CFTC Order Finds that Firm Failed to Disclose Material Changes in Algorithmic Trading Program

The CFTC entered an Order requiring a Russia-based investment adviser firm and its owner to pay a $280,000 civil monetary penalty for failing to disclose its principal and material changes in its algorithmic trading program in its registration filings.

The Order stated that the investment adviser firm, a registered Commodity Trading Advisor, failed to disclose in registration filings with the National Futures Association ("NFA") that a finance service company was acting as its principal. In failing to update registration to disclose its principal and by failing to disclose the finance service company as a principal in annual registration updates, the investment adviser firm violated CEA Sections 9(a)(3) ("Violations generally; punishment; costs of prosecution") and 6(c)(2) ("Exclusion of persons from privilege of "registered entities" procedure for exclusion; review by court of appeals").

The Order also stated that the investment adviser firm disseminated false and misleading marketing materials to prospective clients, failing to disclose material changes in the algorithmic trading system that the firm was using. According to the Order, this conduct violated CEA Sections 4o(1)(A) and (B) ("Fraud and misrepresentation by commodity trading advisors, commodity pool operators, and associated persons") and CFTC Rules 4.41(a)(1) and (2) ("Commodity pool operators and commodity trading advisors").