NFA Fines Firm for Conducting Business with Unregistered Entity and Failure to Submit Trade Data (with Mehta Comment)
The National Futures Association ("NFA") fined registered retail foreign exchange dealer and NFA member, Forex Capital Markets LLC ("FXCM"), for conducting business with an unregistered entity and for failing to submit trade data.
According to the complaint, FXCM conducted business with a firm that was required to be registered with the CFTC as a CPO and an NFA Member. NFA found that FXCM did not take proper steps to ensure that the firm was properly registered.
Additionally, FXCM failed to submit certain trade data to NFA through NFA's Forex Transaction Reporting Execution Surveillance System.
Mehta Comment: In light of this disciplinary action, firms operating funds under the de minimis exemption provided by CFTC Rule 4.13(a)(3) may face additional scrutiny when doing business with FCMs or other relevant registered-NFA members. Simply filing the exemption (or providing signed representations) may not be sufficient for the NFA members; further inquiry into the investment strategy and portfolio constructions may be necessary in order for the NFA member to satisfy its obligations under NFA Bylaw 1101.