A registered futures commission merchant ("FCM") settled CFTC charges for engaging in prohibited noncompetitive, fictitious wash sales. The CFTC found that the conduct resulted in "hundreds" of trades in violation of CFTC regulations.
According to the CFTC, the FCM engaged in approximately 385 noncompetitive, fictitious and wash sales involving Exchange for Physical (or "EFP") transactions. The CFTC found that 217 of the transactions took place post-entry of a Consent Order, resolving a CFTC enforcement action against the FCM's parent company for wash and fictitious transactions.
The CFTC stated that the FCM's failure to fulfill its supervisory requirements resulted in further violations of CFTC rules through its failure to (i) file quarterly Risk Exposure Reports in a timely manner, (ii) accurately state the "effectiveness" of its Risk Management Program in its Chief Compliance Officer Reports and (iii) update and maintain required records.
To settle the charges, the FCM agreed to (i) cease and desist from further violations of certain CFTC rules, (ii) pay a civil monetary penalty of $5 million, (iii) pay any post-judgment interest and (iv) comply with the conditions and undertakings outlined in the Offer.
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