The CFTC order finds that as a result of ADM’s ownership and voting interests in ADMIS and the affiliates, ADMIS was prohibited from commingling its customers’ funds with funds held in the affiliates’ accounts. Further, the order finds that by combining funds of its commonly controlled affiliates with funds of its customers, ADMIS unlawfully commingled its customers’ funds with funds in ADMIS’s proprietary accounts. The order finds that, in July 2011, ADMIS transferred the affiliates’ positions and associated funds out of customer segregated accounts.
FXDirectDealer ordered to pay $275,000 penalty
The CFTC filed and simultaneously settled charges that, between November 2010 and December 2012, FXDirectDealer, LLC (FXDD), a CFTC-registered retail foreign exchange dealer (RFED) and FCM headquartered in New York, failed to comply with minimum financial requirements for RFEDs and FCMs.
Effective Oct. 18, 2010, the CFTC adopted comprehensive rules to protect members of the public who buy foreign currency contracts from, or sell forex contracts to, forex firms. Under these rules, RFEDs and FCMs that offer or engage in retail forex transactions must at all times maintain adjusted net capital of $20 million, or more in certain circumstances.
According to the CFTC, FXDD did not maintain its required adjusted net capital during at least 18 separate months between November 2010 and December 2012, with month-end adjusted net capital computations showing that FXDD was undercapitalized by more than $7.5 million at one point. Because FXDD reported its adjusted net capital on a consolidated basis with its subsidiary, FXDD apparently did not realize that, on the required stand-alone basis, it failed to satisfy its adjusted net capital requirements throughout most of this period, the order finds.
The order imposes a $275,000 civil monetary penalty and a cease and desist order against FXDD for its violations.
RJO ordered to pay $125,000 for violation of customer protection regulation
The CFTC filed and settled charges against R.J. O’Brien & Associates LLC,a CFTC-registered FCM based in Chicago, for unlawfully commingling secured foreign futures and options customer funds with segregated domestic futures and options customer funds. The CFTC Order requires RJO to pay a $125,000 civil monetary penalty and orders RJO to cease and desist from further violations of CFTC Regulation 30.7(d).
The CEA and CFTC regulations contain provisions to protect the funds of customers trading on both U.S. and foreign exchanges. In relation to customers trading on foreign exchanges, an FCM must account for and maintain money, securities, and property in an amount at least sufficient to cover or satisfy all of its current obligations to foreign futures and options customers in a separate “secured account.” Regulation 30.7(d) prohibits secured customer funds from being commingled and deposited into the same accounts separately held for segregated domestic futures and options customer funds.
On or about Feb.10, 2012, RJO, as carrying broker and depository for a non-clearing FCM, transferred $1,586,000 from the non-clearing FCM’s secured omnibus customer account (approximately $605,268 of which represented secured foreign futures or foreign options customer funds) and held, commingled, and deposited the secured customer funds in the non-clearing FCM’s segregated omnibus customer account, the Order finds. RJO transferred the funds to reduce a margin deficiency in the non-clearing FCM’s segregated omnibus account, without knowing whether the funds were part of the non-clearing FCM’s secured account requirements. Further, the CFTC finds that RJO did not make a margin call to the non-clearing FCM and did not notify the non-clearing FCM that it was transferring the funds from the non-clearing FCM’s secured omnibus account.
According to the CFTC, on Monday, Feb. 13, 2012, the non-clearing FCM discovered that as a result of the transfer, it had insufficient funds in its secured accounts to meet its obligations to its secured customers. The non-clearing FCM had sufficient funds otherwise available in other accounts to satisfy the segregated funds margin call if RJO had not on its own moved funds from the secured omnibus account. The non-clearing FCM contacted RJO to reverse the transfer, which RJO effected that morning. The non-clearing FCM reported to the CFTC on the same morning that it did not have sufficient funds to meet its obligations to its secured customers.
COMEX broker Dominick Anthony Cognata charged with failing to produce required documents
The CFTC filed two separate administrative proceedings against Dominick Anthony Cognata, a registered COMEX floor broker. In one proceeding, a complaint charges Cognata with failing to produce to the CFTC certain records relating to his brokerage activities. In the other proceeding, the CFTC seeks to revoke Cognata’s registration as a floor broker.