October 9, 2014
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the issuance of an Order filing and settling charges against Kent Woods of Chicago, Illinois, a longtime floor broker in the soybean commodity futures pit at the Chicago Board of Trade (CBOT), for failing to comply with applicable record-keeping and audit trail rules, the belated creation of trading records containing fictitious information that were submitted for clearing, engaging in unauthorized trading, and failure to supervise employees of Futures International LLC, a Chicago-based Introducing Broker of which he was a principal.
The CFTC also announced today that it filed a civil Complaint in the U.S. District Court, Northern District of Illinois, against Futures International LLC (FI) and its Chief Operating Officer Amadeo Cerrone, a principal of the firm, alleging violations arising from the same underlying set of facts in the CFTC Order.
The CFTC Order finds, and the Complaint alleges, that from at least January 2009 to at least November 2012, Woods communicated with his clients on a regular basis to discuss their trading intentions, but that Woods habitually failed to obtain or record specific order instructions from his customers. As alleged, Woods frequently executed, or directed his staff at FI to execute, soybean orders without the customer specifying the precise commodity interest to be purchased or sold and the exact amount of the commodity interest to be purchased or sold. The CFTC Order further finds that because Woods did not possess a power of attorney over his commercial customers’ accounts, his exercise of discretion over their accounts in placing and executing trades was unauthorized under CFTC Regulations, even in the absence of customer complaints.
According to the CFTC Order and the Complaint, Woods routinely failed to record customer orders on order tickers immediately upon receipt of order instructions from FI customers, and instead documented the order instructions and “fill” information only after the orders were executed. The CFTC Order further finds and the Complaint further alleges that Woods’ co-workers timestamped blank floor order tickets throughout the trading session and used those “pre-timestamped” order tickets to document Woods’ trades, sometimes hours after execution, so that it appeared as though Woods had complied with the applicable record-keeping requirements. According to the CFTC Order and Complaint, these floor order tickets bearing false timestamps were subsequently submitted to the CBOT, in violation of the Commodity Exchange Act (CEA).
In addition, the CFTC Order finds that Woods conducted commodity futures business via instant messages, but he failed to maintain full and complete records of those communications, in violation of CFTC Regulations. The Complaint similarly alleges that FI and Cerrone failed to maintain full and complete records of the company’s commodity futures business-related instant messages in violation of CFTC Regulations. The CFTC Order and Complaint both reflect that the inability to produce complete records hindered the CFTC’s ability to investigate violations of the CEA and CFTC Regulations.
According to the Order, Woods did not implement adequate procedures at FI, nor did he diligently supervise FI’s employees to ensure compliance with the federal commodities law, in violation of CFTC Regulations. According to the Complaint, FI and Cerrone also failed to implement adequate procedures and diligently supervise employees to ensure compliance with the law, in violation of CFTC Regulations.
The CFTC Order requires Woods to pay a $200,000 civil monetary penalty. The Order also requires Woods to cooperate in any related action and to execute all non-electronic orders only through his current employer’s floor desk for two years. The Order further permanently prohibits Woods from further violations of the CEA and CFTC Regulations, as charged.
In the litigation against FI and Cerrone, the CFTC seeks disgorgement of all benefits received as a result of the unlawful conduct, civil monetary penalties, and permanent injunctions against further violations of the CEA and the Regulations, as charged.
CFTC Division of Enforcement staff members responsible for this case are Allison Passman, Theodore Polly, Joseph Patrick, Nancy Hooper, Susan Gradman, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
Last Updated: October 9, 2014