New York, NY – December 3, 2012 – MBF Clearing Corp. has been ordered to pay a $650,000 civil monetary penalty and is permanently prohibited from further violations of Commodity Exchange Act (CEA) and CFTC regulations, according to a federal court order obtained by the U.S. Commodity Futures Trading Commission (CFTC).
The order, entered on November 28, 2012, by Judge Shira A. Scheindlin of the U.S. District Court for the Southern District of New York, stems from a CFTC complaint filed on March 13, 2012. The complaint alleged that from September 2008 through March 2010, MBF routinely held between $30 million and $90 million in customer funds in an account not legally qualified for segregated funds.
Specifically, the account lacked a legal obligation to make funds available for customer redemption within one business day and was not properly designated as a “customer segregated funds” account. MBF also failed to obtain necessary acknowledgements from the financial institution confirming the segregated status of the funds, and similar acknowledgements for at least six other accounts holding customer funds.
The CFTC also charged MBF with supervisory failures, citing a lack of written policies and procedures governing the opening and maintenance of customer segregated accounts. David Meister, Director of the CFTC’s Division of Enforcement, emphasized the importance of strict compliance with segregated account requirements, stating the agency “will not tolerate less” when it comes to protecting customer funds.
The order permanently enjoins MBF and its successors from violating the CEA’s customer segregated funds provisions and from failing to diligently supervise employees to ensure proper fund segregation. The case was led by CFTC staff including Elizabeth N. Pendleton, Melissa Glasbrenner, William P. Janulis, Michael P. Geiser, Joseph Rosenberg, Rosemary Hollinger, Scott R. Williamson and Richard B. Wagner, with assistance from Nicholas Chiacchere and Robert Laverty of the Division of Swap Dealer and Intermediary Oversight.
Source: CFTC.gov
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