CFTC Settles Charges against FCM for Custody and Reporting Violations

The CFTC simultaneously filed and settled charges against a registered futures commission merchant ("FCM") for violating CFTC requirements that an FCM (i) report immediately any deficiency in its customer segregated accounts, or the targeted residual interest in its customer segregated accounts, to the CFTC, and (ii) submit daily reports to the CFTC for positions held by certain large traders ("Large Trader Reports") whose accounts are carried by the FCM. In addition, the CFTC settled charges against the FCM's controller and head accountant for aiding and abetting the FCM's violations.

The CFTC found that on March 10, 2014, "as a result of a clerical error in transferring funds," the FCM fell (i) over $3.4 million below the amount that was required to be held in its segregated customer account, and (ii) below its target residual interest in segregated funds. In addition, the CFTC determined that when the controller detected the error on the following day, he directed the FCM's bank to transfer more than $5 million from the firm's house account to its customer segregated account. In doing so, the CFTC noted, the controller backdated the transfer and failed to notify the CFTC concerning these issues.

The CFTC also found that the FCM failed to file certain Large Trader Reports with the CFTC that related to positions held in silver futures and soybean options. The CFTC ordered the FCM and its accountant to pay a monetary penalty of $150,000.