September 28, 2018
CFTC Charges Chairman of Board of Interdealer Broker with Supervisory Failures
Washington, DC —The Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Michael Leibowitz, Chairman of the Board of TFS-ICAP LLC and TFS-ICAP Ltd. (TFS-ICAP), for failing to diligently supervise the handling by brokers on the emerging markets desks at TFS-ICAP of foreign exchange options (FX Options) trades. As found in the Order, it was common practice for TFS-ICAP brokers on the emerging markets desks in both London and New York to engage in practices known as “flying” and “printing” where brokers would communicate to clients fake bids and offers and fake trades intended to create an illusion of greater liquidity and induce clients to trade via TFS-ICAP. The Order further finds that senior managers at TFS-ICAP had reason to know that brokers were flying and printing. The Order finds that Leibowitz failed to implement any policies or procedures to ensure that brokers and senior managers did not engage in this conduct.
CFTC Director of Enforcement Comments
James McDonald, CFTC Director of Enforcement commented: “As this matter clearly indicates, in policing the integrity of our markets, we are committed to going up the chain — and to holding accountable those who have supervisory responsibilities to ensure policies and procedures are in place that would have prohibited, and could have deterred, illegal conduct from occurring in the first place.”
Summary of Order
The Order requires Leibowitz to pay a $250,000 civil monetary penalty and requires him to cease and desist from further violations of the Commodity Exchange Act and to cooperate with the CFTC in the related ongoing litigation.
The CFTC today separately filed a lawsuit in the Southern District of New York against TFS-ICAP and certain senior managers for fraud and supervision failures in connection with brokers’ communication to clients of fake bids and offers and fake trades (see CFTC Release No. 7816-18, September 28, 2018).
The CFTC appreciates the cooperation and assistance of the Office of the Attorney General of the State of New York and the United Kingdom’s Financial Conduct Authority.
CFTC Division of Enforcement staff members responsible for this case are, Elizabeth May, Christopher Giglio, Sam Wasserman, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan.