Release Number 8614-22
CFTC Orders Wisconsin Broker to Pay Over $750,000 for Improper Trade Allocation and Additional Violations
October 20, 2022
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against Prime Agricultural Investors, Inc. (Prime), an introducing broker based in Wisconsin, and Chad Henderson, a Principal and Associated Person of Prime, for violations of the Commodity Exchange Act (CEA) and CFTC regulations relating to improper allocation of customer trades.
The order requires Prime to pay a $100,000 civil monetary penalty and Henderson to pay a $300,000 civil monetary penalty. Prime and Henderson will also be required to pay $463,459.65 in restitution. In addition, the order requires Prime to implement procedures and internal controls designed to prevent the improper allocation of trades. The order also permanently bars Henderson from trading customer funds in connection with transactions involving commodity interests.
According to the order, from January 2018 to September 2019, Henderson, in his capacity as an Associated Person and Principal of Prime, transferred profitable futures transactions from his customers’ commodity interest accounts to his own account. He also transferred his own unprofitable futures transactions to his customers’ accounts. As a result, Henderson allocated profits to himself that should have gone to his customers and avoided losses that he otherwise would have incurred. Based on these actions, during the relevant period, Prime and Henderson violated the CEA.
The order also finds that Prime failed to adopt internal policies and procedures to effectively prevent this type of improper trading activity. For instance, it did not have a policy requiring that someone, in addition to the individual broker, review trade transfer requests of the kind that Henderson routinely made. Prime also failed to diligently supervise Henderson in a manner sufficient to detect his repeated violations. Prime’s failure to implement robust policies and controls to prevent fraudulent trade transfers between employee and customer accounts and its failure to diligently supervise Henderson, constituted failure to supervise in violation of CFTC regulations.
In accepting the Offer of Settlement from Prime and Henderson, the CFTC recognizes their cooperation during the Division of Enforcement’s investigation of this matter.
The CFTC thanks the CME Group for its assistance in this investigation.
The Division of Enforcement staff members responsible for this action are Dmitriy Vilenskiy, Jennifer Blakley, Chrystal Gonnella, Jason Wright, A. Daniel Ullman II, and Paul Hayeck.