Washington, D.C. – Commodity futures brokerage FCStone, LLC has been penalized $140,000 by the U.S. Commodity Futures Trading Commission (CFTC) for failing to adequately supervise its employees and maintain proper oversight procedures, the agency announced May 1, 2015.
The CFTC order requires FCStone to cease and desist from violating CFTC Regulation 166.3, which mandates adequate supervision of employees. The investigation revealed deficiencies in FCStone’s policies and procedures regarding the transfer of positions between customer accounts between 2008 and May 2013.
Specifically, the CFTC found FCStone lacked a formal written policy governing position transfers between accounts. While an unwritten policy existed requiring employees to seek guidance for transfers between accounts not under common control, it failed to address the critical issue of beneficial ownership. According to the CFTC, transfers are permissible if the underlying beneficial ownership remains consistent between accounts.
In one instance, FCStone employees transferred approximately $20 million in gold and silver positions from an individual’s personal account to a corporate account where the individual held a 98.95% ownership stake. The transfer was mistakenly believed to be permissible due to a shared large trader number and the individual’s control over both accounts. However, differing tax identification numbers revealed the accounts did not share the same beneficial ownership, as the corporate account had minority owners.
The CFTC noted FCStone’s full cooperation with the investigation and its proactive revision of written procedures regarding position transfers following the discovery of the issue. James Deacon and Rick Glaser of the CFTC’s Division of Enforcement led the investigation.
FCStone, LLC is headquartered in New York, New York and is registered with the CFTC as a Futures Commission Merchant (FCM).
Source: CFTC.gov
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