CFTC Sanctions FCM for Supervision Violations
Commentary by Bob Zwirb
The CFTC announced the filing and simultaneous settlement of charges against Rosenthal Collins Group, LLC ("RCG"), a registered futures commission merchant ("FCM"), for failing to supervise an Associated Person diligently and for failing to provide and maintain an adequate program of supervision in violation of CFTC Rule 166.3.
The CFTC's order found that, from March 2008 to July 2013, RCG failed to supervise diligently an employee registered as an Associated Person at one of its branch offices by allowing him to conduct business on its behalf while working entirely from the office of another CFTC-registered FCM.
Furthermore, the CFTC's order found, the supervisor in the branch office did not know that RCG's policies prohibited Associated Persons from conducting business on its behalf from an office other than RCG's offices; consequently, the supervisor took no action to address this violation of RCG's policies and procedures.
See: Order Regarding Rosenthal Collins Group.
Commentary
This is another example of a supervisory violation found for conduct that violated a firm's own compliance manual, not for conduct violating any rule of the CFTC. That is, under Rule 166.3, the CFTC can hold a firm to be in violation of the CFTC's rules if the firm fails to comply with its own internal policies. Accordingly, firms should not introduce requirements into their compliance manuals that go beyond those of the law unless the firms actually intend to comply with those additional requirements.