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ARTICLE · 06 JULY 2020

FCM Settles CFTC Charges For Supervisory Failures

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A registered futures commission merchant settled CFTC charges for failing to supervise accounts and for missing "indications" that an introducing broker was defrauding customers.

United StatesFinance and Banking
Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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A registered futures commission merchant ("FCM") settled CFTC charges for failing to supervise accounts and for missing "indications" that an introducing broker ("IB") was defrauding customers.

According to the CFTC, the FCM did not prevent the IB from introducing new accounts or collecting commissions, despite the FCM's knowledge that the IB was (i) fraudulently making the same trading recommendations and using "false and misleading statements" for each of its clients, (ii) managing customer trading without being registered as a commodity trading advisor, and (iii) under investigation by NFA.

To settle the charges, the FCM agreed to (i) cease and desist from further violation of CFTC rules, (ii) pay a civil monetary penalty of $250,000, and (iii) pay restitution and disgorgement amounts imposed against the IB of up to $640,000.

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