Release Number 8679-23

CFTC Orders Puerto Rico Commodity Pool Operator to Pay $150,000 for Supervision and Reporting Violations

March 21, 2023

Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against DARMA, LLC, a registered commodity pool operator and commodity trading advisor located in Puerto Rico, for violating CFTC regulations for supervision and reporting.

Specifically, the order finds DARMA failed to diligently supervise its fund administrator’s activities, resulting in DARMA’s failure to accurately prepare and distribute timely pool statements to pool participants. It also resulted in DARMA’s failure to file its annual audited pool financial statement (AFS) with the National Futures Association (NFA) in a timely manner.

The CFTC order requires DARMA to pay a $150,000 civil monetary penalty and to cease and desist from further violations of CFTC’s regulations, as charged.

Case Background

The order finds that since September 2018, DARMA operated two exempt commodity pools. In November 2018, DARMA hired a third-party fund administrator to calculate the pools’ net asset value (NAV), which was a necessary component of the pool statements that DARMA was required to prepare and distribute to its pool participants. The administrator was consistently late in providing NAVs to DARMA and, when provided, the NAVs were often inaccurate, resulting in the preparation of inaccurate pool statements that were repeatedly distributed to pool participants well past the regulatory deadline. Further, in many instances the pool statements needed to be revised and restated. DARMA also failed to file and distribute its AFS, which was to be prepared by the Administrator, with the NFA in a timely manner. 

The order further finds that despite these issues, DARMA did not begin the process of hiring a new fund administrator until November 2019 and did not end its relationship with the administrator until March 2020. This was almost 13 months after DARMA first became aware of the administrator’s lateness in preparing the pool statement for January 2019, and 10 months after it first became aware of the administrator’s inaccuracy. Accordingly, as the order finds, DARMA failed to establish and implement an adequate supervisory system through enforcement of adequate policies and procedures. DARMA also failed to diligently supervise its administrator and thereby ensure pool statements were accurately prepared and distributed to pool participants within the proper timeframe and that the AFS was filed with the NFA in a timely manner. 

The CFTC’s recognition of DARMA’s substantial cooperation and remediation is reflected in the form of a reduced civil monetary penalty.   

The CFTC acknowledges the assistance of the NFA in this matter.

The Division of Enforcement staff members responsible for this case are Katherine Rasor, Xavier Romeu-Matta, Karin Roth, Judith M. Slowly, David MacGregor, Steven Ringer, Lenel Hickson, Jr., and Manal M. Sultan.