The CFTC filed a civil enforcement action ("Complaint") in the U.S. District Court for the Southern District of New York against a CFTC-registered Retail Foreign Exchange Dealer ("RFED") for having a capital deficiency, failing to report the deficiency, and representing that it would guarantee customers against losses.
The Complaint alleged that the RFED responded belatedly to an inquiry from the NFA, acknowledging that it was not in compliance with the NFA's adjusted net capital requirement. The capital shortfall followed the sudden removal by the Swiss National Bank of the 1.2000 EUR/CHF fixed exchange rate in January 2015, the Swiss National Bank's announcement of the removal, and the drop of the EUR/CHF rate to 1.1659 "[w]ithin seconds of the announcement." The Complaint stated that the RFED's systems were not designed to prevent or diminish the effects of such a market event, which led to increased losses.
The Complaint asserted that the RFED failed to notify the CFTC as soon as it knew or should have known that its adjusted net capital had fallen below the required amount. The Complaint also charged that the RFED "advertised that it would zero balance customers with debit balances in violation of CFTC Rule 5.16," which prohibits an RFED from representing that it will (i) guarantee customers against loss, (ii) limit the losses of customers, or (iii) not require or attempt to collect security deposits, margin or other deposits from customers.
In its request for relief against the RFED, the CFTC stated that it seeks civil monetary penalties and a permanent injunction against future violations of federal commodities laws, as charged.
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