The US Commodity Futures Trading Commission (CFTC) recently fined Gain Capital $300,000 for foremost bogus trades. Foremost was working with Gain as an independent introducing broker.
Civil penalty on the forex firm
Gain Capital Group is the largest retail forex broker in the US. The civil penalty against the firm will help resolve the allegations over its handling of customer accounts via Foremost Trading. The firm, Foremost Trading, is run by Illinois broker Mark Miller. The CFTC said that it was working with Gain as an independent introducing firm and it was subject to a previous enforcement action for fraud and some other violations. The firm’s owner, Miller, was involved in a series of fictitious and unauthorized transactions between February 1, 2014, and August 31, 2016.
The CFTC alleged that Miller was making these transactions in a customer account that Foremost introduced to Gain Capital. Miller misappropriated customer funds and reported fake errors to the Gain, the futures commission merchant to the customer. The customer account lost over $700,000 because of his action.
Why was Gain fined?
While the fraudulent transactions were carried out by Miller, Gain was accused of failing to supervise him and allowing to continue to his fraud for years. The CFTC said that diligent reviews would have helped the employees discover the fraud. It said that following the policy for “processing trade move requests between accounts owned by different persons” could have helped unearth the fraudulent behavior.
Miller was accused of making over 500 unauthorized bogus trades that moved the money from a customer’s accounts to proprietary accounts that he and his family members held. He also requested the winning trades to be moved to his proprietary accounts at Gain. The regulator noted that Miller made hundreds of suspicious requests related to his company’s proprietary accounts that were injurious to customer accounts.
It noted, “At least some of these trade move requests transferred winning trades out of the customer’s accounts and into Foremost’s proprietary accounts based on purported trade errors. Gain employees did not consistently seek additional information on these trade move requests, as was provided in Gain’s policies and procedures.”
Employees, agents, and officers at Gain ignored all the red flags in these transactions. The company has agreed to cease and desist from making any breaches to CFTC regulations in the future.