CFTC LAW

NFA ACTION: ACJ Capital, Inc

Felix Shipkevich — Mon, 08 Feb 2010 19:17:42 +0000

The NFA permanently barred from NFA membership ACJ Capital, Inc. and its principal, Angel F. Collazo. The Business Committee found that ACJ and Collazo provided false information to customers about the performance of their accounts by providing fictitious account statements which showed significant equity, when in fact, most, if not all of their equity was lost. The Committee also found that ACJ and Collazo failed to observe high standards and equitable principles of trade in the conduct of their foreign currency exchange business. ACJ and Collazo did not file an Answer to the Complaint nor did they respond to it in any way.
The Decision, issued by NFA’s Business Conduct Committee, is based on an NFA Complaint filed in November 2009.

NFA ACTION: Capital FX LLC

Felix Shipkevich — Sat, 06 Feb 2010 02:14:01 +0000

The NFA has accepted Capital FX LLC’s settlement offer to permanently withdraw from NFA membership. CFX is a Commodity Trading Advisor located in Elizaville, New York. The NFA ordered Robert W. Pecord, its sole principal and employee, to permanently withdraw from NFA membership. The Decision, issued by NFA’s Business Conduct Committee, is based on an NFA Complaint filed in December 2009 and a settlement offer submitted by CFX and Pecord.

The Complaint charged that CFX and Pecord provided false and misleading information to NFA and failed to cooperate with NFA in its investigation of the firm. The Complaint also charged CFX with using an inaccurate disclosure document.

ICE Futures ordered to beef up compliance

Felix Shipkevich — Thu, 04 Feb 2010 00:37:44 +0000

The CFTC’s Division of Market Oversight notified ICE Futures US of the results of a rule enforcement review. The review covered the period from June 1, 2007 through June 1, 2008. The Division assessed ICE Futures’ compliance with core principles relating to audit trail, trade practice surveillance, disciplinary and dispute resolution programs.

The Division found that the Exchange’s Compliance staff, although very experienced, has been reduced since the Division last conducted a comparable review in 2004. In addition, several significant events occurred during the target period that impacted the Compliance Department and required its attention. These events placed a notable strain on staff’s ability to fulfill important self-regulatory obligations in a timely manner. For example, the Exchange was unable to complete a saturation audit trail recordkeeping review during the target period and the Division identified several investigations that were open for excessively long time-periods. The Division recommended that ICE Futures hire additional Compliance staff and monitor the size and workload of the Compliance Department and increase the size of staff as appropriate based on changing circumstances.

The Division also identified some additional areas in which ICE Futures needs to make improvements and recommended that ICE Futures (1) ensure that open outcry saturation recordkeeping reviews are conducted annually; (2) re-examine its trading card compliance program and make adjustments to achieve a higher percentage of compliance, and ensure that the Compliance Department uses its enhanced authority with respect to issuing meaningful summary fines; (3) augment its audit trail compliance program to include a programmatic review of electronic audit and recordkeeping rules; (4) take appropriate measure to complete investigations in a timely manner; and (5) record the date on which completed investigative reports are approved by senior Compliance staff.

CFTC gets budget increase

Felix Shipkevich — Tue, 02 Feb 2010 00:19:38 +0000

Commenting on the President’s FY2011 budget request, CFTC Chairman Gary Gensler said: “I am pleased that the President’s budget request provides a much-needed funding increase to better enable the CFTC to regulate the markets and protect the American public.”

CFTC ACTION: Lodge Capital Group, LLC

Felix Shipkevich — Fri, 29 Jan 2010 17:33:47 +0000

The CFTC charged Jay C. Nolan of Wilmette, Ill. and his company, Lodge Capital Group, LLC with commodity pool fraud. According to the complaint, from at least December 2004 to the present, the defendants fraudulently solicited approximately $3.9 million from at least five individuals. The complaint charges that Nolan and Lodge Capital made misrepresentations and failed to disclose material facts to pool participants regarding the profitability of the pool and the performance of the participants’ investments in the pool. In its continuing litigation, the CFTC seeks a return of ill-gotten gains, restitution to defrauded customers, civil monetary penalties and permanent injunctions prohibiting the defendants from violating federal commodity laws and from engaging in further trading.

CFTC ACTION: Scotia Capital Inc.

Felix Shipkevich — Fri, 29 Jan 2010 05:46:04 +0000

The CFTC issued an order filing and simultaneously settling charges against Scotia Capital Inc., for prearranging trades in the natural gas futures contract on the New York Mercantile Exchange (NYMEX) during November and December of 2006.

The CFTC order imposes a $250,000 civil monetary penalty on SCI, an investment dealer in Toronto, Ontario, Canada and a wholly owned subsidiary of The Bank of Nova Scotia. Additionally, SCI was ordered to cease and desist from future violations of the Commodity Exchange Act.

On one or more occasions in November and December 2006, SCI prearranged natural gas futures trades on the NYMEX for its customers, according to the order. The trades were part of a strategy involving the purchase and sale of the same quantity of NYMEX natural gas futures contracts by one customer and the opposite sale and purchase of the same quantity of NYMEX natural gas futures contracts by the other customer, according to the order.

Prior to the trades being entered on the NYMEX, SCI employees arranged for the trades to be executed with a minimal price difference between long and short positions by seeking trades such that there was no more than a half a cent price differential between the buy and sell orders. These prearranged trades negated market risk and price competition and constituted fictitious sales and non competitive transactions, according to the order.

CFTC ACTION: Pinemore, L.P. and Birchmore, L.P.

Felix Shipkevich — Fri, 29 Jan 2010 04:48:28 +0000

The CFTC issued an order filing and simultaneously settling charges against Pinemore, L.P. and Birchmore, L.P. , two Canadian limited partnerships based in Calgary, Alberta, Canada, for engaging in unlawful wash sales in the natural gas futures contract on the New York Mercantile Exchange (NYMEX) during November and December of 2006.

The order imposes a $250,000 civil monetary penalty each on Pinemore and Birchmore, two limited partnerships controlled by the same general partner and with substantially identical ownership. Additionally, the firms were ordered to cease and desist from future violations of the Commodity Exchange Act (CEA).

According to the order, on one or more occasions in November and December 2006, Pinemore and Birchmore ordered through their broker certain natural gas futures trades on the NYMEX that were wash sales. The trades were part of a strategy involving the purchase and sale of the same quantity of NYMEX natural gas futures contracts by Pinemore and the opposite sale and purchase of the same quantity of NYMEX natural gas futures contracts by Birchmore.

Because the trades ordered by Pinemore and Birchmore were designed to give the appearance of submitting trades to the open market, while negating the risk incident to the market and producing a virtual financial nullity, they constituted wash sales in violation of the CEA.

NFA ACTION:Kingz Capital Management Corporation

Felix Shipkevich — Wed, 27 Jan 2010 06:15:20 +0000

On September 30, 2009, NFA issued a Complaint charging Kingz Capital Management Corporation and its principal and associated person David M.S. Krywenky with failure to uphold high ethical standards and failure to supervise. The Complaint also charged KCM with cheating, defrauding or deceiving another person or attempting to do so.

On October 15, 2009, KCM and Krywenky filed an Answer to the Complaint in which they denied the material allegations contained therein.

The NFA ordered KCM was ordered to withdraw its NFA membership and never apply for NFA membership or principal status with any NFA Member. Krywenky was ordered to withdraw his NFA membership and principal status with any NFA Member and not apply for NFA associate membership for three years. Krywenky was also ordered not to apply for NFA membership or principal status with any NFA Member or act in a manner that would require his disclosure as a principal of any NFA Member at any time in the future. Should Krywenky apply for NFA associate membership with any NFA Member following the expiration of the three-year period, he was ordered to pay a $25,000 fine, due and payable in full on or before the date of any such application.

NFA ACTION: Muirfield Capital LLC

Felix Shipkevich — Wed, 27 Jan 2010 06:06:41 +0000

The NFA ordered Muirfield Capital LLC to withdraw from NFA membership. If Muirfield reapplies for NFA membership, it was ordered to pay a $10,000 fine, payable when it reapplies for NFA membership. Muirfield’s application for NFA membership will not be processed until the fine has been paid in full.
On September 25, 2009 the NFA issued a Complaint charging Muirfield with failure to timely file with NFA an annual report. On October 23, 2009, Muirfield filed an Answer to the Complaint in which it denied the material allegations contained therein.

DFSA to host Islamic Financial Services Board seminar

Felix Shipkevich — Wed, 27 Jan 2010 01:56:16 +0000

The Islamic Financial Services Board (IFSB) is organizing its 5th Seminar on the Regulation of Takaful on 22nd and 23rd February 2010, at the Emirates Towers Hotel, in Dubai. The DFSA will be hosting the Seminar.