UPDATE:Updating, 10/13/2014 with additional CFTC finding in 2014.
UPDATE: I am going to start adding Secured (30.7) violations and FCM minimum capital violations too. I also changed the blog post title. This post still does not include LIBOR violations, nor various precious metal scams, nor simple supervision violations.
Since, alas, it has become so hard to keep track of all the FCM violations of Customer Seg Funds regulations, I decided to create this so I have one place to refer to in the future. Note please that these are only Customer Seg violations, not violations of 30.7 regs nor of Retail Foreign Exchange Dealer (RFED) net capital requirements. Not various and sundry other ponzi schemes, fraudulent precious metal scams, or other violations. These are all just violations of the U.S. Customer Segregation rules and regulations. This post also doesn’t include the many and varied enforcement actions against all the bankers caught up in the LIBOR rip-off/scandal.
Source: Enforcement actions as archived on the CFTC website.
October 8, 2014: Friedberg Mercantile Group (FMG): Firm was under-secured (30.7) in early February, 2013. Friedberg.
September 24, 2014: FXDirectDealer, LLC undercapitalized, under he CFTC’s FCM/Retail FX Dealer adjusted net capital rule requiring a minimum of $20MM. FXDirectDealer, LLC
May 19, 2014: Global Futures & Forex, Ltd., undercapitalized, under he CFTC’s FCM/Retail FX Dealer adjusted net capital rule requiring a minimum of $20MM. Global Futures & Forex, Ltd.
March 27, 2014: Morgan Stanley Smith Barney, under in Secured (30.7) funds and commingling customer and firm funds. MSSB.
September 30, 2013: ADM Investor Services (ADMIS): Ugh. Add ADM to the list. Caught commingling customer and prop accounts in their Customer Seg account. ADMIS This appears to have ended in July 2011 and probably was self-reported.
September 27, 2013: Vision Financial: fined for Seg violations in 2008/09. Vision Financial
September 27, 2013: R.J. O’Brien: an inter-account transfer from Secured (30.7) to Seg, for a non-clearing FCM for whom RJO cleared, put the non-clearing FCM into a Secured deficit. RJO Ops apparently made the transfer to cover a Seg margin deficiency for the omnibus account but never told the non-clearing FCM, nor called the non-clearing FCM for additional funds. R.J. O’Brien
June 19, 2013: ABN Amro Chicago: fined for violations in 2011. ABN Amro
April 9, 2013: Interactive Brokers: the firm “failed to compute on a currency-by-currency basis the amount of customer funds on deposit and required to be on deposit in segregated accounts.” Interactive Brokers
February 19, 2013: Enskilda Futures Limited (EFL), a London-based Futures Commission Merchant (FCM) fined $125,000 for failure to maintain adequate capital after undermargining a proprietary omnibus account. Enskilda
January 3, 2013: Muzuho Securities fined for Secured 30.7 violations. Mizuho Securities
December 3, 2012: MBF: Federal Court Orders MBF Clearing Corp. to Pay $650,000 for Violating Customer Fund Segregation Requirements. MBF judgement
November 21, 2012: Cantor Fitzgerald:operational inadequacies and under seg. Cantor Fitz
October 10, 2012: Farr Financial. (I had somehow missed this one last year. I’d also never heard of Farr Financial before now.) Improper investment of customer segregated funds. Farr Financial
July 10, 2012: Peregrine Financial: the infamous Russ Wasendorf theft of $215 million. Peregrine Financial and Russ Wasendorf.
April 4, 2012: JP Morgan: fined $20 million for using the customer seg funds of a FCM called LBI as “net free equity” covering intra-day credit that JP Morgan extended to LBI over a 22-month period. During the Lehman bankruptcy, when LBI requested JP Morgan to release the customer seg funds, JP Morgan refused because it was using the customer money to cover LBI proprietary credit lines. J. P. Morgan 2012
March 13, 2012: MBF: This is the original CFTC complaint against MBF, settled on December 3rd above. MBF original charges.