June 27, 2017
CFTC Orders Hong Kong-Based Huafu HK Co. Ltd. to Pay $225,000 for Reporting Violations
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Huafu HK Co. Ltd. (Huafu), a corporation based in Hong Kong, for failing to file CFTC Form 304 reports, reporting its call cotton purchases and sales when it held or controlled at least 100 cotton futures positions. The CFTC previously issued a market Advisory reminding cotton market participants wherever they are located of their ongoing obligation to comply in a timely manner with applicable reporting obligations (see CFTC Staff Advisory No. 13-14, Obligation of Reportable Market Participants to File CFTC Form 304 Reports for Call Cotton in a Timely Manner as Required by Commission Regulation 19.02, May 8, 2013).
The CFTC Order requires Huafu to pay a $225,000 civil monetary penalty and prohibits it from committing future violations of CFTC Regulation 19.02, as charged.
The Order states that Huafu will undertake to adopt and maintain internal controls that are reasonably designed to ensure that the agents and employees under Huafu’s authority and control comply fully with the CFTC cotton reporting regulations, including, but not limited to, designating a specific individual or individuals with responsibility for filing CFTC Form 304. The Order further states that Huafu will undertake to provide its employees with training to ensure future compliance with CFTC requirements and to back-file the CFTC Forms 304 that previously should have been filed with the CFTC.
Specifically, the Order finds that, on approximately 78 occasions, between May 2012 and June 2015, Huafu held or controlled at least 100 cotton futures positions but did not file weekly CFTC Form 304 reports as required. Cotton merchants and dealers that hold or control at least 100 cotton futures positions (the reportable level for cotton futures contracts under CFTC Regulations), are required to file weekly CFTC Form 304 reports that show their call cotton purchases and sales as of the close of business Friday, and file no later than two business days following the date of the report.
According to CFTC Regulations cited in the Order, call cotton refers to “spot cotton bought or sold, or contracted for purchase or sale at a price to be fixed later based upon a specified future.”
The CFTC acknowledges the assistance of Janet Briner, Kelly Beck, and Matthew Hunter of the CFTC’s Division of Market Oversight and Andrew Balzano of the CFTC’s Office of Data and Technology in connection with this matter.
The Division of Enforcement staff members responsible for this case are Elizabeth C. Brennan, Christopher Giglio, R. Stephen Painter, Jr., Lenel Hickson, Jr. and Manal M. Sultan.
Last Updated: June 27, 2017