CFTC Fines Bank, Settling Charges Relating to Rules and Regulations Pertaining to Segregated and Secured Amount Funds

The CFTC announced the filing and settling of charges against Morgan Stanley Smith Barney LLC ("MSSB"), a registered futures commission merchant ("FCM"), for violating CFTC rules governing secured funds of foreign futures and option customers, commingling customer and firm funds, failing to prepare accurate daily computations of its segregated and secured funds, failing to properly title account statements for four customer segregated accounts, and failing to diligently supervise its employees' handling of matters related to its business as a CFTC registrant.

According to the Order, none of the violations resulted in any customer losses. The CFTC found that, on April 8, 2013, MSSB erroneously transferred approximately $16 million from a customer secured funds bank account, resulting in a deficiency in MSSB's secured funds of approximately $9.27 million. MSSB discovered the error the next day and cured the deficiency. Furthermore, the Order states, after its secured deficiency in April 2013, MSSB independently engaged KPMG LLP to review its policies and procedures with respect to segregated and secured accounts. KPMG subsequently issued a report recommending changes to MSSB's policies and procedures, which MSSB has substantially implemented.

Additionally, the CFTC found that, for approximately an eight-month period in 2012, MSSB failed to prepare accurate daily computations of its segregated and secured funds. None of the errors caused MSSB to fall below its required segregated or secured funds; however, MSSB was required to re-file 120 daily statements as a result of the errors.

See: Order: Morgan Stanley Smith Barney LLC.