WASHINGTON, D.C. – The Commodity Futures Trading Commission (CFTC) has penalized Cost Management Solutions, LLC (CMS), a Texas-based corporation, with a $100,000 civil monetary penalty for operating as an unregistered Introducing Broker (IB). The order, issued and settled on August 12, 2024, also requires CMS to cease and desist from further violations of the Commodity Exchange Act (CEA).
According to the CFTC, from at least May 2018 through the present, CMS acted as an IB by soliciting and accepting orders for swap and options transactions on behalf of its clients. The firm primarily brokered transactions in energy commodities, specifically propane, heating oil, and crude oil. These activities included identifying potential counterparties, conducting price discovery, negotiating trades, and executing those trades.
The CFTC found that CMS did not accept any funds to margin, guarantee, or secure these transactions, but did receive fees directly from its clients for providing brokerage services. Clients were largely propane retailers looking to hedge their risk exposure.
A typical transaction involved CMS contacting two to three counterparties at the client’s request to obtain price quotes. CMS would then negotiate with those counterparties on behalf of the client. If the client approved a quote, CMS would execute the swap agreement or option transaction.
The case was led by CFTC Division of Enforcement staff members Michael Amakor, Karen Kenmotsu, A. Daniel Ullman II, and Paul G. Hayeck. The CFTC urges the public to verify the registration status of any individual or company before entrusting them with funds, utilizing resources like NFA BASIC. Individuals can report suspicious activity to the CFTC via the toll-free hotline 866-FON-CFTC, online tip submission, or through the Whistleblower Office, which offers potential rewards of 10-30% of collected monetary sanctions.
Source: CFTC.gov
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