BEFORE THENATIONAL FUTURES ASSOCIATION

In the Matter of:

INNOVATIVE CAPITALMANAGEMENT LLC(NFA lD #332418)

ano

YEHUDA BELSKY(NFA lD #321217)

NFA Docket No. 08-MRA-001

NOTICE OF MEMBER RESPONSIBILITY ACTION AND ASSOCIATERESPONSIBILITY ACTION UNDER NFA COMPLIANCE RULE 3-15

National Futures Association ('NFA) hereby gives notice to InnovativeCapital Management LLC ("lnnovative"), a commodity pool operator ("CPO"),commodity trading advisor (''CTA"), NFA Member; and Yehuda Belsky ("Belsky"), thesole owner and principal of Innovative, an associated person and an NFA AssociateMember, that, pursuant to NFA Compliance Rule 3-15, the President of NFA, with theconcurrence of NFA's Executive Committee, has taken a Member Responsibility Action('MRA) and an Associate Responsibility Action ("ARA") against Innovative and Belsky,respectively, whereby:

1. Effective immediately and until further notice, Innovative and Belskyare suspended from NFA Membership and NFA AssociateMembership, respectively;

2. Innovative and Belsky are prohibited from acting in any mannerwhich requires registration under the Commodity Exchange Act,

3. Innovative and Belsky are prohibited from soliciting or accepting anycustomer or pool participants'funds or placing trades on behalf ofany customers or commodity pools it operates except to liquidateexisting positions;

4. Innovative and Belsky are prohibited from distributing, disbursing ortransferring any funds of customers or commodity pools, including toexisting customers, from any accounts (bank, trading, or any othertypes of accounts) without the prior approval of NFA; and

5. Innovative and Belsky are required to provide copies of this MRA viaovernight courier to all customers having accounts that Innovative orEelsky control and to all pool participants in any pools that Innovativeor Belsky operate, including, but not limited to the lnnovative CapitalFund LLC ("lCF"), or over which either Innovative or Belsky exercises

control and to all banks and other financial institutions with whichmoney is on deposit in the name of Innovative, Belsky or ICF or inthe name of a customer that Innovative or Belsky controls.

This action is effective immediately and is deemed necessary to protectcustomers because Innovative and Belsky have provided NFA with false and misleadinginformation regarding accounts controlled by Innovative.

In support of these actions, NFA attaches the affidavit of Joseph Picone("Picone"), a Manager in NFA's Compliance Department, and based thereon alleges asfollows:

'1. Innovative is a CPO and CTA located in Brooklyn, New York.Innovative has been registered as a CPO and CTA and an NFAMember since July 2005. Belsky is the firm's sole owner andprincipal, and is an associated person and an NFA Associate. Basedon filings NFA received from Innovative, ICF appears to be the onlypool operated by Innovative and commenced trading in February2006.

2. On January 22, 2008, as part of an examination, NFA requested fromBelsky copies of the most recent monthly statements for the ICFaccount at MF Global Inc. ("MF"), the futures commission merchant(.'FCM") that holds the account. Belsky provided NFA with what herepresented were statements for October and November 2007.Belsky represented that he did not have the December statement,but would later provide it to NFA. On January 24, 2008, NFAreceived a facsimile with what purported to be the December 2007MF statement, which appeared to be identical in form to the otherstatements provided by Belsky. (The statements received fromInnovative are attached as Exhibit A).

3. NFA subsequently requested and received, directly from MF, theOctober, November, and December 2007 statements for ICF'saccount. (The statements provided by MF are attached as Exhibit B).

4. When NFA compared the account statements received from MF tothose received from Belsky on behalf of Innovative, it found that therewere material differences between the information in the statements.

5. Among other things, the statements provided by Innovative ascompared to those provided by MF indicate the following:

Innovative Statement MF StatementOctober:

Ending Balance 762,311.86Options Market Value 37,800Account Value at Market 800,1 11.86

November:

Ending Balance 798,843.86Options Market Value 1,250-Account Value at Market 797,593.86

December:

Ending Balance 826,069.86Options Market ValueAccount Value at Market 826,069.86

318,938.88637,650956,588.88

269,990.8812,500-

257,490.88

134,370.88243,750378,120.88

6. NFA also noted that there were discreoancies between thestatements regarding the quantity and value of trades, as well as thevalue of cash transactions.

7. NFA provided MF with copies of the statements provided by Belskyand MF reoresented that these statements were fictitious.

8. Accordingly, it appears that Innovative and Belsky have providedNFA with materially false and misleading information by providingfictitious statements.

The MRA will remain in effect until such time as Innovative and Belskyhave demonstrated to the satisfaction of NFAthatthey are in complete compliance withall NFA Reouirements.

Innovative and Belsky are entitled to a prompt hearing on this matterbefore NFA's Hearing Committee if they so request. The request for a hearing shall bemade in writing to:

National Futures Association300 S. RiversidePlazaSuite 1800Chicago, lL 60606Attn: Legal Docketing Department

Aggrieved parties may petition the CFTC for a stay of this MRA pending ahearing pursuant to and in conformity with the terms set forth in CFTC Regulation171.41.

NATIONAL FUTURES ASSOCIATION

Date: Februarv 25, 2008

M:$rAMP\MRA_Notice_lnnovative.docr

AFFIDAVIT

THE AFFIANT. JOSEPH PICONE. BEING DULY SWORN AND UNDEROATH STATES THAT:

My name is Joseph Picone and I am employed by National FuturesAssociation ('NFA") as a Manager in the Compliance Department. Inmy capacity of Manager, I led a team that has been investigatinglnnovative Capital Management LLC ("lnnovative") a registeredcommodity pool operator ('CPO') and commodity trading advisor('CTA") located in Brooklyn, New York. Innovative has beenregistered as a CPO and CTA and an NFA Member since July 2005.Yehuda Belsky ("Belsky") is the sole owner and principal ofInnovative and is also an associated person and an NFA AssociateMember. According to filings NFA received from Innovative, thelnnovative Capital Fund LLC ('lCF") is the only pool operated by thefirm and commenced trading in February 2006.

On January 22, 2008, as part of an examination, NFA requested fromBelsky copies of the most recent monthly statements for the ICFaccount at MF Global Inc. ("MF"), the futures commission merchant('FCM) that held the account. Belsky provided NFA with what hereoresented were statements for October and November 2007.Belsky represented that he did not have the December statement,but would later provide it to NFA. On January 24, 2008, NFAreceived a facsimile with what purported to be the December 2007MF statement, which appeared to be identical in form to the otherstatements provided by Belsky. (The statements received fromInnovative are attached as Exhibit A).

NFA subsequently requested and received, directly from MF, theOctober. November. and December 2007 statements for ICF'saccount. (The statements provided by MF are attached as Exhibit B).

When NFA compared the account statements received from MF tothose received from Belsky on behalf of Innovative, it found that therewere material differences between the information in the statements.

Among other things, the statements provided by Innovative ascompared to those provided by MF indicate the following:

1.

2.

4.

Fab-Z5-2008 0l :36pm Fron-liATl0l{A[ FUTURES ASSOClATlOli 2l?96139r 3

lnnovativeStatement MFStiatement

T-496 P.802/002 F1g0

October:

Ending Bafance 762,:t11.86Options Market Value 37,1J00

AccountValue at Market 800,111.86

November:

Ending Balance 798,1i43.86Options Market Value 1,:150-Account Value at Market 797,1i93.86

December:

31E,938.68637,650956,588.89

269,990.8812,500-

257,490.88

134,370.88245,750378,120.88

Ending BalanceOptions Market Value

826,r)69.86

Account Value at Market 826,,)69.86

NFA also noted that there were d screpanci$ between thestatements regarding the quantity and value of trades, as well as thevalue of cash transactions.

NFA provided MF with copies of tne statements provided by Belskyand MF reoresented that lhese statements were fictitious.

Accordingly, it appears that lnnovative and Belsky have providedNFA with materially false and misleading information by providingfictitious $tatements.

Further Affiant sayeth not.

Subscribed and sworn to before meOn this 25'n day of February 2008.

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AFFIDAVIT OF SERVICE

l, Myra Lewis, on oath state that on February 25,2008, I served copies of the

attached Notice of Member Responsibility Action and Associate Responsibility Action by sending

such copies by facsimile and overnight mail in envelopes addressed as follows:

David Stawick, SecretariatCommodity Futures Trading CommissionThree Lafavette Centre1 155 21"t Sireet, N.W.Washington, D.C.20581Facsimile No.: 2021418-5521

Barbara GoldActing Deputy Director Compliance & RegistrationDivision of Clearing and Intermediary OversightCommodity Futures Trading CommissionThree Lafayette Centre1155 21st Street, N.W.Washington, D.C. 20581Facsimile: 2021418-5536

and by sending a copy by e-mail, facsimile and regular and overnight mail in envelopes

addressed as follows:

Yehuda BelskyInnovative Capital Management LLC4205 Avenue MBrooklvn, NY 11234Facsimile No. : 71 8/253-9470E-mail: Ybelsky@innovativecta.com

and also by sending a copy by regular and overnight mail in envelopes addressed as follows:

Yehuda Belsky1386 East 31't StreetBrooklyn, NY 1't210

and also by messenger service and facsimile to:

Jeffrey D. BarclaySchuyler, Roche & ZwirnerOne Prudential Plaza, Suite 3800130 East Randolph StreetChicago, lL 60601Facsimile No: 312i565-8300

Subscribed and sworn to beforeme on this 25th day of February, 2008.

OSFICIALSEAL

m:\myl\affd\lnnovative Capjtal MRA affd 2 08.mamp