NEW YORK, NY – Mizuho Securities USA Inc. has been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for failing to promptly report secured fund deficiencies and for inadequate employee supervision, according to an order issued January 3, 2013. The firm, a registered Futures Commission Merchant (FCM) based in New York, will pay a $175,000 civil monetary penalty.
The CFTC found that Mizuho violated regulations 1.12(h) and 166.3. Regulation 1.12(h) requires FCMs to immediately report any deficiencies in secured funds—funds held to cover obligations to foreign futures and options customers—to the CFTC. Regulation 166.3 mandates diligent supervision of employees.
The investigation revealed that on October 7, 2011, Mizuho held $524,471,120 in secured accounts when it was required to hold $536,875,879, creating a deficiency of $12,404,759. A further deficiency of $41,019,145 was identified on October 10, 2011, with secured funds totaling $523,184,067 against a requirement of $564,203,212.
While Mizuho did cure the deficiencies on October 11, 2011, the CFTC determined that the firm failed to provide timely notice of the October 7th and 10th deficiencies, waiting until October 12, 2011, to alert the agency. The order also noted that Mizuho met its segregated funds requirements and maintained excess segregated funds throughout this period.
The CFTC found that Mizuho’s failure to provide adequate employee training regarding reporting obligations and the lack of policies mandating immediate notification contributed to the violations. The order requires Mizuho to cease and desist from violating CFTC regulations.
The case was led by CFTC Division of Enforcement staff members Elizabeth N. Pendleton, Rachel A. Hayes, Melissa Glasbrenner, William P. Janulis, Scott Williamson, Rosemary Hollinger, and Richard B. Wagner.
Source: CFTC.gov
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