CFTC orders Futures Commission Merchant and its controller to pay a $150,000 Penalty 

Cunningham also Penalized for its Failure to Immediately Report a Customer Residual Account Deficiency and for its Failure to Report Special Account Positions Held by Large Traders

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Cunningham Commodities, LLC (Cunningham), a registered Futures Commission Merchant (FCM) based in Chicago, Illinois. The Order finds that Cunningham violated CFTC’s Regulations that 1) require an FCM to immediately report to the CFTC any deficiency in its customer segregated account or the targeted residual interest in its customer segregated account and 2) require an FCM to submit daily reports to the CFTC for positions held by certain large traders (Large Trader Reports) whose accounts are carried by the FCM.

The Order also finds Cunningham’s Controller and head accountant, Salvatore Carmen Russo of Wheaton, Illinois, liable for aiding and abetting Cunningham’s failure to immediately report the customer segregated account deficiency.

The Order requires Cunningham and Russo jointly to pay a civil monetary penalty of $150,000 and permanently prohibits them from further violations of the CFTC Regulations, as charged.

Specifically, the Order finds that Cunningham violated CFTC Regulations when it failed to immediately notify the CFTC of an overnight deficiency of more than $3.4 million in its segregated customer account and an equivalent deficiency in its targeted residual account, which resulted from an operational cash transfer error at the firm on March 10, 2014. According to the Order, Cunningham immediately corrected the error the following morning, but did not notify the CFTC of the deficiency until March 12, 2014, after Chicago Mercantile Exchange audit staff had notified Cunningham on March 11, 2014 that its records reflected a $5 million discrepancy between the amount of customer funds on deposit in segregated accounts and the amount reported. The Order finds that Russo aided and abetted the firm’s reporting violation by attempting to conceal the shortfall and failing to immediately report it to the CFTC.

The Order also finds that Cunningham violated another, though unrelated, CFTC Regulation by failing to file required special account position reports for Comex silver futures for nearly six months commencing in November 2013 and soybean options for two weeks during July 2014. An outside software vendor’s failure to properly set up the contracts for reporting contributed to both failures, according to the Order. These reports are used by the CFTC to evaluate potential market risks and monitor compliance with CFTC requirements, the Order states.

The CFTC Division of Enforcement staff members responsible for this matter are Susan B. Padove, Elizabeth M. Streit, Scott Williamson, and Rosemary Hollinger, with assistance from CFTC Office of Data and Technology staff, Margaret M. Sweet and Michael S. Zieff.

Source: CFTC

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