The US Commodity Futures Trading Commission (CFTC) has hit retail FX broker FXDD with a $600,000 fine for failing to adhere to CFTC regulations prior to it pulling out of the US market.
CFTC has issued an order filing and simultaneously settling charges against FXDirectDealer LLC, which is still a CFTC-registered retail foreign exchange dealer (RFED) and futures commission merchant (FCM) headquartered in New York, however the firm has formally withdrawn its membership following the sale of its US accounts to FXCM earlier this year.
The charges were that FXDD failed to meet the minimum financial requirements for RFEDs and FCMs, failed to supervise its employees and failed to comply with a prior CFTC administrative order dated 30 September, 2013. The prior order fined FXDD $275,000 for failing to meet minimum capital requirements under US rules.
Under CFTC regulations, RFEDs and FCMs that offer or engage in retail FX transactions must at all times maintain adjusted net capital (ANC) of $20 million, or more in certain circumstances. In the prior order, the CFTC found that FXDD failed to maintain its required ANC during at least 18 separate months between November 2010 and December 2012, and ordered FXDD to, among other things, cease and desist from further violations of its ANC requirements.
According to the most recent order, during the period 20 March, 2013 to 11 December, 2013, FXDD improperly included certain funds held in an account at an unregulated entity in its ANC computations. After excluding those funds as required, the order finds that FXDD was under-capitalised for 96 days between 24 April, 2013 and 13 December, 2013. Additionally, the order finds that FXDD was under-capitalised for 41 days between 30 September, 2013 and 13 December, 2013 in violation of the prior order.
The new order also finds that FXDD violated CFTC minimum financial requirements by making three prohibited equity withdrawals between 13 January, 2014 and 14 February, 2014.
Each of these violations, the order finds, was a result of FXDD’s inadequate supervisory system and its failure to diligently supervise employees, officers and agents with respect to the handling and monitoring of FXDD’s compliance with its minimum financial requirements.
The order imposes a $600,000 civil monetary penalty against FXDD for its violations, as well as a cease and desist order and a three-year registration ban as an FCM or RFED.
CFTC says that in settling the matter, it took into account the corrective action that FXDD undertook after its deficiencies were discovered and FXDD’s pending request to withdraw its registrations as an FCM and RFED. It is understood that without these actions, the firm could have been facing a fine up to $1,250,000.