0711 markets
Traders work on the floor of the New York Stock Exchange on July 6, 2012 in New York City. - 

Jeremy Hobson: Well for more on the Peregrine story, let's bring in Josh Brown of Fusion Analytics. He joins us live. Good morning.

Josh Brown: Good morning.

Hobson: Well Josh, what's your takeaway from this strange story out of Cedar Falls?

Brown: It's unbelievable. I mean this is nine months after MF Global had $1.6 billion missing. So this is $220 million that was supposed to be in a bank account according to falsified records from the founder of this firm. It turns out there is only $5 million in that account. People I know in the futures industry are just beside themselves right now. 

Hobson: Well is this a failure of regulation? Or what do you think?

Brown: Undoubtedly. This is a situation where, I mean it's really gotten to the point where the regulators are captured, they don't have the budget, it's not 100 percent their fault. They are relying on congress for funding, and it's just an area that has been kind of light touch, especially when compared to the work that the SEC does. I think that they have to get a lot tougher.

Hobson: Is there something to the fact that this and MF Global and even Bernie Madoff happened when the markets aren't doing that well? Is it a coincidence or what?

Brown: You know, I think fraud is something that happens in perpetuity, but it only gets noticed when the tide goes out, as Warren Buffett said, and you see who's swimming naked. People are not making money, bonds have no yields, stocks aren't going up, futures and commodities have crashed. People are just unhappy and they are looking around and they are asking the questions that they don't ask during times of prosperity. So it feels like there's more, but the truth is we're just noticing it now.

Hobson: Josh Brown of Fusion Analytics, thanks so much.

Brown: Thank you.