July 12, 2019
CFTC Orders Dean Katzelis and Shahin Maleki d/b/a Essex Futures to Pay a $500,000 Penalty to Settle Charges of Unauthorized Options Trading, Failure to Supervise, and Other Violations
Washington, DC — The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Dean Katzelis (Katzelis) and Shahin Maleki (Maleki) d/b/a Essex Futures (Essex). Katzelis and Maleki, both residents of California, are ordered to jointly pay a $500,000 civil monetary penalty and cease and desist from any further violations of the Commodity Exchange Act (CEA) or CFTC Regulations.
The Order found that from January 1, 2014, to September 24, 2017, Essex, a registered guaranteed introducing broker (GIB), improperly combined proprietary and customer trades in bunched orders when it transmitted the orders to futures commission merchants (FCMs) for execution. Essex also engaged in unauthorized trading for certain customer accounts by exercising trading discretion over customers’ accounts without powers of attorney from the customers and without obtaining the requisite specific authorizations from its customers. Essex also failed to (1) prepare the requisite written records for those transactions; and (2) maintain and produce to the Commission upon request required records.
Additionally, the Order finds that Essex failed to diligently supervise the handling by its employees and agents of commodity interest accounts introduced by Essex and the activities of its employees and agents relating to its business as a GIB to ensure compliance with the CEA and CFTC Regulations, as well as to deter and detect misconduct. In particular, Essex had a supervisory system in place as evidenced by its compliance manual; nevertheless, Essex failed to adequately supervise its employees and agents to ensure they: (1) submitted bunched orders that properly segregated proprietary trades from customer trades; (2) submitted bunched orders that properly segregated trades from discretionary and non-discretionary customer accounts; (3) engaged only in authorized trading for customer accounts; (4) prepared the required written records for transactions.
Finally, the Order finds that Essex failed to notify the National Futures Association within thirty days of when an associated person terminated their association with Essex, failed to transmit checks that they received from Essex customers to an FCM on the date that they received the checks, and failed to identify to the public an Essex branch office.
CFTC Division of Enforcement staff members responsible for this case are James Deacon, Kara Mucha, Kevin Samuel, James H. Holl III, and Rick Glaser.