CFTC Charges IB and Associated Person for Misusing Information

The CFTC charged an introducing broker ("IB") and an associated person for (i) misusing customer information to benefit the account of a customer for whom the associated person exercised discretionary authority, (ii) failing to maintain required records, and (iii) failing to supervise employees.

According to the Complaint filed in the U.S. District Court for the Southern District of New York, a broker at EOX Holdings LLC ("EOX") shared with a client and friend ("Customer A") material nonpublic information regarding other EOX customers, and used his discretionary trading authority to trade on behalf of Customer A against EOX customers. EOX allegedly failed to establish policies to monitor trading and, specifically, to ensure that its associated person did not misuse the material nonpublic information. According to the SEC, EOX neglected to prepare and keep sufficient written records of customer orders and retain pre-trade communications with customers.

The CFTC seeks monetary penalties and disgorgement of gains, permanent injunctions against further violations, and registration and trading bans.