The US Commodity Futures Trading Commission (CFTC) has fined the voice brokerage arm of BGC Partners Inc $3 million to settle charges of supervision, reporting, and recordkeeping violations spanning over five years.
BGC Financial LP was ordered to pay a civil money penalty and cease and desist from committing further violations of CFTC regulations. Additionally, the order requires the interdealer broking group to retain an outside consultant to review its compliance and recommend improvements. During this time, the consultant will create reports on findings and remediation efforts that BGC will be required to submit to the CFTC.
Per regulators, from 2014 and 2019, BGC failed to establish a supervisory system with respect to its traditional and block trading futures brokerage businesses. Among other things, BGC lacked adequate processes in areas such as the creation, maintenance, and retention of audit trail data.
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BGC’s employees also violated its policies that prohibit the use of their personal phones to conduct firm business. In two instances, BGC managers were unaware of assuming a supervisory role on several brokers at their branches, which led to other violations of the company’s recordkeeping, reporting, and other obligations.
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“Today’s enforcement action highlights the importance of recordkeeping, supervision, and transparency in reporting to the Commission. These are fundamental requirements, which are necessary for the Commission to accomplish its mission to safeguard the integrity of our markets,” said CFTC Director of Enforcement James McDonald.
The penalty is the latest to be handed out in a long-running regulatory probe into BGC’s practices. The settlement comes barely a few weeks after two units of BGC Partners paid $25 million to settle charges of fraudulent practices related to FX option trades.
Brokers at BGC Financial and GFI Securities created false trades to induce customers to indulge in foreign-exchange options at unfair prices, according to charges brought by the CFTC, the main US derivatives market regulator.