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Screenshot of a breaking news alert e-mail from Q2 2017
The National Futures Association (NFA) has issued a complaint against global financial institution UBS AG (SWX:UBSN), as a result of the regulator having found reason to believe that the NFA requirements are being, have been or are about to be violated and that the matter should be adjudicated, the NFA’s Business Conduct Committee has issued a complaint against UBS Financial Services, lnc. (UBS).
The NFA stated that at all times relevant to the complaint, UBS was a futures commission merchant (FCM) located in Weehawken, New Jersey.
NFA Financial Requirements Section 16(a) provides, in pertinent part, that an FCM must maintain written policies and procedures regarding the maintenance of the FCM’s residual interest in its foreign futures and foreign options customer secured amount funds accounts as identified in Commodity Futures Trading Commission (CFTC) Regulation 30.7.
Further, NFA Financial Requirements Section 16(a) provides that these written policies and procedures must target amounts (either by percentage or dollars) that the FCM seeks to maintain as its residual interest in its foreign futures and foreign options customer secured amount funds and be designed to reasonably ensure the FCM maintains these target amounts.
NFA Financial Requirements Section 16(c) provides, in pertinent part, that no Member FCM via a single or multiple transaction(s) may withdraw, transfer or otherwise disburse funds (disbursement) from foreign futures and foreign options customer secured amount funds account(s) as identified under CFTC Regulation 30.7 that exceed 25% of the FCM’s residual interest in foreign futures and foreign option customer secured amount funds without the FCM’s CEO, CFO or Financial Principal pre-approving the disbursement in writing and filing that written pre-approval with NFA.
On October 7 , 2014, approximately $12 million was auto-swept overnight by the firm’s bank depository from a customer secured amount funds account to a nonsecured amount funds account. This transfer constituted a withdrawal of more than 25% of the target residual interest amount. On October 8,2014, the money was swept back into the secured amount funds accounts.
As the transfer of funds was generated by the firm’s depository, UBS did not obtain written pre-approval of a financial principal and submit the pre-approval to the NFA prior to the transfer of customer secured amount funds from its secured amount funds account to a non-secured amount funds account.
On October 24, 2014, a UBS employee moved approximately $11.7 million from UBS’s customer secured amount funds account to a non-secured amount funds account. This transfer also constituted a withdrawal of more than 25% of the target residual interest amount and UBS did not obtain written pre-approval of a financial principal and submit the pre-approval to NFA prior to the transfer of these funds. Once UBS learned of this transfer error, it transferred the funds back to the customer secured amount funds account the following day.
While the first transfer in October caused UBS to fall below its target residual amount, even after that transfer the firm maintained an amount that significantly exceeded its minimum customer secured amount funds requirement under CFTC Regulation 30.7.
The NFA concluded by stating that by reason of the foregoing acts and omissions, UBS is charged with violations of NFA Financial Requirements Section 16.
The fine stipulated by the NFA for this transgression is $17,500.
To view the official announcement from the NFA, click here.