NFA issues complaint against Monex’s IBFX and its CCO Herbert Walton for several deficiencies


We haven’t gone back to the events from January 15, 2015, recently but a National Futures Association (NFA) complaint against US Forex broker IBFX, part of Monex Group, Inc. (TYO:8698), has just refreshed our memory of that moment and the consequences it had for numerous Forex brokers.

In a complaint, dated November 2, 2015, the NFA identifies several regulatory requirements violations, committed by IBFX and its Chief Compliance Officer (CCO) Herbert L. Walton. The list of violations includes breach of capital requirements due to “Black Thursday” events.

Below is a summary of the NFA allegations.

Count 1: Failure to comply with CCO requirements and to implement an adequate risk management program

In July 2014, the NFA started an SD check (swap dealer check) of IBFX and its CCO. The review found several deficiencies, including how the firm’s risk management program was performed and handled. In addition, during the NFA’s annual check of the firm as an FDM further deficiencies were uncovered with regards to how the CCO performed his functions. For instance, Mr Walton misinformed the regulator that the firm would withdraw its SD registration.

Count 2: Violations of capital requirements

On January 15, 2015, IBFX’s personnel informed the NFA that the events had no material impact on IBFX’s financial condition.

Two weeks later, the firm informed the NFA that it had incurred a shortfall of $5.3 million on January 15, 2015 and January 22, 2015. The notice for the shortfall was not filed in a timely manner.

Due to underestimation of losses suffered at IBFX’s Australian operations, IBFX revised the shortfall assessment again. It informed the NFA that between January 15, 2015 and February 5, 2015, it was undercapitalized by as much as $9 million.

The regulator notes that IBFX’s press release regarding the impact from January 15, 2015 events was misleading too.

The company also failed to maintain sufficient amount of assets in acceptable depositories to cover its liabilities to its US retail customers.

Count 3: Failure to maintain accurate books and records.

This concerns violations of capital computations, as well as miscalculations of profit/loss values for 700 customer accounts that were transferred to “another FDM” in September 2014.

Count 4: Failure to adequately supervise the firm and its employees.

Penalties

The violations committed by IBFX and its CCO may lead to the following penalties:

  • expulsion or suspension for a specified period from NFA membership;
  • bar or suspension for a specified period from association with an NFA member;
  • censure or reprimand;
  • a monetary fine not to exceed $250,000 for each violation found;
  • order to cease and desist or any other fitting penalty or remedial action not inconsistent with these penalties.

IBFX and Mr Walton have 30 days to respond to the complaint, dated November 2, 2015, in a written form.

To view the full complaint against IBFX and Mr Walton, click here.

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NFA issues complaint against Monex's IBFX and its CCO Herbert Walton for several deficiencies

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