CFTC Sanctions MF Global Inc. $10 Million for Significant Supervision Violations between 2003 and 2008
CFTC charges relate to risk supervision failures in four separate instances.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against MF Global Inc., a registered futures commission merchant, and its predecessor corporation, Man Financial Inc. (collectively, “MF Global”), relating to risk supervision failures in four separate instances between 2003 and 2008.
The CFTC order imposes a $10 million civil monetary penalty on MF Global. The order also requires MF Global to comply with several undertakings, including enacting policies and procedures to enhance risk monitoring procedures, training, compliance procedures and compliance audit procedures. MF Global will also undertake an Independent Review and Assessment, which will be conducted by Eugene Ludwig of Promontory Financial Group. The Assessment will, among other things, review the effectiveness of existing and future Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term, supervisory and compliance policies and procedure at MF Global.
Specifically, the CFTC order finds that, from 2003 to 2008, MF Global failed in four separate instances to ensure that its risk management, supervision and compliance programs comported with 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 to supervise diligently its business as a CFTC registrant.
In one instance, MF Global failed to diligently supervise the trading activities of an associated person (AP) on February 26-27, 2008, resulting in wheat futures trading losses by MF Global of more than $141 million. MF Global further failed to provide appropriate supervisory training to the Branch Office supervisors in the office where the trading losses occurred. The AP began trading with a debit balance of $3,004. By 6:00 am (CT) on February 27, 2008, when the overnight trading session ended, the AP held a short position in all wheat futures months combined totaling 16,428 contracts. The AP's excessive overnight trading went undetected by MF Global’s designated risk monitoring staff in New York, Singapore and London. A staff member of MF Global’s Risk Department became aware of the AP’s position by 10:40 am (CT) on February 27, 2008. After the AP’s positions were confirmed by MF Global personnel, MF Global management ordered that the AP’s access to the trading system be shut off, which was effected by 11:18 am (CT).
Read the rest here.
CFTC charges relate to risk supervision failures in four separate instances.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing and simultaneous settlement of charges against MF Global Inc., a registered futures commission merchant, and its predecessor corporation, Man Financial Inc. (collectively, “MF Global”), relating to risk supervision failures in four separate instances between 2003 and 2008.
The CFTC order imposes a $10 million civil monetary penalty on MF Global. The order also requires MF Global to comply with several undertakings, including enacting policies and procedures to enhance risk monitoring procedures, training, compliance procedures and compliance audit procedures. MF Global will also undertake an Independent Review and Assessment, which will be conducted by Eugene Ludwig of Promontory Financial Group. The Assessment will, among other things, review the effectiveness of existing and future Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term, supervisory and compliance policies and procedure at MF Global.
Specifically, the CFTC order finds that, from 2003 to 2008, MF Global failed in four separate instances to ensure that its risk management, supervision and compliance programs comported with 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 to supervise diligently its business as a CFTC registrant.
In one instance, MF Global failed to diligently supervise the trading activities of an associated person (AP) on February 26-27, 2008, resulting in wheat futures trading losses by MF Global of more than $141 million. MF Global further failed to provide appropriate supervisory training to the Branch Office supervisors in the office where the trading losses occurred. The AP began trading with a debit balance of $3,004. By 6:00 am (CT) on February 27, 2008, when the overnight trading session ended, the AP held a short position in all wheat futures months combined totaling 16,428 contracts. The AP's excessive overnight trading went undetected by MF Global’s designated risk monitoring staff in New York, Singapore and London. A staff member of MF Global’s Risk Department became aware of the AP’s position by 10:40 am (CT) on February 27, 2008. After the AP’s positions were confirmed by MF Global personnel, MF Global management ordered that the AP’s access to the trading system be shut off, which was effected by 11:18 am (CT).
Read the rest here.