CFTC Fines EOX, Futures International, OTC Europe for Capital Deficiencies
- The deficiencies resulted from the IBs’ failure to make deductions when valuing a credit line for an affiliated company.
The US Commodity Futures Trading Commission (CFTC) has hit three registered introducing brokers (IB) with regulatory fines for failing to adhere to certain regulations, including that they failed to meet minimum capital requirements.
The CFTC found that Texas-based EOX Holdings LLC, Futures International LLC of Chicago, and London-headquartered OTC Europe LLP were net-capital deficient, ranging between $9 million and $25 million.
The deficiencies resulted from the IBs’ failure to take required deductions when valuing a certain agreement to guarantee a revolving line of credit for an affiliated company. The CFTC further explains that the three IBs guaranteed to compensate for any drawdowns in the credit line. During the period, funds “were drawn on the line of credit on a monthly basis for the benefit of the affiliated company, in amounts ranging from $10 million to $26 million,” the regulator said.
None of the three IBs deducted the amount of the guaranteed drawdown in its calculation of adjusted net capital, which facilitates recovery of customer assets if the broker becomes insolvent. As such, they did not fully recognize this shortfall, as well as the fact that it was actually undercapitalized during the relevant time.
OANDA Fined for Similar Reasons
CFTC has issued an order filing and simultaneously settling charges against the three introducing brokers. To resolve the CFTC’s complaint, they each agreed to pay a penalty of $120,000 and, among other things, cease and desist from further violations of its capital requirements.
Last month, the CFTC also fined OANDA Corporation $500,000 for similar lapses in net capital requirements. The charges were that OANDA failed to meet the minimum financial requirements for RFEDs and FCMs and violated the equity withdrawal restriction that resulted from making dividend Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term on three occasions.
The order found that each of these violations was a result of OANDA’s inadequate internal controls and its failure to supervise matters related to handling its business compliance as a CFTC registrant.
Under CFTC regulations, a retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term firm must at all times maintain adjusted net capital (ANC) of $20 million, or more in certain circumstances. Events triggering a shortfall in these requirements typically require filings within very short time periods.
The watchdog said that in settling the matter, it took into account OANDA’s cooperation in the investigation and the corrective actions the company undertook after its deficiencies were discovered. Furthermore, it found no indication that OANDA customers suffered losses as a result of the firm’s net capital and equity withdrawal lapses.
The US Commodity Futures Trading Commission (CFTC) has hit three registered introducing brokers (IB) with regulatory fines for failing to adhere to certain regulations, including that they failed to meet minimum capital requirements.
The CFTC found that Texas-based EOX Holdings LLC, Futures International LLC of Chicago, and London-headquartered OTC Europe LLP were net-capital deficient, ranging between $9 million and $25 million.
The deficiencies resulted from the IBs’ failure to take required deductions when valuing a certain agreement to guarantee a revolving line of credit for an affiliated company. The CFTC further explains that the three IBs guaranteed to compensate for any drawdowns in the credit line. During the period, funds “were drawn on the line of credit on a monthly basis for the benefit of the affiliated company, in amounts ranging from $10 million to $26 million,” the regulator said.
None of the three IBs deducted the amount of the guaranteed drawdown in its calculation of adjusted net capital, which facilitates recovery of customer assets if the broker becomes insolvent. As such, they did not fully recognize this shortfall, as well as the fact that it was actually undercapitalized during the relevant time.
OANDA Fined for Similar Reasons
CFTC has issued an order filing and simultaneously settling charges against the three introducing brokers. To resolve the CFTC’s complaint, they each agreed to pay a penalty of $120,000 and, among other things, cease and desist from further violations of its capital requirements.
Last month, the CFTC also fined OANDA Corporation $500,000 for similar lapses in net capital requirements. The charges were that OANDA failed to meet the minimum financial requirements for RFEDs and FCMs and violated the equity withdrawal restriction that resulted from making dividend Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term on three occasions.
The order found that each of these violations was a result of OANDA’s inadequate internal controls and its failure to supervise matters related to handling its business compliance as a CFTC registrant.
Under CFTC regulations, a retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term firm must at all times maintain adjusted net capital (ANC) of $20 million, or more in certain circumstances. Events triggering a shortfall in these requirements typically require filings within very short time periods.
The watchdog said that in settling the matter, it took into account OANDA’s cooperation in the investigation and the corrective actions the company undertook after its deficiencies were discovered. Furthermore, it found no indication that OANDA customers suffered losses as a result of the firm’s net capital and equity withdrawal lapses.