The Commodity Futures Trading Commission (CFTC) has announced earlier today that it has filed charges against registered futures commission merchant Gain Capital Group, LLC, for supervision violations.
The regulator added that the violations are related to the company’s handling of customer accounts introduced by an independent introducing broker that was subject to a prior CFTC enforcement action for fraud and other violations.
Gain needs to pay a civil monetary penalty of $300,000 and cease and desist from violating CFTC Regulation 166.3.
According to the regulator’s order, from 2014 to 2016, the company failed to supervise accounts by not following its policy regarding trade move requests and having inadequate policies and procedures for reviewing customer accounts, introduced by Foremost Trading LLC and traded by the company’s principal, Mark Miller..
Gain also failed to ensure that its employees followed company policies for the processing of trade move requests between accounts owned by different persons. Foremost made hundreds of suspicious trade move requests to Gain in connection with Foremost’s proprietary accounts and the injured customer’s accounts. Miller had discretion to trade this customer’s accounts and also traded the proprietary accounts. Gain employees did not consistently seek additional information on these trade move requests, as was provided in Gain’s policies and procedures.
Gain missed red flags—Foremost’s suspicious trade move requests and Miller’s trading of both the proprietary and the injured customer’s accounts in the same markets—and did not appropriately surveil these accounts.
Gain was supposed to review the activity in customer accounts for irregularities or concerns, however the policy was inadequate because it did not define what reviews involved and, prior to 2016, did not include follow-on policies or procedures for doing such reviews.
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