Washington, D.C. – Farr Robert, of San Jose, California, and his firm Farr Financial Inc., have agreed to pay a $280,000 penalty to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) related to the improper handling of customer funds. The CFTC announced the settlement on October 10, 2012.
The charges stem from a period between late 2007 and the end of 2010, during which Farr Financial, registered as both an introducing broker and a futures commission merchant (FCM), allegedly failed to properly invest and supervise customer segregated funds. FCMs are legally obligated to keep customer funds separate from their own and invest them only in specific, low-risk instruments as outlined by CFTC regulation 1.25.
According to the CFTC order, Farr Financial invested customer funds in at least seven accounts that did not meet the requirements of regulation 1.25. These included a money market mutual fund lacking required liquidity, five unauthorized savings and money market deposit accounts, and a certificate of deposit from an issuer that did not meet the necessary credit rating standards.
The CFTC also found that Farr Financial failed to diligently supervise its employees and lacked adequate written policies and procedures to ensure proper segregation of customer funds. The company also allegedly failed to maintain required records and miscalculated the amount of funds it was required to segregate.
In addition to the $280,000 civil monetary penalty, the CFTC order mandates that Farr Financial cease and desist from further violations of the Commodity Exchange Act and related regulations. The National Futures Association assisted the CFTC in this investigation.
The case was led by CFTC staff members Theodore Z. Polley III, Ken Hampton, William P. Janulis, Scott Williamson, Rosemary Hollinger, Richard B. Wagner, Tom Bloom, and Kurt J. Harms.
Source: CFTC.gov
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