Chicago-based futures firm Advantage Futures LLC, its Chief Executive Officer Joseph Guinan, and former Chief Risk Officer William Steele will collectively pay $1.5 million to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC). The CFTC alleges failures in supervision, risk management, and inaccurate reporting to the agency.
The CFTC’s order, issued September 21, 2016, details violations of the Commodity Exchange Act (CEA) and related regulations occurring between November 2011 and August 2015. Specifically, Advantage Futures and Guinan were charged with failing to adequately supervise customer accounts, despite receiving warnings from three exchanges regarding potentially unlawful trading activity by a specific client. These exchanges flagged trading patterns consistent with spoofing and manipulation.
According to the CFTC, Advantage Futures did not promptly investigate these concerns, though it eventually restricted the customer’s trading in the flagged contracts. Crucially, the firm failed to extend increased scrutiny to the customer’s trading in *other* markets, allowing the suspect activity to continue. William Steele, as Chief Risk Officer, was found responsible for deficient risk management and credit risk practices, including failures to adhere to established company policies.
This case marks the CFTC’s first enforcement action concerning Regulations 1.11 and 1.73, which outline risk management and supervisory obligations for Futures Commission Merchants (FCMs). The order requires Advantage Futures to implement improvements to its policies, procedures, and oversight practices, focusing on strengthening its Risk Management Program and Risk Department. The $1.5 million penalty will be paid jointly and severally by Advantage Futures, Guinan, and Steele.
The CFTC’s investigation revealed that Advantage Futures lacked a sufficient system for establishing and enforcing risk tolerance limits, reviewing those limits, and managing exceptions, as required by CFTC rules. While the firm maintained written policies, they were not effectively implemented or followed.
Source: CFTC.gov
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