its second year.
But it wasn’t to last.
Enter the Securities Commission of the Bahamas
The first real sign of trouble came in 2018. The securities watchdog in the island nation fined SureTrader $120,000 for several infractions, including:
- Not following know-your-customer rules
- Failing to properly maintain account records
- Not obtaining written permission for some financial transactions
- Failing to provide details on insurance coverage
- Not monitoring the risk of client accounts…and more
Then in September 2019, the Securities Commission forcibly closed SureTrader for five days, preventing any trading activity by any clients. The broker was also prevented from handling client assets during the suspension.
Although no explanation was given for the closure, SureTrader said it wasn’t about the company’s liquidity or solvency. After meeting with the SCB, SureTrader’s license was reinstated.
But just two months later, SureTrader called it quits.
Why Traders Chose SureTrader
Besides not having a PDT rule, SureTrader was able to offer its customers several other benefits. It accepted deposits by debit or credit card. It offered not only stocks on the major U.S. exchanges, but also options, penny stocks, and over-the-counter equities.
Despite its strengths, SureTrader had many weaknesses as well. The broker charged $40 to make a withdrawal by ACH. This undoubtedly irritated many of its American clients.
Some of those clients have moved their accounts to F1 Trade. The first big difference between SureTrader and F1Trade is that the latter isn’t a Bahamian company.
It’s registered in St. Vincent and the Grenadines, another Caribbean country, but not the Bahamas. Different rules, different laws, different government.
F1Trade is regulated by the Financial Services Authority. Its company number is 25629 BC 2019. St. Vincent does not require a broker to hold any financial services license or authorization, which must raise some serious eyebrows.
Despite this and many other concerns, the official language of St. Vincent is English, which is definitely an advantage.
Other highlights at F1Trade include 6:1 day-trading leverage, no routing fees, and multiple trading platforms. The broker charges just half a penny per share for trades with a $1 minimum commission.
For software, F1 uses DAS Trader Pro, the same platform we saw at SureTrader. F1 charges $49 per month to use the program, and this fee is assessed against professional and non-professional accounts alike.
If the $49 price tag is too steep for you, the broker-dealer offers a browser-based platform for free. Called ActiveWeb, this one is also from DAS. It has a lot of the same features as its desktop cousin minus Level II quotes.
One Caveat about F1Trade
F1Trade is a CFD broker. This means the assets that are traded are actually contracts for difference. They are securities with stocks and options as the underlying instruments. This is why there are no routing fees. Orders aren’t sent to the exchanges. Trades occur between F1 and its customers.
Because CFDs are traded on margin, there is an elevated degree of risk with them. In order for a trade to go smoothly, the counterparty (in this case, F1Trade) must be able to pay the difference between the starting and ending prices.
This counterparty risk is significant. No wonder CFDs are actually banned under most situations by U.S. regulators.
With all the red flags surrounding F1Trade, former SureTrader customers should think twice before jumping head first into this Caribbean beach.