An introducing broker and two principals settled charges for failing to supervise employees' handling of accounts owned or controlled by an associated person ("AP") of a commodity trading advisor ("CTA") and commodity pool operator. The supervisory issues led to a failure to detect post-execution trade allocation activity that favored the accounts of the CTA. The respondents agreed to pay $300,000 to the CFTC and $200,000 to the National Futures Association ("NFA") to settle the charges.
According to the CFTC Order, Global Asset Advisors LLC ("GAA") and Glenn A. Swanson, a principal of GAA, reportedly failed to (i) enforce compliance with directives pertaining to CTA's submission of allocation instructions and (ii) supervise the GAA AP in processing the CTA's bunched orders. The CFTC asserted that the CTA engaged in an unlawful post-execution allocation scheme that ultimately benefited the CTA and hurt its customers. In particular, the CFTC alleged that the CTA deliberately (i) allocated profitable trades to accounts in which the CTA or the CTA's associates had a proprietary interest and (ii) allocated unprofitable trades to its advised customer or pool accounts. The CFTC alleged that despite the introducing broker principal's awareness of this activity, supervisory personnel neglected to take any remedial action. The CFTC further found that GAA lacked a policy and a sufficient system to adequately monitor the accounts owned or operated by the CTA.
The NFA also ordered Kenneth S. Packard, an AP and principal of GAA, to pay a $35,000 fine. According to the NFA Complaint, GAA, Mr. Swanson and Mr. Packard allegedly neglected to monitor GAA's operations or review its communications, which led to (i) a failure to detect unusual allocation activity and (ii) the evasion of a Member Responsibility Action banning trade that was issued by the NFA.
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