CFTC settles charges with Chicago company

Stephanie Ostrowski Jan. 17, 2013, 1:27pm

WASHINGTON (Legal Newsline) - Charges were settled against a Chicago company by the U.S. Commodity Futures Trading Commission for failure to diligently supervise employees in connection with handling commodity futures orders of clients.

Announced Jan. 2, R.J. O'Brien & Association was found by the CFTC for incorrect supervision of a Guaranteed Introducing Broker of RJO and the GIB's Associated Person, sole principal and owner.

From at least January 2003 to February 2007, the GIB's AP engaged in an illegal trade allocation scheme for personal benefit. As a result, a loss of both the GIB's customers and a commodity futures pool operated by the AP through accounts held at RJO.

The order found the AP was able to allocate trades post-execution and awarded himself the more profitable trades to his personal accounts. In turn, the unprofitable or less profitable trades went to either the GIB customer accounts or the pool account.

Customers of GIB and AP sustained losses up to $183,000, according to the CFTC order.

RJO failed to follow procedures by not ensuring the placement of bunches orders by account managers always received post allocation prior to the GIB's AP's filing of bunched orders, according to the CFTC.

Proper procedures to monitor, detect, and deter unusual activity concerning trades were not implemented. Employees were not monitored while handling and processing bunched orders which is in direct violation of CFTC regulation 166.3, 17 C.F.R. § 166.3 (2011).

RJO is also required to cease and desist from further violations and $300,000 civil monetary penalty is imposed by the CFTC.

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