DCO Settles CFTC Charges for Customer Protection Violations

A derivatives clearing organization ("DCO") settled CFTC charges for failing to obtain required depository acknowledgment letters for certain futures customer fund accounts.

As covered in its Order, the CFTC found that the DCO failed to (i) obtain executed acknowledgment letters, in violation of CFTC Rules 1.20(g)(4) ("Written Acknowledgment from Depositories") and 39.15(b)(1) ("Segregation"), and (ii) maintain the accounts as required under CFTC Rule 39.15(c) ("Holding of Funds and Assets") for certain futures customer fund accounts. The CFTC also found that the DCO did not have in place supervisory procedures to ensure that the DCO's list of futures customer funds accounts conformed with the list of those managed by its custodial firms, in violation of CFTC Rule 39.15(a) ("Required Standards and Procedures").

To settle the charges, the DCO agreed to (i) cease and desist from future violations, (ii) a $450,000 civil monetary penalty and (iii) several compliance undertakings outlined in the Order.