Chicago, IL – ADM Investor Services Inc. (ADMIS), a registered futures commission merchant, has been slapped with a $500,000 penalty by the Commodity Futures Trading Commission (CFTC) for failing to adequately supervise its employees and agents. The CFTC issued an order simultaneously filing and settling charges against the firm on Thursday, September 29, 2022.
The order details that between December 1, 2016, and September 1, 2019, ADMIS neglected its supervisory duties regarding commodity interest accounts carried by the firm and introduced by its Guaranteed Introducing Brokers (GIBs). Specifically, ADMIS’s account review policies were deemed inadequate prior to Spring 2018, lacking clear guidance on handling account change requests from individual brokers.
Investigators found ADMIS failed to detect a pattern of improper and fictitious trade transfer requests. Brokers employed by ADMIS or its GIBs allegedly executed trades and then submitted fraudulent transfer requests to unfairly allocate profitable trades to favored clients or accounts they controlled, while simultaneously assigning losing trades to other managed accounts. This practice continued for several years, violating the Commodity Exchange Act (CEA) and CFTC regulations.
“FCMs are obligated to adequately supervise their agents and employees,” stated CFTC Acting Director of Enforcement Gretchen Lowe. “As this case shows, it is essential that registrants have adequate policies and procedures in place to deter and detect wrongdoing, and to ensure they perform their supervisory duties diligently.”
The CFTC acknowledged ADMIS’ cooperation during the investigation. Assistance was also provided by the CME Group Inc. and the National Futures Association. The settlement requires ADMIS to cease and desist from any further violations of the CEA and CFTC regulations.
The case was led by CFTC staff members Janine Gargiulo, Benjamin J. Rankin, Trevor Kokal, Patryk J. Chudy, Lenel Hickson, Jr., and Manal M. Sultan.
Source: CFTC.gov
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