Washington, D.C. – ADM Investor Services, Inc. (ADMIS), a registered Futures Commission Merchant, has been penalized $425,000 by the U.S. Commodity Futures Trading Commission (CFTC) for unlawfully commingling customer funds with those held in non-customer accounts. The settlement, finalized on September 30, 2013, requires ADMIS to cease and desist from violating specific sections of the Commodity Exchange Act (CEA) and related Commission Regulations.
The CFTC found that ADMIS improperly classified accounts belonging to its affiliates as customer accounts, despite its parent company, Archer Daniels Midland Company (ADM), holding significant ownership and voting interests—ranging from 16% to 100%—in those affiliates. This practice violated regulations requiring the segregation of customer funds from the funds of any other entity.
According to the CFTC Order, ADMIS, a wholly-owned subsidiary of ADM, was prohibited from combining customer funds with those of its affiliates. By doing so, ADMIS unlawfully commingled customer funds with its own proprietary accounts, violating Section 4d(a)(2) of the CEA and CFTC Regulation 1.20(c). The illegal commingling involved a transfer of affiliate positions and associated funds out of customer segregated accounts in July 2011.
In addition to the monetary penalty, ADMIS is required to implement improved procedures to ensure proper account classification, to the extent they haven’t already been implemented. The case was led by CFTC Division of Enforcement staff including Michael C. McLaughlin, R. Stephen Painter, Jr., David W. MacGregor, Lenel Hickson, Jr., Stephen J. Obie, Richard Wagner, Manal M. Sultan, and Vincent A. McGonagle.
The CFTC’s enforcement action underscores the importance of maintaining strict segregation of customer funds within the financial industry.
Source: CFTC.gov
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