The U.S. futures industry faced another potential setback Monday after a midsize broker froze client accounts, disclosed that its founder had been hospitalized following a suicide attempt and faced closure after being accused of misstating financial records.

Late Monday, the National Futures Association, the futures industry’s self-regulatory body, said it has taken an emergency enforcement action against broker PFGBest’s parent company, Peregrine Financial Group Inc., as well as a unit, Peregrine Asset Management Inc. Under the emergency enforcement action, the firm isn’t allowed to accept any funds or place trades for customers.

Peregrine, based in Cedar Falls, Iowa, couldn’t be reached for comment on the NFA action, but in an earlier statement to clients said “some accounting irregularities are being investigated regarding company accounts.”

“What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds,” said PFGBest in its statement.

Also in the statement, the firm said Russell R. Wasendorf Sr., its founder, chairman and chief executive, had experienced a “recent emergency” and described it as a “suicide attempt.” A spokeswoman for PFGBest said Mr. Wasendorf was in critical condition in a hospital.

In its action, the NFA said PFGBest had about $5 million on deposit at U.S. Bank despite maintaining it had more than $225 million on deposit. Moreover, the NFA believes that when PFGBest reported bank balances of more than $200 million in February 2010 and March 2011, in fact it had less than $10 million for each one of these months. Mr. Wasendorf “may have falsified bank records,” the NFA said.

As of June 4, PFGBest, which is largely engaged in retail commodities and foreign-exchange trading, reported about $400 million worth of client funds on deposit to back up outstanding trades to the Commodity Futures Trading Commission, making it the 37th-largest futures brokerage by client funds, according to the CFTC.

PFGBest’s woes come as another blow to a derivatives industry still reeling from the collapse of futures brokerage MF Global last year, which left thousands of retail and institutional clients nursing financial losses.

Both industry and government regulators have promised to crack down on fraud issues related to securities trading; on Monday, the PFGBest allegations sent shockwaves through the trading community, especially in the commodity-trading capital of Chicago.

“This is an abysmal failure by the regulators,” said Lauren Nelson, director of communications for Chicago-based Attain Capital Management, a broker that used PFGBest to process transactions.

The CFTC earlier this year conducted a spot check of all futures-commission merchants, including PFGBest, where it found no material breaches of customer-funds-protection requirements.

Reached by email late Monday, Bart Chilton, a commissioner with the CFTC, said “we continue to witness circumstances which make a futures insurance fund a needed option. Such a fund is critically important. Futures customers should be protected like banking and security customers are protected.”

The comments were echoed by James Koutoulas, chief executive of Typhon Capital Management. Typhon, a futures-trading firm, routed business through both MF Global and PFGBest.

Further fallout from PFGBest, which had a large individual investor clientele, according to Mr. Koutoulas, would likely hamper long-running efforts among futures brokers and exchanges to develop a retail customer base.

Several PFGBest’s clients said they were able to liquidate some of their holdings, although they were unable to trade.

“Now, there’s really nothing I can do, or any of the other account holders can do,” said Kevin Davey, a 45-year old independent commodity futures trader in Cleveland. “The worst case is that everything remains frozen, kind of like what happened with MF Global.”

The Peregrine spokeswoman said representatives of the NFA and CFTC were at the company’s Iowa offices Monday. She said PFGBest employees across the U.S. were at risk of losing their jobs. PFGBest has about 200 employees across the U.S., mostly in Chicago and Cedar Falls. Staff were briefed on the developments by management Monday.PFGBest’s executive committee is making decisions for the firm, according to the spokeswoman.

It’s not known whether its staff can be paid, and employees have been told that the company isn’t likely to survive, according to a person familiar with the matter.

No clearing firm or firms have yet been identified to step in and take over the accounts of PFGBest’s customers.

The company was founded more than 20 years ago by Mr. Wasendorf, 64 years old, a prominent figure in the close-knit Chicago derivatives industry who is known for his outside and philanthropic interests, including protecting the peregrine falcon that gave the firm its original name.

Mr. Wasendorf moved the company’s head office to Cedar Falls while retaining a presence in Chicago, its original location, commuting between the two by private plane.

Earlier this year, PFGBest was sued in U.S. District Court in Minnesota due to a relationship with Trevor Cook, who was sentenced to 25 years for operating a Ponzi scheme that stole more than $190 million from investors in his funds.

According to a lawsuit filed by a court-appointed receiver in the case, Mr. Cook and his associates lost more than $30 million in forex and futures trading accounts at PFGBest. The receiver alleged that PFGBest allowed Mr. Cook to maintain the accounts “in the face of overwhelming red flags of fraud or insolvency.” A motion to change venue filed by Peregrine was denied. An attorney for Peregrine wasn’t immediately available to comment on the case.

—Doug Cameron, Jerry A.DiColo, Georgia Wells and Josh Dawsey contributed to this article.

Write to Geoffrey Rogow at [email protected], Jacob Bunge at [email protected] and Tatyana Shumsky at [email protected]

A version of this article appeared July 10, 2012, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: Futures Broker Freezes Accounts.

From the Archives

In a 2008 letter to the editor of The Wall Street Journal, PFGBest Chairman and CEO Russel Wasendorf Sr. argued against higher capital requirements for foreign currency brokerages, a move he said would hurt small firms and harm investors:

• “Smaller firms’ business activities are consistently transparent and are easily audited by regulators. Eliminating participation of smaller firms … puts investors at risk.”

Read Wasendorf’s full letter