IB Fined for Interpositioning

An introducing broker and two of its personnel settled NFA charges for acting without a "bona fide reason" for placing a favored customer as a counterparty in trades with other customers; NFA alleged the actions generated profits for the favored customer and additional brokerage fees at the expense of other customers.

According to the NFA, the firm engaged in deceptive conduct, failed to observe high standards of commercial honor and just and equitable principals of trade, and acted contrary to their customer’s best interests, in violation of NFA Compliance Rules 2-2(a) ("Fraud and Related Matters") and 2-4 ("Just and Equitable Principles of Trade"). Further, two associated persons of the firm were charged with failing to supervise their employees and agents properly, in violation of NFA Compliance Rule 2-9(a) ("Supervision").

To settle the charges, the firm agreed to a monetary fine of $225,000, with its CEO liable for $50,000 of the total penalty. The other associated person of the firm agreed to (i) pay a monetary fine of $125,000, (ii) withdraw membership from the NFA before May 01, 2023 and (iii) a four-month ban from NFA associate membership and principal status.