Foreign FCM and principal fined for failure to supervise

The CFTC had simultaneously filed and settled charges against London-based Futures Commission Merchant (“FCM”) Enskilda Futures Ltd. (“EFL”) and Swedish firm Skandinaviska Enskilda Banken AB (“SEB”). According to the order, SEB failed to supervise commodities accounts held at EFL. SEB is a financial services group that wholly owns EFL’s parent company, and in this way directs and controls EFL’s FCM activities. The defendants have been ordered to jointly and severally pay $150,000 in civil monetary penalties.

In the order, the CFTC states that between February 5 and June 9, 2010, EFL did not develop an adequate internal supervision and control system which would prevent violations to the CEA and relevant CFTC regulations like washes or fictitious sales. EFL is therefore found to have failed to diligently supervise its partners, officers, employees, and agents handling commodity interest accounts at the FCM.

Furthermore, the order holds SEB liable for EFL’s failures because SEB acted as EFL’s principal. The FCM’s six board members are also SEB employees. EFL does not even have employees or offices, but is entirely dependents on SEB and its employees to provide services and facilities to continue to operating, including management, compliance, audit services, legal and risk management services, and IT network and operations. The FCM is not even involved in the solicitation of clients and acceptance of orders, or have client contact. EFL uses the parent company’s policies and procedures, and transactions listed under EFL on U.S. futures exchanges are really orchestrated by SEB.

Read more about this CFTC enforcement action.
Creative Commons License photo credit: .Martin.

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About the Author

Felix Shipkevich
Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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