On September 24, 2014, The mission of the Commodity Futures Trading Commission (CFTC), an independent agency of the United States
government that regulates futures and option markets, has published a Press orders FXDirectDealer, LLC (FXDD) to pay $600,000 and three-year registration ban as an FCM or RFED for Violating Minimum Financial Requirements and a Prior CFTC Order. Detailed as follow:
FXDirectDealer, LLC Ordered to Pay $600,000 Civil Monetary Penalty and to Comply with Three-Year Registration Ban as FCM or RFED for Violating Minimum Financial Requirements and a Prior CFTC Order
Firm’s Supervisory Failures Led to Repeated and Extended Periods of Undercapitalization
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against FXDirectDealer, LLC (FXDD), a CFTC-registered Retail Foreign Exchange Dealer (RFED) and Futures Commission Merchant (FCM) headquartered in New York, New York, for failing to meet the minimum financial requirements for RFEDs and FCMs, failing to supervise its employees, and failing to comply with a prior CFTC administrative order dated September 30, 2013 (Prior Order) (see CFTC Press Release 6725-13). FXDD has been registered with the CFTC as an FCM since December 10, 2009 and as an RFED since September 2, 2010.
Under CFTC Regulations, RFEDs and FCMs that offer or engage in retail foreign exchange (forex) 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 Order, during the period March 20, 2013 to December 11, 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 undercapitalized for 96 days between April 24, 2013 and December 13, 2013. Additionally, the Order finds that FXDD was undercapitalized for 41 days between September 30, 2013 and December 13, 2013 in violation of the Prior Order. The Order also finds that FXDD violated CFTC minimum financial requirements by making three prohibited equity withdrawals between January 13, 2014 and February 14, 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. The Order notes that in settling this matter, the CFTC 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.
The CFTC thanks the National Futures Association for its assistance.
CFTC Division of Enforcement staff members responsible for this case are Rachel Hayes, Charles Marvine, and Richard Wagner. Kevin Piccoli, Gerald Nudge, Robert Loeber, and Nicholas Chiacchere of the CFTC’s Division of Swap Dealer and Intermediary Oversight also assisted in this matter.