IDB Gets Chunky Fine From CFTC for Misleading Statements to Clients and Regulator
20 September 2019: Tullett Prebon Americas Inc, a Commodity Futures Trading Commission-registered introducing broker and an interdealer broker (IDB), settled two enforcement actions by the CFTC and agreed to a combined fine of $13m and remedial measures.
CFTC claimed that from October 2, 2012 to December 2014, Tullett failed to adequately supervise brokers on its USD medium-term interest rates swaps desk who allegedly made numerous false and misleading statements to customers related to certain executed trades as well as bids and offers. CFTC claimed that in response to concerns raised by a Tullett employee to the firm’s compliance department in 2011 regarding such improper conduct prior to the relevant period, the firm took no meaningful action to upgrade its oversight and certain brokers on the relevant desk continued to provide false or misleading information to customers regarding executed trades, bids and offers.
In the other action, CFTC claimed that during its investigation into Tullett’s conduct, one unnamed broker make false or misleading statements or omitted material information to it during a voluntary appearance. The CFTC claimed that the broker had material information “regarding the practices at the heart of the investigation.” However, he purportedly made false or misleading statements or omitted material information after he was told the day before his interview by a co-head of the relevant desk to “just answer questions and not to go on and on about it.” The unnamed broker believed this was an instruction to “toe a line that protected Tullett.”
Tullett will pay a fine of $11m to settle the CFTC’s action related to its failure to supervise and to enhance its supervision of the relevant desk to help prevent misleading information by brokers. Tullett agreed to a fine of $2m to resolve the allegations regarding the false or misleading statements of one employee to the Commission staff. Tullett Prebon is now part of the TP ICAP Group.