Chicago, IL – X-Change Financial Access LLC (XFA) has been slapped with a $150,000 penalty by the Commodity Futures Trading Commission (CFTC) for failing to adequately supervise its employees and maintain proper records, according to an order filed on May 29, 2018.
The CFTC found that between January 2013 and January 2014, XFA allowed a client – a registered commodity pool operator and advisor – to engage in an illegal post-execution allocation scheme. This scheme involved the client favoring accounts with personal financial interest with profitable trades, while assigning losing or less profitable trades to customer accounts.
Investigators discovered XFA lacked written policies and training for handling post-execution allocation of trades. A floor broker employed by XFA processed the client’s allocations despite clear warning signs the client was violating CFTC regulations. The client had previously been flagged by the National Futures Association (NFA) with regulatory actions, including prohibitions on soliciting funds and a complete trading ban.
Despite the NFA’s sanctions, the client continued trading through a newly created account under their spouse’s name. The XFA broker executed trades in this account even after the trading ban was in effect. The CFTC determined XFA’s failure to recognize the relationship between the client and the spouse’s account highlighted the inadequacy of their compliance procedures.
Further compounding the issues, XFA failed to preserve complete records of allocated orders and did not maintain electronic records in their original format. The CFTC order mandates XFA pay the $150,000 penalty and cease any further violations of the Commodity Exchange Act. The CFTC acknowledged the assistance of the NFA in the investigation.
Lucy C. Hynes, George H. Malas, Christine M. Ryall, and Paul G. Hayeck of the CFTC’s Division of Enforcement led the case.
Source: CFTC.gov
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