The Commodity Futures Trading Commission (CFTC) has settled charges against DARMA, LLC, a Puerto Rico-based commodity pool operator and trading advisor, for failing to adequately supervise its fund administrator and comply with reporting regulations. The CFTC issued its order on March 21, 2023.
According to the order, DARMA operated two exempt commodity pools starting in September 2018. In November 2018, the firm contracted a third-party administrator to calculate the pools’ net asset value (NAV), a critical component of statements distributed to investors. The CFTC found the administrator consistently delivered NAVs late and, often, with inaccuracies.
This resulted in DARMA distributing inaccurate pool statements to participants beyond regulatory deadlines, frequently requiring revisions and restatements. The firm also failed to file its annual audited pool financial statement (AFS) with the National Futures Association (NFA) on time. Despite recognizing these issues as early as January 2019, DARMA didn’t begin seeking a new administrator until November 2019, and didn’t fully terminate the relationship with the problematic administrator until March 2020 – a delay of over 13 months.
The CFTC determined DARMA failed to establish and enforce adequate supervisory policies and procedures, leading to inaccurate reporting and delayed filings. The order requires DARMA to pay a $150,000 civil monetary penalty and cease further violations of CFTC regulations. The penalty was reduced in recognition of DARMA’s cooperation and efforts to remediate the issues.
The NFA provided assistance in the investigation. The case was led by CFTC staff members Katherine Rasor, Xavier Romeu-Matta, Karin Roth, Judith M. Slowly, David MacGregor, Steven Ringer, Lenel Hickson, Jr., and Manal M. Sultan.
Source: CFTC.gov
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