CFTC Fines MF Global $10 Million for Back Office Violations
December 18, 2009
The Commodity Futures Trading Commission (CFTC) said Thursday it has fined New York-based futures broker MF Global Inc. $10 million for what it called “risk supervision failures” between 2003 and 2008.
The CFTC found that, from 2003 to 2008, MF Global failed in four separate instances to ensure that its risk management, supervision and compliance programs complied with its obligations to diligently supervise its business as a CFTC registrant, the commission said in a release.
As part of the settlement, the CFTC is also requiring MF Global to enact policies and procedures to enhance risk monitoring, training, compliance and compliance audit procedures. MF Global also agreed to undertake an independent review and assessment to review the effectiveness of its back office processes, including risk management, supervisory and compliance policies and procedures.
According to the CFTC, MF Global failed to diligently supervise the trading activities of an associated person on February 26-27, 2008, resulting in wheat futures trading losses of more than $141 million. MF Global further failed to provide appropriate supervisory training to the supervisors in the office where the trading losses occurred, the CFTC said.
The CFTC also found that from May 2003 until April 2007, MF Global provided a customer with voice brokerage services in its natural gas derivatives trading business, which generated commissions for MF Global. “MF Global failed to implement procedures to ensure appropriate transmission of price indications to the MF Global customer for certain natural gas options,” the commission said. “In particular, MF Global failed to have procedures to ensure that the price indications transmitted by its broker reflect a consensus taken on [a particular] date and time and were derived from different sources in the market place.”
In two other instances, the CFTC said that MF Global failed to diligently supervise the proper and accurate preparation of trading cards and failed to maintain appropriate written authorization to conduct trades.
