Chicago, IL – November 13, 2014 – The U.S. Commodity Futures Trading Commission (CFTC) announced charges and a settlement against Rosenthal Collins Group, LLC (RCG) today, citing failures in supervisory practices. The firm, a registered Futures Commission Merchant (FCM), was penalized for failing to adequately supervise an Associated Person and for lacking a sufficient supervisory program, violating CFTC Regulation 166.3.
The CFTC order mandates that RCG pay a $700,000 civil monetary penalty and disgorge $104,279 in commissions earned from the problematic trading activity. The firm must also cease and desist from further violations of CFTC Regulation 166.3.
The investigation revealed that between March 2008 and July 2013, RCG failed to diligently supervise an employee, referred to as AP #1, working in its Memphis, Tennessee branch. This employee conducted business on behalf of RCG while operating entirely from the office of a competing CFTC-registered FCM. The supervisor at the Memphis office was reportedly unaware that RCG’s policies prohibited employees from conducting business from external offices and took no corrective action.
During this five-year period, AP #1 not only introduced customer accounts to RCG and earned commissions, but also facilitated swap agreements for the other FCM, including transactions with multiple cattle feedyards. AP #1 also assisted in opening new futures accounts for these feedyards at RCG. Another RCG employee (AP #2) executed the trades, receiving all commissions from RCG, which were then split with AP #1 through personal checks, according to the CFTC. The Memphis office supervisor claims to have been unaware of this commission-sharing arrangement.
The CFTC found that RCG failed to provide adequate training on company policies to the Memphis office supervisor, did not maintain an effective supervisory program, and did not enforce its own established policies, constituting a violation of CFTC Regulation 166.3.
Brigitte Weyls, Stephanie Reinhart, Joseph Patrick, Susan Gradman, Scott R. Williamson, and Rosemary Hollinger of the CFTC Division of Enforcement were responsible for the investigation.
Source: CFTC.gov
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