Enskilda Futures fined for failure to meet capital requirements

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Enskilda Futures Limited (EFL), a London-based Futures Commission Merchant (FCM), for failing to meet the minimum capital requirements as set forth in Section 4f(b) of the Commodity Exchange Act (CEA) and CFTC Regulation 1.17. The failure to meet the minimum capital requirements was a result of EFL’s failure to call for sufficient margin collateral on an intra-month basis from its ultimate parent, Skandinaviska Enskilda Banken, AB (SEB), which holds an omnibus account at EFL, the Order finds. The CFTC Order requires EFL to pay a $125,000 civil monetary penalty and to maintain the remedial measures adopted following discovery of the error.

The CFTC Order finds that during the period of July 14 to Aug. 2, 2011 (the Relevant Period), EFL collected only net margin collateral from SEB on an intra-month basis and not gross margin collateral as required. At month end, EFL and SEB settled up and EFL called for gross margin; thus, there was no effect on EFL’s monthly capital.  However, because EFL failed to collect adequate margin collateral on an intra-month basis from SEB, EFL incurred charges to its adjusted net capital. As a result of these charges, EFL failed to meet the minimum capital requirements on 11 days in violation of Section 4f(b) of the CEA, 7 U.S.C. § 6f(b) (2006), and CFTC regulation 1.17, 17 C.F.R. § 1.17 (2011), according to the Order.

The error was discovered during a routine risk-based audit conducted by CME Group, Inc. (CME) on or about Nov. 8, 2011, the Order finds. On Nov. 9, 2011, EFL filed notice with the CFTC, the National Futures Association, and the CME, pursuant to CFTC regulation 1.12(a) and (f)(3), 17 C.F.R. §1.12(a) and (f)(3) (2011), advising of its failure to meet the net capital requirements during the relevant period. EFL immediately undertook measures to revise its policies and procedures and collect adequate margin collateral from its customer, the Order further finds. 

EFL has cooperated fully with CFTC staff, according to the Order. Further, it appears that at all times during the Relevant Period, SEB possessed ample funds to satisfy any intra-month collateral call from EFL. EFL need only have collected such funds to have remained in compliance with CFTC regulations, the Order finds.

The CFTC thanks the CME for its cooperation.

The CFTC Division of Enforcement staff responsible for this matter are Allison Baker Shealy, Timothy J. Mulreany and Joan Manley, with assistance from CFTC Division of Swap Dealer and Intermediary Oversight staff Kevin Piccoli, Robert Laverty, Ronald Carletta, and Linda Santiago.

Comments
comments powered by Disqus