CFTC Enforcement Matters

Federal Court Orders Trader to Pay $130,000 Penalty for Violating Speculative Position Limits for Cattle Futures

The District Court for the Northern District of Illinois entered a final judgment and consent order for permanent injunction against James Yadgir, who has been registered with the CFTC as a floor trader since 1993 and as a floor broker since 2007.  The order settles charges that Yadgir exceeded speculative position limits in live cattle futures contracts on one day and feeder cattle futures contracts on two other days.  The order requires Yadgir to pay a civil monetary penalty of $130,000 and permanently prohibits him from violating speculative position limits of a registered entity.  More specifically, the order finds that on April 6, 2011, Yadgir held an aggregate live cattle futures net long position that totaled 620 contracts, exceeding his speculative position limit by 70 contracts.  The order further finds that on May 23 and May 24, 2012, Yadgir held aggregate futures equivalent net short positions in feeder cattle futures contracts that totaled 381.759 and 300.152 contracts, respectively, exceeding the speculative position limit by 81.759 and 0.152 contracts, respectively.

SEC Enforcement Matters

SEC Files Complaint Against Ohio Based RIA For Fraud Stemming from Violations of Custody Rules

The SEC recently filed a complaint alleging fraud and seeking an asset freeze against Professional Investment Management (PIM), both based in Columbus, Ohio.  PIM is alleged to have violated the Custody Rule.  Additionally, PIM and its principal are alleged to have attempted to hide a $700,000 shortfall from SEC examiners by entering into a fake trade in PIM’s books and records, providing falsified records to the SEC and moving customer funds around in an attempt to cover the shortfall.  PIM was registered with the SEC as an investment adviser from 1978 until September 2013 when it voluntarily withdrew its registration.  At the time the complaint was filed, the SEC alleged that PIM had approximately $125 million under management and approximately 425 different accounts.  The SEC examination arose in November 2013 because the SEC learned that PIM had not been arranging for independent verification of client assets in violation of the Custody Rule and PIM had filed a notice to withdraw its registration in September 2013.  A hearing on the SEC’s motion for a preliminary injunction is scheduled for May 12.

NFA Enforcement Matters

NFA Permanently Bars CPO/CTA Member for Willfully Providing Misleading Information to Investors

The NFA has permanently barred Level III Management LLC (L3 Management), a commodity pool operator and commodity trading advisor, for violations of NFA Compliance Rule 2-2(a) by providing misleading information to participants of the Level III Trading Partners LP, a commodity pool managed by L3 Management.  The underlying complaint also alleged claims of failure to observe high standards of commercial honor and just and equitable principles of trading (NFA Compliance Rule 2-4) and failing to cooperate with NFA (NFA Compliance Rule 2-5)  The permanent bar was issued pursuant to a settlement offer made by L3 Management and its principal.  The principal of L3 Management was also ordered to withdraw from NFA membership for a period of no less than seven years.  In connection with any re-application for NFA membership after the seven year period, the principal must also pay a fine of $50,000.