The US Commodity Futures Trading Commission (CFTC) has issued two orders filing and settling charges against inter-dealer broker Tullett Prebon Americasrequiring the firm to pay a total of $13 million for failing to supervise employees and making false or misleading statements to CFTC staff.
The first order requires Tullett to pay an $11 million civil monetary penalty; to cease and desist from violating CFTC regulations; and comply with certain undertakings for its failure to supervise voice brokers’ conduct on its US dollar medium term interest rate swaps desk.
The second requires the broker to pay a $2 million civil monetary penalty for making false or misleading statements. Specifically, this order stipulates that during the course of a CFTC investigation, at least one Tullett broker made false or misleading statements of material facts or omitted to state material facts to CFTC staff concerning the subject of the investigation. The statements, which violated the Commodity Exchange Act, were made within the scope of the broker’s employment or office at Tullett, and therefore the violation is deemed to be the act, omission, or failure of Tullett.
In the failure to supervise order, the CFTC finds that Tullett failed to implement supervisory procedures reasonably designed to prevent Tullett brokers on the desk from making false or misleading statements to Tullett customers relating to certain trades, bids, and offers. The failure to supervise order also finds that Tullett failed to take sufficient corrective action when the conduct was brought to management’s attention by a whistleblower, thereby allowing it to continue.
The failure to supervise order requires Tullett to comply with certain undertakings, including implementing direct personal supervision of the desk and deploying new software to monitor trades brokered by the desk; enhancing the firm’s review of voice-broking by such means as increased random review; publishing internal guidelines to its brokers on acceptable and prohibited voice-brokering conduct; seeking to ensure that customers understand the practice of voice-broking and the information disclosed; and implementing annual and new-hire training and certification of brokers on the desk.
“The CFTC is devoted to ensuring price transparency and competition in all markets, whether electronically traded futures contracts or voice-brokered swaps,” says CFTC director of enforcement James McDonald. “As important, the CFTC is committed to ensuring that its investigations and fact gathering processes are not obstructed by false or misleading information.”