The US Commodity Futures Trading Commission (CFTC) today issued an order requiring Barclays Capital, Inc. (Barclays), a Connecticut firm, to pay penalties for failing to diligently supervise the processing of exchange and clearing fees it charged customers for trading and clearing Chicago Mercantile Exchange products from January 2011 to April 2015.
Barclays, which is registered with the CFTC as a Futures Commission Merchant, is required to pay $800,000 in penalties and refrain from violating the CFTC regulation governing diligent supervision.
Customer transactions executed on exchanges are subject to payment of exchange and clearing fees that are applied to each transaction in the normal course of business.
Clearing firms such as Barclays receive invoices for these fees from the exchange clearinghouses, which the firms pass on to their customers.
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However, the CFTC found that Barclays failed to implement and maintain adequate systems for reconciling invoices from exchange clearinghouses with the amounts of fees actually charged to its customers through its back-office accounting software.
Barclays also failed to implement and maintain adequate policies and procedures regarding reconciliation of exchange and clearing fees, including failing to draft procedures and adequately train staff on how to complete the reconciliations.
According to the CFTC, this led to instances in which Barclays overcharged some customers to an aggregate amount of $1.1 million.
Barclays reportedly discovered the problem in 2012 and has since taken remedial steps, including refunding adversely affected customers.
This is the second action that the CFTC has brought over a clearing firm’s supervisory failures over fee processing. In August 2014, the CFTC ordered Merrill Lynch, Pierce, Fenner & Smith to pay a $1.2 million penalty relating to its processing of futures exchange and clearing fees charged to customers.