CFTC Levies $250,000 Penalty on Angus Energy for Acting as Unregistered CTA

Angus engaged in advising clients on OTC commodity options and swaps contracts without being registered.

The US Commodity Futures Trading Commission (CFTC) has announced the imposition of a $250,000 penalty on Florida-based Angus Partners, trading as Angus Energy, for acting as an unregistered Commodity Trading Advisor (CTA) and for violating certain disclosure rules applicable to CTAs, just a day after charging options trader Thomas Lindstrom with fraud for causing the collapse of a trading firm.

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The CFTC found that at least since October 2012, for compensation or profit, Angus engaged in the business of advising over 15 clients as to the value of or the advisability of trading in over-the-counter (OTC) commodity options and swap contracts and held itself out generally to the public as a CTA without being registered as such with the CFTC. Angus also failed to adequately disclose to its clients certain conflicts of interest.

Fuel Oil Markets

The CFTC noted that Angus’s clients were retailers of fuel products and for compensation or profit. Angus advised its clients on the development and implementation of fuel hedging programs to mitigate the clients’ exposure to price movements in the fuel oil markets.

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These hedging strategies entailed the clients purchasing and selling OTC commodity option and swap contracts. Angus marketed itself as an expert in helping its clients devise optimal hedging strategies, uniquely tailored to each client’s business and the company’s website, giving clients the clear impression that Angus would act in its clients’ best interest.

Non-Disclosure

According the the CFTC, Angus failed to adequately disclose the conflict between them, advising clients on the merits of entering into commodity option and swap transactions and Angus’s financial interest in those same transactions.

Specifically, Angus was the counterparty to its clients’ option and swap contracts which certain clients were not aware of. Furthermore, Angus did not disclose that a markup – effectively, a transaction fee – was embedded in the premium price that the clients paid to Angus for the options transactions, and that Angus retained the markup.

In addition to the $250,000 penalty, Angus is prohibited from further violations of the CTA registration provision of the Commodity Exchange Act and disclosure regulations.

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