CFTC Penalizes ADM Investor Services for Unlawfully Commingling Customer Funds with Funds in Non-Customer Accounts (with Lofchie Comment)

The CFTC issued an Order filing and simultaneously settling charges against ADM Investor Services, Inc. ("ADMIS"), a CFTC-registered futures commission merchant ("FCM"), for unlawfully commingling customer funds with funds held in its non-customer accounts.

FCMs are required to segregate funds held on behalf of customers, and are not permitted to commingle customer funds with the funds of any other person. As described in the CFTC Order, ADMIS treated the accounts of its multiple affiliates as customer accounts, notwithstanding that ADMIS's parent corporation, Archer Daniels Midland Company ("ADM"), had ownership interests in the affiliates and voting interests in each of the affiliates.

Lofchie Comment: While the distinction is not relevant to this case, firms that are dually registered as broker-dealers and FCMs should be mindful of the fact that the definition of the term "customer" for purposes of the segregation requirements is different under the relevant statutes and, particularly, that the definitions differ as applied to affiliates. By way of example, under "broker-dealer regulation," the accounts at issue would have been "customer" accounts.

See: Order:ADM Investor Services, Inc.