Complaint 1 (2010)
On June 30, 2010, NFA issued a Complaint charging TFI and Russell Sands with using deceptive and misleading promotional material which failed to clearly label hypothetical performance as hypothetical and failed to include the required hypothetical disclaimer; using deceptive and misleading promotional material which exaggerated the profit potential and downplayed the risk of loss of trading commodities; using deceptive and misleading promotional material that attempted to minimize the significance of NFA’s earlier disciplinary Complaint; and using deceptive and misleading promotional material which failed to state that testimonials are not indicative of future performance and that all gains touted in the testimonials were not representative of all reasonably comparable accounts.
Decision 1 (2011)
On January 20, 2011, pursuant to a settlement offer submitted by TFI and Russell Sands, TFI and Sands were ordered to pay a $45,000 fine. In addition, TFI and Sands were ordered to pre-submit all promotional material to NFA prior to first use for three years. This includes all material used by Sands’ Entities. Further, TFI and Sands were ordered to pre-submit all promotional material used by any Third-Party Marketers to NFA for approval prior to its first use for three years. TFI, Sands and Sands’ Entities were also ordered to provide to NFA a list of Third-Party Marketers with whom they transact business and update this list during the Pre-Review Period. Finally, TFI, Sands and Sands’ Entities were ordered to only transact business with those Third-Party Marketers which use promotional material to promote Turtle Products, if such promotional material is approved by NFA during the Pre-Review Period.
Complaint 1 (1997)
On September 19, 1997, NFA’s Business Conduct Committee issued a Complaint to Turtle Futures, Inc., Russell J. Sands, LFG LLC and John E. Yackley. The Complaint alleges that Turtle Futures, Sands and LFG used deceptive, misleading and unbalanced promotional material which failed to clearly identify performance results as hypothetical and failed to include the required hypothetical disclaimer, in violation of NFA Compliance Rules 2-29(b)(1) through 2-29(b)(3), 2-29(c) and 2-29(f). The Complaint also alleges that Yackley used deceptive and misleading promotional material, in violation of NFA Compliance Rules 2-29(b)(1) and (2). In addition, the Complaint alleges that Turtle Futures, Sands and LFG failed to obtain acknowledgments from customers indicating receipt of a disclosure document, in violation of NFA Compliance Rule 2-8(e)(2). Furthermore, the Complaint alleges that Turtle Futures did business with a non-member of NFA, in violation of NFA Bylaw 1101. Finally, the Complaint alleges that LFG failed to supervise, in violation of NFA Compliance Rule 2-9.
Decision: Sands 2 (1999)
On January 7, 1999, a designated panel of NFA’s Hearing Committee issued a Decision to Turtle, Sands and Yackley after a hearing was held. The panel ordered Turtle and Sands to pay a fine of $20,000 for which they are jointly and severally liable. Furthermore, the panel ordered Sands, for a period of one year, to submit all promotional material prepared by him to NFA prior to its first use. Finally, the panel dismissed with prejudice the charges against Yackley. This decision becomes effective January 22, 1999.
Note: Russell Sands died July 2019.
What the NFA Record Documents
The regulatory record shows three separate enforcement actions spanning 1997, 1999, and 2011. The violation in each case is structurally identical: using promotional material that presented hypothetical performance as if it were actual trading results, or that failed to include the disclosures required to allow investors to assess that distinction. The NFA’s hypothetical disclaimer requirement exists specifically to prevent this practice. Hypothetical performance results, generated by backtesting a system on historical data, can be made to show any desired performance through parameter selection, look-ahead bias, and overfitting. The requirement to clearly identify results as hypothetical and include standard disclaimers about the limitations of hypothetical performance is the minimum disclosure standard for accurate investor communication.
The 2010-2011 complaint added additional violations: exaggerating profit potential, downplaying risk of loss, attempting to minimize prior disciplinary action, and presenting testimonials without required disclosures about their non-representativeness. This pattern, identified across three enforcement actions over fourteen years, documents a persistent practice of using the Turtle brand and Turtle narrative to market trading products while obscuring the actual track record.
The contrast with the NFA records of successful Turtle graduates is total. Jerry Parker, Liz Cheval, Paul Rabar, and other Turtle-trained managers have clean regulatory records. Their performance is documented in audited actual trading results, not in hypothetical backtests presented without disclaimer. The regulatory record is the clearest available quantitative measure of the difference between the Turtle graduates who succeeded and those who failed: the successful ones traded actual capital and produced actual results; the unsuccessful ones marketed hypothetical results without the disclosures that would have revealed them as hypothetical.
Russell Sands (deceased) fines administered by USA Government:
Read the full document here.
Frequently Asked Questions
What is the NFA’s hypothetical disclaimer requirement?
The National Futures Association requires that any promotional material presenting hypothetical performance results, meaning results generated by backtesting a system rather than trading it in real markets, must clearly identify the results as hypothetical and include standardized disclaimers explaining that hypothetical results have inherent limitations, do not represent actual trading, and may not reflect the impact of material economic and market factors. Failing to include these disclosures violates NFA Compliance Rule 2-29 and is the violation that appears in all three Sands enforcement actions.
Why does the same violation appear in three separate enforcement actions over fourteen years?
Because the promotional activity continued despite the prior findings and fines. The 2010 Complaint specifically charged that Sands had attempted to minimize the significance of NFA’s earlier disciplinary action in new promotional material. The pattern across three enforcement actions, each finding the same fundamental violation, documents persistent non-compliance rather than an isolated error. The 2011 settlement included a three-year pre-review requirement for all promotional material, a direct response to the demonstrated inability to self-correct.
How does this regulatory record relate to evaluating trading education products generally?
It confirms that the standard for evaluating any trading education product is the actual audited trading results of the seller and their students, not the hypothetical backtested results that promotional material typically presents. The NFA’s disclosure requirements exist because the gap between hypothetical and actual performance is consistently large and consistently in the direction of hypothetical outperforming actual. When a trading educator presents performance results, the first question is always whether those results are actual or hypothetical, and the second question is whether the required disclosures accompany the hypothetical results.
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