The US CFTC starts the new year with issuing a warning and a civil monetary penalty on a Hong Kong broker. US CFTC fines CNCGC HK $150,000, but based on what reasons was this decision made?
18 January, AtoZForex – The US Commodity Futures Trading Commission (CFTC) has issued charges against CNCGC Hong Kong Ltd, an investment and trading firm based in Hong Kong. The regulator fines the entity, based on the charges that the broker did not manage to file the required CFTC Form 304 Cotton On-Call reports. Alongside, the broker failed to file the Form 304 reports late on two occasions.
US CFTC fines CNCGC HK
According to the order, the company held at least 100 cotton futures on 53 instances between March 2014 and August 2015. On, two occasions CNCGC HK failed to file the weekly Form 304 reports. While it is mandatory for a cotton merchants, or dealers that hold 100 cotton futures positions, to file on a weekly basis the CFTC Form 304 reports. The reports indicate a firm's call cotton purchases and sales as of the close of business Friday. Under the CFTC Regulations, call cotton implies "spot cotton bought or sold, or contracted for purchase or sale, at a price to be fixed later based upon a specific future".
Therefore, the commission orders CNCGC HK to pay a $150,000 civil monetary penalty for these failures. Additionally, CFTC forbids the company to breach CFTC Regulation 19.02 in the future. According to the order notes, so far the trading firm has complied and cooperated sufficiently with the regulator during and after the investigation. The broker also introduced a compliance program that now enables CNCGC HK to report cotton transactions on time.
CFTC's previous Call Cotton Reporting Violation cases
It has not been the first time that the CFTC has taken measures against brokers that violated the call cotton reporting. According to the latest data, today's order is already the fourth enforcement action of the CFTC for similar cases. Earlier in July 2016, CFTC ordered Agrocorp International Pte Ltd. to pay fine of $150,000 for Call Cotton Reporting violations. Prior to this case, the regulator imposed similar charges of $480,000 against Libero Commodities SA, an agricultural trading company. Whereas, the other two instances included the civil monetary penalties against Brazil-based firms Multigrain SA and Agricola Xingu SA. Both companies had to jointly pay a fine of $500,000.
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