NFA Bans FCM for Poor Risk Management

A financial services firm was banned from operating as a futures commission merchant ("FCM") in light of findings by the NFA Business Conduct Committee. The committee found that the firm's risk management policy "failed to adequately assess and monitor the risks associated with the accounts of customers who trade in volatile markets."

The firm carried accounts engaged in highly volatile options activities and failed to collect adequate margin or have adequate procedures to determine the level of the firm's risk. As a result, when markets moved against the firm's clients, the margin deficiencies appeared to exceed the firm's capital. In addition, the officers of the firm made repeated representations to the NFA that they would implement specific steps to improve risk management but failed to do so.

The firm was ordered to pay a $75,000 fine.