The U.S. Commodity Futures Trading Commission (CFTC) today filed and settled charges against Mizuho Securities of New York for regulatory violations. Among these: Mizuho apparently failed to notify the CFTC of secured fund deficiencies and to “diligently supervise its employees.” As a result of the violations, the CFTC has ordered Mizuho Securities to pay a $175,000 civil monetary penalty and orders Mizuho to cease and desist from violating CFTC regulations.
From the CFTC statement:
The Commodity Exchange Act and CFTC regulations contain provisions to protect the funds of customers trading on both U.S. and foreign exchanges. In relation to customers trading on foreign exchanges, an FCM must account for and maintain money, securities, and property (collectively “funds”) in an amount at least sufficient to cover or satisfy all of its current obligations to foreign futures and options customers in a separate “secured account.”
The CFTC reports that Mizuho was required to hold $536,875,879 in secured funds as of October 7, 2011. It fell somewhat short of this mark. It appears, however, that Mizuho had enough an “excess of segregated funds,” according to a statement issued by the CFTC.
According to the CFTC statement, Mizuho Securities rectified the problem on the day it occurred.
Mizuho became aware of its deficiency in secured funds on Tuesday, October 11, 2011, and cured it that same day. However, Mizuho failed to provide notice of the deficiencies on October 7 and 10 to the CFTC until Wednesday, October 12, 2011.
The CFTC order further finds that Mizuho failed to diligently supervise its employees by failing to provide adequate employee training regarding their obligations to comply with regulation 1.12(h), and because Mizuho did not have policies or procedures in place mandating immediate notification to both the CFTC and its DSRO of any segregated or secured fund deficiency.