Release Number 5639-09
For Release: March 26, 2009
CFTC Sanctions ADM Investor Services, Inc. $200,000 For Failing To Diligently Supervise Its Employees
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today simultaneously filed and settled charges against ADM Investor Services, Inc. (ADMIS) for violating rules governing post-execution allocations, maintenance of books and records, and supervision of its employees. The CFTC order sanctioned ADMIS with a $200,000 civil monetary penalty, among other things.
The CFTC entered an order on March 26, 2009, which finds that during 2002 to 2004, ADMIS, a Chicago-based registered futures commission merchant, failed to diligently supervise its employees concerning post-execution allocations of bunched orders.
According to the order, ADMIS had no written policy or procedures concerning post-execution allocations of bunched orders. To the extent ADMIS had unwritten procedures concerning such allocations, ADMIS on certain occasions failed to implement those procedures, the order finds. Additionally, ADMIS allowed an account manager to conduct post-execution allocations days after orders were originally executed and failed to maintain records that identify orders subject to the post-execution allocations. Finally, the order finds that ADMIS prepared, but failed to keep, forms related to such allocations.
Post-execution allocation is a procedure where an account manager is permitted to bunch customer orders together for execution, and to allocate them to individual accounts at the end of the day. Bunching of orders involves an account manager placing trades for two or more customers at the same time in the same order. By allowing all customers the opportunity to have their orders bunched, customers may receive better execution and better pricing of their orders. After the bunched orders are executed, an account manager must assign the trades to customers’ accounts, a process known as allocation. The allocation must be made in a manner that is fair and equitable.
The order also requires ADMIS to implement enhanced procedures to assure adherence to rules governing post execution allocation of trades.
The CFTC wishes to thank the National Futures Association for its cooperation in this matter.
The following Division of Enforcement staff was responsible for this case: W. Derek Shakabpa, Eliud Ramirez, Nathan Ploener, Manal Sultan, Lenel Hickson, Jr., Vincent A. McGonagle, and Stephen J. Obie.
Last Updated: March 26, 2009