CFTC Charges Florida Companies with Illegal Off-Exchange Precious Metals Transactions and FCM Registration Violations

The CFTC filed a civil injunctive enforcement action against a Florida-based individual and his two asset management companies for engaging in "illegal, off-exchange transactions in precious metals with retail customers." The CFTC also charged the accused individual and his companies with acting as futures commission merchants ("FCMs") without registering with the CFTC, as required by CEA Section 4d(a)(1) ("Dealing by Unregistered Futures Commission Merchants or Introducing Brokers Prohibited; Duties in Handling Customer Receipts; Rules to Avoid Duplicative Regulations").

In its complaint, the CFTC alleged that the accused companies solicited at least 42 retail customers in order to engage in at least 241 financed precious metals transactions, and accepted over $1.5 million from those customers with respect to these transactions. The CFTC also charged that the accused companies solicited at least $231,963 from at least 14 retail customers to engage in at least 48 leveraged, margined or financed precious metals transactions.

Pursuant to Dodd-Frank Act amendments to CEA Section 2(c)(2)(D) ("Retail Commodity Transactions"), off-exchange leveraged, margined or financed transactions like those that were conducted by the accused are illegal unless they result in the actual delivery of metal within 28 days. In the complaint, the CFTC alleged that metals were never delivered in connection with the leveraged, margined or financed precious metals transactions on behalf of the accused companies' customers.