Washington, D.C. – Futures brokerage firm BGC Financial, L.P. will pay $3 million in penalties for failing to adequately supervise its operations and maintain proper records, the Commodity Futures Trading Commission (CFTC) announced today. The order, filed and settled simultaneously, details numerous violations spanning from 2014 to March 2019.
The CFTC found that BGC lacked sufficient procedures for maintaining audit trail data and controlling the use of personal cell phones for business communications. Branch managers were also found to be unaware of their designated supervisory roles for certain brokers, contributing to broader recordkeeping and reporting failures.
Specifically, the investigation revealed multiple instances of lost or incomplete voice recordings of trades, including a four-month gap in 2016 encompassing thousands of brokered block trades. When the CFTC requested audit trail data for a sample of trades, BGC took over two months to compile the information due to organizational difficulties. Despite repeated failures, BGC did not meaningfully revise its policies or procedures, according to the order.
The firm also faced criticism for inadequate reporting to the CFTC. BGC failed to disclose material noncompliance issues related to voice capture and retention in its Chief Compliance Officer (CCO) reports, hindering the agency’s ability to assess the severity of the problems and the effectiveness of remediation efforts. Furthermore, BGC was significantly delayed in notifying the CFTC about investigations by other regulatory bodies, including a four-year delay in reporting a Securities and Exchange Commission (SEC) investigation that resulted in a $1.25 million settlement.
“Today’s enforcement action highlights the importance of recordkeeping, supervision, and transparency in reporting to the Commission,” stated CFTC Director of Enforcement James McDonald. “These are fundamental requirements, which are necessary for the Commission to accomplish its mission to safeguard the integrity of our markets.”
As part of the settlement, BGC is required to comply with specific undertakings, including remediation efforts and the retention of an outside consultant to assess compliance and report findings to the CFTC. The firm must also cease and desist from further violations.
The CFTC acknowledged the assistance of the National Futures Association in the investigation.
Source: CFTC.gov
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