From: RegTech Analyst
An American futures industry voice broker and registered futures commission merchant has found itself in the U.S. Commodity Futures Trading Commission’s (CFTC) crosshairs.
BGC Financial allegedly violated several supervision, reporting and recordkeeping rules over a five-year period, according to a new CFTC order telling the firm to pay a $3m civil monetary penalty. It also encouraged the firm to make amends and to strengthen its systems to ensure better compliance in the future.
The fine comes after the CFTC had found that BGC Financial had not lived up to the desired standard of regulatory compliance between 2014 to March this year.
The legal violations included preventing brokers from using their personal cell phones to make trades. It also stated that, even though BGC Financial had policies in place to create and maintain proper audit records, these where not always adhered to.
CFTC put particular emphasis on how BGC Financial had neglected to get multiple voice recording or retention failures, resulting in BGC’s failure to capture verbal bids, offers, orders and other important trade communications.
For example, the regulator claimed that BGC Financial lost nearly four months of voice recordings for thousands of brokered block trades in 2016.
These recordkeeping failures were also evident when CFTC ordered BGC Financial to complete an initial production of audit trail data for a sample of 100 block trades and it took the firm two months to do so.
BGC Financial also face allegations of not putting in proper policies to fix the situation once CFTC alerted the firm about its shortcomings.
Moreover, in two cases two managers did not know they were the designated supervisory managers of several brokers at their respective farms, allegedly leading to more recordkeeping, reporting and other types of violations.
Additionally, CFTC alleged BGC Financial was unable to adequately disclose in its 2015 and 2016 chief compliance officer reports material noncompliance issues related to voice capture and retention and to sufficiently describe the connection of those issues to identified remediation efforts.
“Today’s enforcement action highlights the importance of recordkeeping, supervision and transparency in reporting to the Commission,” said James McDonald, director of enforcement at CFTC. “These are fundamental requirements, which are necessary for the commission to accomplish its mission to safeguard the integrity of our markets.”
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