US CFTC fines Chicago-based RJ O'Brien & Associates $300,000 for supervision failures

Chicago-based futures broker RJ O'Brien & Associates (RJO) has paid $300,000 to settle charges for supervision failures brought by the US Commodity Futures Trading Commission (CFTC), on January 2.

According to the CFTC, RJO failed to supervise one of its guaranteed introducing brokers (GIB) and a member of staff, which were running an illegal trade allocation scheme between January 2003 and February 2007. The staff member was allocating, post-execution, profitable trades to his personal accounts, and unprofitable, or less profitable trades to either the GIB customer accounts or the GIB's commodity pool account held at RJO, the order found. Losses ratcheted up reached $183,000, the order stated.

In addition, the CFTC said, RJO failed to follow procedures it had in place concerning the placement of bunched orders by account managers. For example, RJO failed to ensure it always received a post-allocation plan prior to, or contemporaneously with, the GIB's staff's filing of bunched orders. The order also found that RJO did not employ adequate procedures to monitor, detect and deter unusual activity concerning trades that were allocated post-execution, or for supervision of its employees' handling and processing of bunched orders. This, said the CFTC, violated its rules.

The CFTC order imposes a $300,000 civil monetary penalty and an order to commit to following the CFTC rules.