Washington, D.C. – The Commodity Futures Trading Commission (CFTC) has levied a $100,000 penalty against Cost Management Solutions, LLC (CMS), a Texas-based corporation, for operating as an unregistered Introducing Broker (IB). The CFTC issued an order simultaneously filing and settling the charges on August 12, 2024.
According to the CFTC, CMS engaged in soliciting and executing swap and options transactions for clients beginning in May 2018, without registering as required. The firm primarily brokered trades in energy commodities, specifically propane, heating oil, and crude oil, catering to propane retailers seeking to hedge risk.
The investigation revealed CMS acted as an intermediary, identifying potential counterparties, facilitating price discovery, negotiating trades, and ultimately executing agreements on behalf of its clients. While CMS did not handle client funds for margin or security purposes, it did receive fees for its brokerage services. A typical transaction involved CMS obtaining quotes from two to three counterparties at the client’s request, negotiating terms, and executing the trade if the client approved.
The CFTC order mandates that CMS cease and desist from further violations of the Commodity Exchange Act (CEA). The case was led by CFTC enforcement staff including Michael Amakor, Karen Kenmotsu, A. Daniel Ullman II, and Paul G. Hayeck.
The CFTC reiterated its warning to the public to verify the registration status of any individual or company before entrusting them with funds. Unregistered entities should be treated with caution. Registration information can be found through the National Futures Association (NFA) BASIC system.
The agency encourages individuals to report suspicious activity or potential violations of commodity trading laws through its toll-free hotline (866-FON-CFTC), online tip/complaint form, or by contacting the Whistleblower Office. Whistleblowers may be eligible for rewards of 10-30% of collected monetary sanctions, funded by the Customer Protection Fund.
Source: CFTC.gov
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