CFTC Orders UK Company to Pay Over $490,000 for Registration and Supervision Violations

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CFTC

CFTC Orders UK Company to Pay Over $490,000 for Registration and Supervision Violations

June 10, 2020

CFTC - Supervision ViolationsWashington, D.C. — The Commodity Futures Trading Commission today issued an order filing and settling charges against Gain Capital UK Limited (Gain UK) of London, England for failing to register as a retail foreign exchange dealer (RFED) and for supervision violations related to the handling of a customer account managed by an unregistered commodity trading advisor (CTA). The order requires Gain UK to pay a $250,000 civil monetary penalty, to disgorge $241,671, and to cease and desist from any further violations of the Commodity Exchange Act (CEA) or CFTC regulations, as charged.

The order finds that from at least February 6, 2014 to March 8, 2019, Gain UK acted as a counterparty to retail foreign exchange (forex) customers who were located in the United States, without registering as an RFED as required by the CEA and CFTC regulations. Gain UK accepted customers who used U.S. mailing addresses in account applications and provided documents such as lease agreements, utility bills, and health-insurance enrollment letters suggesting that they were located in the United States. Furthermore, one customer informed a Gain UK employee that she was a student at a U.S. university when questioned about her account application and U.S. mailing address. Nevertheless, Gain UK failed to register as an RFED as required.

The order also finds that Gain UK failed to diligently supervise the handling of the account of a retail forex customer who was located in the United States. Specifically, Gain UK failed to detect warning signs of the underlying fraudulent conduct by an unregistered CTA who solicited the retail forex customer to open an account with Gain UK. For example, a Gain UK employee had extensive communications with the unregistered CTA and was aware that the CTA had been rejected from managing accounts with Gain UK and its affiliates because the CTA may have been soliciting managed accounts through social media and a website without registering with the CFTC. Despite the unregistered CTA not being named on any of the account documents, the CTA had extensive communications with Gain UK’s employee about creating the account, directed the trading in it, and refunded commissions to the customer to reimburse significant trading losses. Due to the unregistered CTA’s fraudulent conduct, the customer suffered approximately $280,000 in losses while Gain UK earned $241,671.

The CFTC thanks and acknowledges the assistance of the United Kingdom Financial Conduct Authority.

The Division of Enforcement staff members responsible for this case are Nicholas Sloey, Rachel Hayes, Elsie Robinson, Christopher Reed, Charles Marvine, and former staff member Peter Riggs.

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