November 27, 2012
CFTC Orders Benjamin Hutchen, Formerly of Morgan Stanley & Co. LLC, to Pay a $300,000 Civil Monetary Penalty for Engaging in Unlawful Noncompetitive Futures Trades
CFTC also suspends Hutchen’s registration for a four-month period
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges that Benjamin Hutchen arranged the unlawful execution of numerous noncompetitive futures trades over an 18-month period, which constituted “fictitious sales” and resulted in the reporting of non-bona fide prices in violation of the Commodity Exchange Act (CEA) and a CFTC regulation. Hutchen, of Winnetka, Ill., was at the time of these violations a managing director and branch manager of Morgan Stanley & Co. LLC (Morgan Stanley), a futures commission merchant (FCM).
The CFTC order requires Hutchen to pay a $300,000 civil monetary penalty and suspends his registration as an Associated Person for a four-month period. The order also prohibits Hutchen from violating Section 4c(a) of the CEA and CFTC regulation 1.38(a), as charged.
According to the order, from at least April 18, 2008 through October 29, 2009, Hutchen arranged the execution of numerous off-exchange trades, primarily in Eurodollar and Treasury Note futures contracts, and caused those trades to be improperly reported to the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) as exchanges for related positions (EFRPs). The trades, however, were not lawful EFRPs as they lacked the corresponding and related cash, over-the-counter (OTC) swap, OTC Option, or other OTC derivative (collectively, “cash or OTC derivative”) positions required to constitute valid EFRPs, pursuant to CME and CBOT rules, the order finds. As a result, the trades constituted “fictitious sales” and resulted in non-bona fide prices being reported, in violation of Section 4c(a) of the CEA and CFTC regulation 1.38(a), the order finds.
On June 5, 2012, the CFTC filed and settled a related action against Morgan Stanley, charging Morgan Stanley with the same violations and a related failure to diligently supervise violation, and imposing a $5 million civil monetary penalty (see CFTC Press Release 6270-12, June 5, 2012).
The CFTC appreciates the assistance of the CME Group in this investigation.
CFTC Division of Enforcement staff members responsible for this case are Brian G. Mulherin, Timothy M. Kirby, Brandon Tasco, Gretchen L. Lowe, and Vincent A. McGonagle.
Last Updated: November 27, 2012