The Commodity Futures Trading Commission has issued an
order filing and settling charges against R.J. O’Brien &
Associates, a CFTC-registered futures commission merchant
(FCM) based in Chicago, Illinois, for unlawfully commingling
secured foreign futures and options customer funds with
segregated domestic futures and options customer funds.
The CFTC Order requires RJO to pay a $125,000 civil
monetary penalty and orders RJO to cease and desist from
further violations of CFTC Regulation 30.7(d).
The Commodity Exchange Act (CEA) and CFTC Regulations
contain provisions to protect the funds of customers trading on
both US and foreign exchanges. In relation to customers trading
on foreign exchanges, an FCM must account for and maintain
money, securities, and property 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”.
Regulation 30.7(d) prohibits secured customer funds from being
commingled and deposited into the same accounts separately
held for segregated domestic futures and options customer funds.
On or about February 10, 2012, CFTC says RJO, as carrying
broker and depository for a non-clearing FCM, transferred
$1,586,000 from the non-clearing FCM’s secured omnibus
customer account (approximately $605,268 of which represented
secured foreign futures or foreign options customer funds) and
held, commingled, and deposited the secured customer funds in
the non-clearing FCM’s segregated omnibus customer account,
the Order finds. RJO transferred the funds to reduce a margin
deficiency in the non-clearing FCM’s segregated omnibus
account, without knowing whether the funds were part of the
non-clearing FCM’s secured account requirements, CFTC says.
Further, the Order finds that RJO did not make a margin call to
the non-clearing FCM and did not notify the non-clearing FCM
that it was transferring the funds from the non-clearing FCM’s
secured omnibus account.
According to the Order, on Monday, February 13, 2012, the
non-clearing FCM discovered that as a result of the transfer, it
had insufficient funds in its secured accounts to meet its
obligations to its secured customers. The non-clearing FCM had
sufficient funds otherwise available in other accounts to satisfy
the segregated fund’s margin call if RJO had not on its own
moved funds from the secured omnibus account. The non-
clearing FCM contacted RJO to reverse the transfer, which RJO
effected that morning. The non-clearing FCM reported to the
CFTC on the same morning that it did not have sufficient funds
to meet its obligations to its secured customers.
The CFTC Order finds that RJO, acting as a clearing FCM and
depository, failed to comply with Regulation 30.7(d), which
prohibits secured customer funds from being commingled with
segregated customer funds.