The Blotter: FXDD fined $2.74 million by CFTC

SEC charges multiple firms with short selling violations

According to the CFTC, Butterfield, an employee of a company registered with the commission as an introducing broker (IB), handled various clerical and administrative responsibilities concerning trading on the floor of the Chicago Board of Trade (CBOT). Her responsibilities included accepting and recording customer orders. When done properly, this involved time-stamping paper order tickets contemporaneously with the receipt of a customer commodity futures or options order to accurately record the time of day when the IB received the order.   

On Jan. 31, 2013, Butterfield gave sworn testimony in an investigation being conducted by the CFTC’s Division of Enforcement.  The CFTC finds that during that testimony, Butterfield knowingly made false and misleading statements regarding whether she had improperly pre-stamped order tickets, i.e., whether she stamped order tickets in blank, prior to the time when a customer order was actually received.  This testimony was significant in that use of pre-stamped order tickets may violate regulations and CBOT rules and also may facilitate unlawful trade allocation schemes in which brokers decide who will receive trades only after they are executed, potentially allowing them to profit at their customers’ expense. 

The CFTC finds that prior to her CFTC testimony, Butterfield told her supervisor, who was a principal at the IB, that “we pre-stamp orders and it’s something that is – that we should not be doing.”  However, on Jan. 31, 2013, when the CFTC staff questioned Butterfield on the IB’s pre-stamping practice, Butterfield falsely told the staff that she “never pre-stamped any [order] tickets.” Later during the course of her testimony the same day, Butterfield admitted to various instances of pre-stamping order tickets, but only after she was confronted by documents that plainly contradicted her initial false testimony. Ultimately, having been confronted with evidence that demonstrated her falsehoods, Butterfield admitted by the end of her testimony that it was in fact her daily practice to pre-stamp order tickets from multiple futures commission merchants throughout the trading session, in numbers amounting to dozens of order tickets every day. 

 In addition to the $50,000 civil monetary penalty, the CFTC requires Butterfield to cease and desist from violating the relevant provision of the CEA, to never apply for or claim exemption from registration with the CFTC or engage in any activity requiring such registration or exemption, and to never act as a principal or officer of any entity registered or required to be registered with the CFTC.


NFA takes emergency enforcement action against Newport Private Capital, Jonathan M. Hansen, and David M. Giunta

The  National Futures Association (NFA) has taken an emergency enforcement action against Newport Private Capital LLC,, a registered commodity pool operator and commodity trading advisor and NFA Member located in Newport Beach, Cal; Jonathan M. Hansen , an associated person and listed principal of Newport Private Capital; and David M. Giunta, a former listed principal and associated person of Newport Private Capital.

NFA has taken the Member Responsibility Action (MRA) and Associate Responsibility Action (ARA) to protect customers of Newport Private Capital, Hansen and Giunta because they have failed to fulfill their financial obligations to participants in the Financial Futures Fund, a commodity pool they operate.

Specifically, the Financial Futures Fund loaned $4 million via a Promissory Note dated March 1, 2009 to the Sure Fund, a real estate fund operated by Solidus Land Company, LLC, an entity operated, in part, by Hansen and Giunta, as managing members, and owned by a principal of Newport Private Capital, Newport Private Capital Holdings LLC, of which Hansen and Giunta each had a 50% ownership interest. Giunta executed the Promissory Note as "Manager of Sure Fund, LLC," and Sure Fund subsequently defaulted on the Promissory Note in 2012. Currently the Promissory Note remains unpaid with monies due to the Financial Futures Fund totaling approximately $6.1 million, including accrued interest.

At the time that Giunta executed the Promissory Note on behalf of Sure Fund, Hansen and Giunta also executed unconditional personal guarantees to repay the loan in the event Sure Fund defaulted on the Promissory Note. To date, despite the Sure Fund's 2012 default of the Promissory Note, neither Hansen nor Giunta have satisfied their personal guarantees.

The MRA/ARA orders Newport Private Capital, Hansen and Giunta to repay in full any monies borrowed plus accrued interest pursuant to the Promissory Note on or before January 15, 2014. In addition, Newport Private Capital, Hansen and Guinta and any other person acting on behalf of them will be prohibited from soliciting or accepting any funds from customers or for any managed accounts or commodity pools until Newport Private Capital, Hansen and Giunta have submitted new disclosure document(s) to NFA containing information about the Member and Associate Responsibility Actions, which have been accepted by NFA.

The MRA/ARA also prohibits Newport Private Capital, Hansen and Giunta from permitting any commodity pool they operate or control to use any means to make any direct or indirect loans or advances of pool assets to Newport Private Capital, Hansen or Giunta or any other person or entity affiliated with Newport Private Capital, Hansen or Giunta. They are also prohibited from disbursing or transferring any funds (other than to margin existing positions) from any trading accounts controlled by any of them or from any pool accounts (including bank, trading or any other types of accounts) without prior approval from NFA.

In the event that Newport Private Capital, Hansen and Giunta fail to comply with any of the requirements set forth in the MRA/ARA, they and any other person acting on behalf of them will be prohibited from placing trades for any pools that they operate or accounts that they own or control or which are held in either of their names, except for liquidation of existing positions.

The MRA/ARA will remain in effect until such time as Newport Private Capital, Hansen and Giunta have demonstrated to the satisfaction of NFA that they are in complete compliance with all NFA Requirements.


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