Capital Market Services, LLC Ordered to Pay $275,000 Penalty to Settle CFTC Charges of Violating Minimum Financial Requirement Rules
Washington, DC–The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges that, between March 2009 and October 2012, Capital Market Services, LLC (CMS), a CFTC-registered Futures Commission Merchant (FCM) and former Retail Foreign Exchange Dealer (RFED) headquartered in New York, New York, failed to comply with minimum financial requirements for FCMs and RFEDs. The CFTC Order requires CMS to pay a $275,000 civil monetary penalty and to cease and desist from violating the Commodity Exchange Act and CFTC Regulations, as charged.
The Order recognizes CMS’s cooperation and corrective action it undertook after its deficiencies were discovered.
According to the Order, under CFTC regulations, an FCM must maintain adjusted net capital (ANC) equal to or in excess of the greatest of $1,000,000 or various other measures, including the “amount of [ANC] required by a registered futures association of which it is a member.” Between January 2009 and mid-December 2010, while a Forex Dealer Member (FDM) with the National Futures Association (NFA), CMS was subject to the NFA’s FDM Financial Requirements, which imposed ANC requirements that ranged between $15,000,000 and approximately $21,000,000. CFTC Regulations also require that an RFED maintains ANC of $20,000,000 plus five percent of its total retail forex obligation in excess of $10,000,000 at all times. CMS’s ANC requirement as an RFED was approximately $21,000,000.
CMS did not maintain its required ANC during at least 17 separate months between March 2009 and October 2012, with month-end ANC computations showing that CMS was undercapitalized by more than $19 million at one point, the Order finds.
CMS has been registered with the CFTC as an FCM since January 2002 and was registered as an RFED from September 2009 to mid-December 2010. CMS also operated as an FDM from approximately January 2009 until mid-December 2010.
The CFTC thanks the NFA for its assistance.
CFTC Division of Enforcement staff members responsible for this case are Kevin S. Webb, Brandon Tasco, Michael Solinsky, Charles D. Marvine, Paul G. Hayeck, and Richard Wagner. Annette Vitale of the CFTC’s Division of Swap Dealer and Intermediary Oversight also assisted in this matter.