Washington, D.C. – The U.S. Commodity Futures Trading Commission (CFTC) announced settlements with FCStone, LLC, a Chicago-based futures commission merchant, and Commodity Operations Inc., formerly of New York, on March 13, 2012, for failing to adequately supervise a floor broker’s account.

The CFTC order mandates that FCStone and Commodity Operations jointly pay a $260,000 civil monetary penalty and cease any further violations of CFTC regulations concerning diligent supervision. The charges stem from a period between August 2007 and February 19, 2008, during which the firms allegedly neglected to properly oversee the floor broker’s trading of Sugar No. 11 futures contracts on ICE Futures U.S., Inc.

According to the CFTC, FCStone and Commodity Operations did not enforce their own internal compliance procedures, allowing the broker to repeatedly exceed account funding limits and trade with a negative balance. A principal at Commodity Operations reportedly violated company policy by personally loaning the broker funds to cover a margin call.

The broker’s excessive trading culminated in a margin call exceeding $2.9 million on February 19, 2008. Furthermore, the firms permitted the broker to utilize another broker’s login credentials to access ICE Futures’ electronic trading platform, a breach of security protocols. The CFTC acknowledged the assistance provided by ICE Futures U.S. in the investigation.

The case was led by CFTC Division of Enforcement staff members Karin N. Roth, David W. MacGregor, Lenel Hickson, Jr., Stephen J. Obie, and Vincent A. McGonagle.

Source: CFTC.gov

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