CFTC slams trader with $10m fine

From: RegTech Analyst

A US regulator has fined a commodity pool operator over $10m for allegedly filling misleading statements and failing to implementing an adequate supervisory system to prevent such misstatements.  

The Commodity Futures Trading Commission (CFTC) has issued an order filing and simultaneously settling charges against Catalyst Capital Advisors and its CEO Jerry Szilagyi.

It also separately charged a portfolio manager at the firm with fraud in a complaint filed in the U.S. District Court for the Western District of Wisconsin.

The order requires Catalyst Capital Advisors to pay a $1.3m civil monetary penalty and over $8,9m in disgorgement. The order also requires Szilagyi to pay a $300,000 civil monetary penalty. Catalyst and Szilagyi are ordered to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

The CFTC accused the company and its agents of misrepresenting the risk management of the Catalyst Hedged Futures Strategy Fund. This included misrepresentation about what stop-loss measures were in place to limit losses, even though there were no such measures. Additionally, while Catalyst Capital Advisors represented that a dedicated risk manager monitored the fund’s risk metrics daily, the risk manager did not actually do so.

“We are committed to protecting investors – including those who invest in our markets through mutual funds,” said James McDonald, director of enforcement at the CFTC. “As this case shows, when companies or individuals make misleading statements about the risks of investing in their products – statements that go to the heart of any investment decision – they will be held accountable.”

Joshua Sterling, director of the CFTC Division of Swap Dealer and Intermediary Oversight, added, “The Commission’s disclosure requirements are a critical component of ensuring that commodity pool investors have the full protections afforded to them and for promoting the integrity, resilience, and vibrancy of our markets. We will continue to support enforcement’s efforts to ensure that commodity pool operators play by the rules.”

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