Release Number 8602-22
CFTC Orders Futures Commission Merchant to Pay $500,000 for Supervision Failures Relating to Improper or Fictitious Trade Transfer Requests
September 29, 2022
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against ADM Investor Services Inc. (ADMIS), a registered futures commission merchant (FCM) in Chicago, Illinois. The order finds that ADMIS failed to supervise its employees and agents in their handling of commodity interest accounts, and failed to perform its supervisory duties diligently. The order requires ADMIS to pay a $500,000 civil monetary penalty and to cease and desist from any further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
“FCMs are obligated to adequately supervise their agents and employees,” said CFTC Acting Director of Enforcement Gretchen Lowe. “As this case shows, it is essential that registrants have adequate policies and procedures in place to deter and detect wrongdoing, and to ensure they perform their supervisory duties diligently.”
The order finds that from December 1, 2016 to September 1, 2019, ADMIS, a registered FCM, failed to diligently supervise the handling by its employees and agents of commodity interest accounts carried by ADMIS and introduced by ADMIS’ Guaranteed Introducing Brokers (GIBs), as well as the activities of its employees and agents relating to its business as a registered FCM. The order finds that prior to Spring 2018, ADMIS’ account review policies and procedures were inadequate because they failed to provide adequate guidance regarding account changes requests submitted by individual brokers. The order further finds that ADMIS failed to perform its supervisory duties diligently because it failed to detect repeated incidents in which brokers employed by ADMIS or ADMIS’ GIBs executed improper or fictitious trade transfer requests that violated the CEA and CFTC regulations. Through these transfers, which collectively persisted for several years, the brokers executed trades and then submitted improper or fictitious trade transfer requests to allocate winning trades to preferred customers or to accounts that they controlled or managed, while allocating losing trades to other accounts they controlled or managed.
In accepting ADMIS’ settlement offer, the CFTC recognizes ADMIS’ cooperation with the Division of Enforcement’s investigation of this matter.
The CFTC acknowledges and appreciates the assistance of the CME Group Inc. and the National Futures Association with this matter.
The Division of Enforcement staff members responsible for this matter are Janine Gargiulo, Benjamin J. Rankin, Trevor Kokal, Patryk J. Chudy, Lenel Hickson, Jr., and Manal M. Sultan.