The Commodity Futures Trading Commission today issued an order filing and settling charges against Cunningham Commodities, LLC, a registered futures commission merchant with its principal place of business in Itasca, Illinois, for failing to diligently supervise accounts set up by an introducing broker whose activities it guaranteed (GIB).
The order requires Cunningham Commodities to pay a $250,000 civil monetary penalty and to cease and desist from any further violations of the Commodity Exchange Act or CFTC regulations, as charged. The order also finds that Cunningham Commodities is liable for any restitution or disgorgement obligations imposed against the GIB in any related CFTC enforcement proceeding regarding the GIB’s conduct during the period of the guarantee, in an amount not to exceed $640,000.
The order finds that Cunningham Commodities’ supervision of the GIB-introduced accounts over a sixteen month period was not diligent. The order further finds that Cunningham Commodities entered into the guarantee with the GIB despite knowing that the GIB offered a “trading program” to customers even though it was not registered as a commodity trading advisor and that the vast majority of customers lost money under the GIB’s trading program. The GIB’s customers included many senior citizens, and many of the accounts traded were retirement accounts.
Moreover, according to the order, Cunningham Commodities learned that the National Futures Association believed that the “[GIB] used misleading and deceptive solicitations and communications to entice investment in a program that the firm know[s] has consistently lost money for substantially all customers,” but did not take adequate steps in response. The order further finds that Cunningham Commodities required the GIB to record its solicitation calls, but did not listen to those calls, even as customer accounts continued to decline in value. Taken together, these findings establish a failure to supervise.
The Division of Enforcement staff members responsible for this case are Ashley J. Burden, Joseph J. Patrick, Elizabeth M. Streit, Scott R. Williamson, and Robert T. Howell. The staff of the Division of Swap Dealer & Intermediary Oversight also contributed to this matter.
