BNP Paribas Securities Corp., a futures commission merchant registered with the Commodity Futures Trading Commission, settled charges brought by the agency that, on three dates in 2014, it violated rules restricting the amount of customer funds it could lawfully invest in money market funds. These rules prohibit an FCM from investing more than 50 percent of its customer funds in MMFs generally, and 10 percent of customer funds in an individual MMF. On two of the occasions, the error was caused by clerical entry mistakes, while on the other occasion the error was caused by a failure to detect an investment percentage overage, said the CFTC. Two of the errors were self-detected on the following business day, and self-reported by BNPP to the CFTC, acknowledged the Commission. BNPP agreed to pay a fine of US $140,000 to resolve this matter. It also agreed to “regularly review its policies and procedures and to provide training to ensure compliance with applicable regulation.” In accepting BNPP’s settlement, the CFTC acknowledged that no customer sustained losses as a result of BNPP’s alleged violations and recognized “BNPP’s cooperation during the investigation.”
Compliance Weeds: Following the collapse of MF Global in October 2011, the Commodity Futures Trading Commission amended a rule to further restrict permissible investments of customer funds by CFTC-registered future commission merchants. Among other things, the rules precluded FCMs from investing customer funds in non-US government guaranteed corporate obligations and foreign sovereign securities, and engaging in repurchase transactions with affiliated companies. In addition, the revised rule imposed concentration limits for certain asset classes (e.g., the maximum percentage an FCM can hold of that asset type compared to its total customer funds held in segregation). For example, these thresholds were set at 50 percent for US agency obligations, 10 percent for municipal securities, 25 percent for qualified certificate of deposits and 50 percent for money market funds other than MMFs including only US government securities. In addition, the revised rule amended issuer-based concentration limits. These included 25 percent for a single issuer of US agency obligations, 5 percent for a single issuer of municipal securities or qualified CDs and 10 percent for a MMF that does not hold US government securities. The CFTC considers that its customer funds investment requirements must be adhered to at all times.