HOUSTON, TX – The Commodity Futures Trading Commission (CFTC) has levied a $200,000 penalty against Asset Risk Management, LLC (ARM), a Houston, Texas-based Commodity Trading Advisor, for operating as an unregistered swap execution facility (SEF). The CFTC issued an order simultaneously filing and settling the charges on September 26, 2022.
According to the CFTC, ARM failed to register as a SEF while facilitating swap transactions for its clients beginning around September 2017. The firm allowed clients to execute swaps – primarily in natural gas, natural gas liquids, and crude oil – by accepting bids and offers from multiple participants through a trading system. Communication and execution occurred via phone, instant messaging, and email, utilizing interstate commerce.
The investigation revealed that ARM would receive swap pricing requests from clients, then relay those requests to counterparties with existing ISDA agreements. After receiving proposed prices, ARM would, with client authorization, approve or reject them, often communicating approval with a simple “done” message via chat or email. In cases where direct authorization was lacking, ARM would facilitate phone calls between the client and counterparty to finalize the terms.
“Failing to register as required by the CEA impairs the CFTC’s ability to monitor swap markets and threatens the integrity of the industry,” stated Acting Director of Enforcement Gretchen Lowe. The order requires ARM to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The CFTC’s Division of Enforcement, led by Benjamin J. Rankin, Trevor Kokal, David Acevedo, Lenel Hickson, Jr., and Manal M. Sultan, conducted the investigation. Assistance was provided by staff from the Division of Market Oversight and the Market Participants Division. The agency encourages the public to verify a company’s registration status with the CFTC before investing and offers resources for reporting suspicious activity, including a toll-free hotline and online complaint form.
Source: CFTC.gov
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