CFTC Charges Supply Chain Manager for Inaccurate Reporting of Cotton Sales

A Singapore-based supply chain manager settled CFTC charges for knowingly or recklessly submitting false, misleading, or inaccurate data related to cotton sales to the US Department of Agriculture and the CFTC.

In the Order, the CFTC detailed that in August and September 2021, the company engaged in five significant sales of physical cotton to an Asian counterparty, totaling over 375,000 bales of cotton valued at more than $190 million. The CFTC found that the company failed to report these sales accurately to the US Department of Agriculture on Form FAS-98, and to the CFTC on Form 304, resulting in misleading information about the actual supply and demand for cotton. The CFTC determined that employees of the company knowingly or recklessly omitted these transactions from their required reports.

The CFTC found that the company violated CEA Section 6(c)(1)(A) ("Prohibition regarding false reporting and manipulation") and CFTC Regulations 180.1(a)(4) ("Prohibition on the employment, or attempted employment, of manipulative and deceptive devices"), 19.02(a) ("Reports pertaining to cotton on call purchases and sales") and former Regulation 19.01(a).

To resolve the charges, the company agreed to (i) cease and desist from further violations of the relevant statutory provisions and regulations; (ii) pay a civil monetary penalty of $3,250,000, plus post-judgment interest; and (iii) implement remedial compliance measures, including to (1) update its policies to "provide for the immediate and timely reporting of physical purchases or sales"; (2) create an "advisory note for employees describing their regulatory reporting responsibilities"; (3) provide "guidelines in its desktop procedure manuals for Form 304 and FAS-98 reporting, providing guidelines on when to recognize a physical sale"; and (4) engage in "ongoing monitoring to ensure that physical purchases and sales are promptly reported."