NFA Fines CPO/CTA $1 Million for Prohibited Loans and Disclosure Violations

The National Futures Association ("NFA") levied a $1 million fine against London-based commodity pool operator ("CPO") and commodity trading adviser ("CTA") Duet Asset Management Ltd. The CPO/CTA – which operates 23 commodity pools – was charged with allowing prohibited loans, failing to disclose material information to pool participants, and other misconduct in relation to its chief executive officer.

The NFA's action arose from a Complaint alleging that the firm "permitted its pools to make prohibited loans and advances to entities affiliated with [its chief executive officer]" in violation of NFA Compliance Rule 2-45, which prohibits any member CPO from allowing a pool to make a loan or advance of pool assets to the CPO or any affiliated person or entity.

In addition, the Complaint contended that the firm (i) allowed the CEO and his affiliates to "misuse pool assets by pledging these assets as collateral to guarantee financial obligations," (ii) failed to meet disclosure requirements regarding the CEO's involvement in pool investments, and (iii) paid redemptions that did not consider the illiquidity of certain holdings.

The NFA further alleged that the firm allowed its CEO to function as an associated person ("AP") of the firm despite his not being registered to act in that capacity, among other material misrepresentations.

In addition to imposing the fine, the NFA also ordered the firm to provide notice of the disciplinary action to its clients, and to "cause [the CEO] to become registered as an AP of the firm," by June 1, 2017.

Premium Content

Available only to Premium subscribers.

 

Tags