For the second week in a row, a panel of the Hearing Committee of the National Futures Association banned a firm and an individual principal and associated person of the firm from NFA membership for not cooperating with NFA staff during an examination. Last week, the panel held that Samico Worldwide Markets, Inc., a registered commodity trading advisor, and Thomas Gasparini, a principal and AP of the firm, failed to cooperate with NFA staff when they failed to produce bank account statements and written explanations for certain transactions, as requested during an examination of Samico during December 2015. NFA staff sought such information because of concern regarding regular undocumented cash deposits that were made into the operating bank account of Samico and into a proprietary trading account of Mr. Gasparini at a futures commission merchant. According to the NFA, “[u]ndocumented cash deposits into the operating account of a CTA and undocumented deposits into a CTA’s proprietary trading accounts are clear red flags for NFA.” The panel also held that Samico and Gasparini failed to maintain certain required records, including a cash receipts and disbursements journal; a general ledger detailing assets, liabilities, capital, income and expense accounts; and cancelled checks and other bank records. Two weeks ago, Nex Capital Management LLC, also a registered CTA, and Jacob Wohl, an associated person and principal of Nex Capital, were permanently barred from being members of the NFA or from acting as principals of an NFA member for likewise failing to cooperate with an NFA examination. (Click here for details in the article “CTA and Principal Barred as NFA Members for Not Cooperating With NFA Examination” in the March 5, 2017 edition of Bridging the Week.)

Compliance Weeds: Not only must registrants cooperate fully with regulators, but documents registrants file with regulators must be accurate and not misleading. In a recent enforcement action against Advantage Futures LLC by the Commodity Futures Trading Commission, the agency charged that when Advantage submitted its risk management policies manual, credit and risk policies and procedures manual and chief compliance officer annual report to it on “multiple occasions” between November 2013 and May 2015, two senior officers of the firm “knew that the documents did not accurately represent Advantage’s actual practices” and therefore contained false or misleading statements in violation of applicable law. (Click here to access Commodity Exchange Act Section 6(c)(2), 7 USC §9(2).) (Click here for details regarding the Advantage Futures enforcement action in the article “FCM, CEO and CRO Sued by CFTC for Failure to Supervise and Risk-Related Offenses” in the September 25, 2016 edition of Bridging the Week.)