Chicago, Illinois – E*TRADE Securities LLC and E*TRADE Clearing LLC have jointly agreed to pay a $280,000 penalty to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) regarding recordkeeping and supervisory failures. The CFTC issued its order on January 26, 2017, detailing the violations.
According to the CFTC, E*TRADE Securities, an introducing broker, and E*TRADE Clearing, a futures commission merchant, failed to properly preserve and maintain crucial audit trail logs for their customers. The alleged failures occurred between October 2009 and January 25, 2014, for E*TRADE Securities, and after February 2013 for E*TRADE Clearing, when it became registered as a futures commission merchant.
The investigation revealed that the firms violated Section 4g(a) of the Commodity Exchange Act (CEA) and CFTC Regulations 1.31 and 1.35 by not maintaining the required records. Furthermore, both entities were found in violation of CFTC Regulation 166.3 for failing to establish adequate policies and procedures to ensure record retention, and for disregarding a prior warning from a vendor regarding the preservation of these logs.
As part of the settlement, E*TRADE Securities and E*TRADE Clearing are required to cease and desist from any further violations of the CEA. Beyond the financial penalty, the firms must also enhance their recordkeeping procedures by updating policies, implementing new procedures, and providing comprehensive training to employees on CEA recordkeeping requirements.
The CFTC acknowledged the cooperation of E*TRADE Securities and E*TRADE Clearing throughout the investigation. The case was led by CFTC Division of Enforcement staff members Aimée Latimer-Zayets, A. Daniel Ullman II, and Paul G. Hayeck.
Source: CFTC.gov
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