FCM and IB Settle CFTC Charges Alleging Recordkeeping and Related Supervisory Failures

E*TRADE Securities LLC, an introducing broker ("IB"), and E*TRADE Clearing LLC, a futures commission merchant ("FCM"), agreed jointly to pay a $280,000 civil monetary penalty to settle CFTC charges alleging that the two entities had failed to supervise adequately a third-party vendor that generated inaccurate audit trail logs for their customers.

The CFTC Order specified that the FCM and IB used a third-party vendor to compile certain audit trail logs. Subsequent to discovering that the third-party vendor routinely destroyed its records after 10 days, the FCM and IB were unable to locate "more than three years' worth of data." The CFTC Order determined that the FCM and IB failed to (i) implement adequate policies and procedures to guarantee the retention of these records, and (ii) respond to a previous warning from the third-party vendor about its recordkeeping policies.

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