♦Don’t Overlook Post-Execution Allocation Rules♦
Attorneys Liz Lyons and Mitch Goldberg call it a “…cautionary tale for Futures Commission Merchants, and other registrants, about the importance of training, updating supervisory procedures, and appropriately maintaining records.”
Last month’s CFTC and NFA enforcement decisions against X-Change Financial Access, a former FCM, centered on bunched order allocation rules. The agencies found that one of XFA’s clients violated allocation rules with tardy conveyances, lack of objective methods and preferential allocations.
And as so often happens, regulators slapped the carrying FCM with failure-to-supervise charges, based on its failure to detect or prohibit the illicit activity.
The authors conclude that “FCMs would be prudent to review their own training and internal policies on allocation rules, and particularly post-execution allocation rules in the wake of these orders.”
Allocation procedures are among the wide range of topics covered in our Futures Ethics courses (Initial and Periodic). We offer an array of compliance training courses, including Anti-Money Laundering, Cybersecurity, Customer Protection Rule, Identity Theft Prevention, Market Conduct and Noncompetitive Trading.
Liz Lyons and Mitch Goldberg are litigation attorneys at the Chicago firm of Lawrence, Kamin, Saunders & Uhlenhop, LLC, where they work in the firm’s financial services and regulatory defense practice groups. They have experience defending clients before various regulators and in handling matters in federal and state court, as well as the National Futures Association (NFA), the Financial Industry Regulatory Authority (FINRA), various exchanges, and other arbitration forums.
