September 13, 2019
CFTC Orders Interdealer Broker to Pay $13 Million for Supervisory Failures and False Statements
Washington, D.C. – The U.S. Commodity Futures Trading Commission today issued two orders filing and settling charges against Tullett Prebon Americas Inc., an interdealer broker and CFTC-registered introducing broker headquartered in New Jersey. The combined orders require Tullett to pay a total of $13 million for failing to supervise employees and making false or misleading statements to CFTC staff.
The first order requires Tullett to pay an $11 million civil monetary penalty; to cease and desist from violating CFTC regulations; and comply with certain undertakings for its failure to supervise voice brokers’ conduct on its U.S. Dollar Medium Term Interest Rate Swaps Desk (the desk).
The second order requires the defendant to pay a $2 million civil monetary penalty for making false or misleading statements. Specifically, this order stipulates that during the course of a CFTC investigation, at least one Tullett broker made false or misleading statements of material facts or omitted to state material facts to CFTC staff concerning the subject of the investigation. The statements, which violated the Commodity Exchange Act, were made within the scope of the broker’s employment or office at Tullett, and therefore the violation is deemed to be the act, omission, or failure of Tullett.
“The CFTC is devoted to ensuring price transparency and competition in all markets, whether electronically traded futures contracts or voice-brokered swaps,” said CFTC Director of Enforcement James McDonald. “As important, the CFTC is committed to ensuring that its investigations and fact gathering processes are not obstructed by false or misleading information.”
Tullett is a domestic brokerage service firm providing intermediary services to institutional customers seeking to buy or sell a variety of products, including interest rate derivatives, foreign exchange, and energy products. In the failure to supervise order, the CFTC finds that Tullett failed to implement supervisory procedures reasonably designed to prevent Tullett brokers on the desk from making false or misleading statements to Tullett customers relating to certain trades, bids, and offers in U.S. dollar medium term interest rate swaps. The failure to supervise order also finds that Tullett failed to take sufficient corrective action when the voice-brokering conduct was brought to management’s attention, thereby allowing it to continue.
The failure to supervise order requires Tullett to comply with certain undertakings, including:
- Implementing direct personal supervision of the desk;
- Implementing new software to monitor trades brokered by the desk;
- Enhancing respondent’s review of voice-brokering by such means as increased random review;
- Publishing internal guidelines to its brokers on acceptable and prohibited voice-brokering conduct;
- Seeking to ensure that customers understand the practice of voice-brokering and the information disclosed; and
- Implementing annual and new-hire training and certification of brokers on the desk.
The CFTC’s Enforcement Division thanks the U.S. Securities and Exchange Commission’s Enforcement Division for its assistance.
The CFTC Division of Enforcement staff members responsible for this case are: Jon J. Kramer, Neel Chopra, Jeffrey Gomberg, David A. Terrell, Scott R. Williamson, Christopher Giglio, David W. Oakland, K. Brent Tomer, Lenel Hickson, and Manal M. Sultan.