Forex Dealer Settles CFTC Charges for Registration and Supervisory Violations

A retail foreign exchange dealer ("RFED") settled CFTC charges for registration and supervisory violations concerning the handling of non-eligible contract participant customer accounts.

In its Order, the CFTC found that Gain Capital UK Limited ("Gain Capital") (i) engaged in leveraged retail forex transactions for U.S. customers who were not eligible contract participants ("ECPs") and (ii) failed to diligently supervise the handling of non-ECP U.S. customer accounts. The CFTC found that Gain Capital failed to register as an RFED despite allowing a number of U.S. customers who were not ECPs to open retail forex accounts. Additionally, the CFTC found that the unregistered RFED neglected to sufficiently monitor its operations such that one of its employees, an unregistered commodity trading advisor, entered into fraudulent transactions on behalf of a non-ECP U.S. customer's account. The CFTC determined that the unregistered RFED violated CEA Section 2(c)(2)(C)(iii)(1)(aa) ("Jurisdiction of Commission; Liability of Principal for Act of Agent; Commodity Futures Trading Commission; Transaction in Interstate Commerce") and CFTC Rule 5.3(a)(6)(i) ("Registration of Persons Engaged in Retail Forex Transactions").

To settle the charges, Gain Capital agreed to (i) cease and desist from any further violations of CEA and CFTC regulations, (ii) pay a civil monetary penalty of $250,000 and (iii) disgorge $241,671 in gains earned on the fraudulent transactions that are the subject of the Order.

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