CFTC Fines Marex Brands in US and UK for Net Capital Lapses

The US securities regulator has fined global commodities brokerage, Marex North America LLC and its UK sister, Marex Spectron $370,000 in collective civil penalties for its alleged failure to maintain net capital above regulatory minimums.

The CFTC said that during a 33-month period, Marex would have been undercapitalized with net capital deficits ranging from $4 million to $75 million, which occurred on separate dates. The deficiencies arose because Marex did not take required deductions when calculating its Obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term under an agreement the company signed to guarantee a revolving credit line for an affiliated company.

If the affiliate’s drawdowns had been correctly taken as deductions, the firm would have inflows of cash that exceeded the amounts it should keep investing with existing operations.

The CFTC further alleges that UK-based Marex Spectron failed to maintain its required minimum net capital during various time periods when it was bound as a guarantor for the benefit of the affiliated company. Apparently, the company did not consult its compliance team as to how these transactions would impact its net capital position, which had resulted in deficits ranging between $14 million to $51 million.

Taken together, both Marex brands operated while they lacked the required minimum net capital in amounts ranging from $10 million to $95 million.

“If the affiliate’s drawdowns had been correctly taken as deductions, Marex, as a guarantor, would have been undercapitalized in the months when there were drawdowns. Likewise, Marex Spectron would have been undercapitalized in 6 of the 10 six-month periods Marex Spectron was bound as a guarantor," the CFTC said.

While introducing brokers are required to report their adjusted net capital every six months, neither Marex nor Marex Spectron deducted the guaranteed drawdowns in their calculation in order to reflect the potential effect of its actions on net capital.

Earlier today, the CFTC hit three registered introducing brokers with $360,000 in regulatory fines for similar lapses, namely the failure 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 watchdog said firms should look closely at their transactions with Affiliates Affiliates Affiliates serve as an essential component of a broker’s client acquisition tactics and marketing. One of the most important functions of affiliate marketers is the sending of leads to the broker, which are directly opening an account or visiting the broker’s website. There are several ways in which brokers are compensating affiliates based on the number and type of clients they refer to the company and whether or not or how much they end up depositing.Understanding CPA or Cost Per Acquisition T Affiliates serve as an essential component of a broker’s client acquisition tactics and marketing. One of the most important functions of affiliate marketers is the sending of leads to the broker, which are directly opening an account or visiting the broker’s website. There are several ways in which brokers are compensating affiliates based on the number and type of clients they refer to the company and whether or not or how much they end up depositing.Understanding CPA or Cost Per Acquisition T Read this Term as it may not go under the same level of compliance review as transactions with third parties.