CFTC sues Chicago broker for trade violations, lax supervision

Thu Oct 9, 2014 5:03pm EDT
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By Tom Polansek

CHICAGO Oct 9 (Reuters) - The compliance officer of a futures brokerage that was a top player in a market on the Chicago Board of Trade floor never reviewed company policies on floor operations or oversaw activities related to the trading floor, U.S. regulators said on Thursday in a lawsuit charging the firm with violations.

The Commodity Futures Trading Commission, in a civil complaint filed in U.S. district court in Chicago, said Futures International and its chief operating officer, Amadeo Cerrone, failed to properly supervise employees, created trading records with false information and engaged in unauthorized trading.

Kent Woods, who ran the brokerage from 2009 to 2012, agreed to pay $200,000 to settle similar charges as part of an agreement with the CFTC.

Futures International declined to comment on the lawsuit. Woods, who left the firm last year and now works for another Chicago brokerage, could not be reached for comment.

The company was one of the largest participants, if not the largest, in the soy crush market on the CBOT floor, which soybean processors often use to manage their risks, according to the CFTC.

Woods, a longtime CBOT floor broker, habitually failed to obtain or record order instructions from his customers and improperly made trading decisions on their behalf, the lawsuit said. He placed trades without knowing which accounts would eventually receive them and then "shopped" the trades to potentially interested customers, according to the complaint.

Futures International had a compliance officer from 2004 to 2012 who had no experience in trading floor operations, never visited the floor to observe employees and did not oversee floor activities, the lawsuit said.

A senior clerk whom Cerrone said was responsible for ensuring compliance with CFTC rules about trading desk activities was never told that those were her responsibilities, according to the complaint. The employee and others at the firm were involved in a practice of improperly stamping ticket orders on the trading floor with false timestamps to disguise unauthorized trading practices, the complaint said.   Continued...