CFTC Fines Houston, Chicago, and London-Based Introducing Brokers for Net Capital Deficiencies

Posted on September 24, 2020Comments Off on CFTC Fines Houston, Chicago, and London-Based Introducing Brokers for Net Capital Deficiencies


Washington, DC (STL.News) The Commodity Futures Trading Commission today issued orders filing and settling charges against three registered introducing brokers (IB)—EOX Holdings LLC of Houston, Texas; Futures International LLC of Chicago, Illinois; and OTC Europe LLP of London, United Kingdom—for failure to meet minimum adjusted net capital requirements.

The orders require EOX, Futures International, and OTC Europe to each pay a civil monetary penalty in the amount of $120,000 and to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.  The orders recognize each IB’s remediation and cooperation to ensure that they meet their obligations as registrants.

“We will continue working cooperatively with the Division of Swap Dealer and Intermediary Oversight to bring enforcement actions when registered firms fail to meet minimum capital requirements,” said Division of Enforcement Director James McDonald.

“Ensuring the financial integrity of derivatives market intermediaries is a key aspect of the CFTC’s mission, making necessary the reporting of guaranteed obligations and liabilities of subsidiaries or affiliates in the computation of adjusted net capital,” added Division of Swap Dealer and Intermediary Oversight Director Joshua B. Sterling.

Case Background

The orders find that EOX, Futures International, and OTC Europe improperly accounted for deductions arising out of their agreement to guarantee a revolving line of credit for an affiliated company in computing their adjusted net capital.  The orders reflect that during the period in which the three IBs were guarantors of drawdowns on the revolving line of credit, funds were drawn on the line of credit on a monthly basis for the benefit of the affiliated company, in amounts ranging from $10 million to $26 million .  None of the three IBs deducted the amount of the guaranteed drawdown in its calculation of adjusted net capital as required.  The orders find that, had they done so, the net capital of each IB would have fallen below the adjusted net capital required by the CEA and CFTC regulations, with resulting deficits ranging from approximately $9 million to $25 million.

The CFTC thanks the National Futures Association for its assistance with this matter.

The Division of Enforcement staff members responsible for these cases are Jon J. Kramer, David A. Terrell, Scott R. Williamson, and Robert T. Howell.



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