IKON GM fined $20,000 by NFA

On November 17, 2009, NFA issued a Complaint charging IKON with failure to observe high standards of commercial honor and just and equitable principles of trade; and failure to adopt enhanced supervisory procedures.

ANSWER:

On December 21, 2009, IKON filed an Answer to the Complaint in which it denied the material allegations contained therein.

Decision:

On March 4, 2010, an NFA Hearing Panel issued a Decision finding that IKON violated NFA Compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term Rule 2-36(c), as alleged in Count I of the Complaint, and ordered the firm to pay a $20,000 fine by April 18, 2010. The Panel dismissed Count II of the Complaint.

It's quite amazing to read the details of the Complaint NFA filed against IKON - sometimes it's very surprising how customers money is handled by brokers. Citing from the Complaint:

6. CFS Capital Management LLC ('CFS') is a commodity trading advisor, which directed customer accounts held at IKON. As a result of trading losses that occurred between approximately October 3 and 8, 2008, a number of CFS's customer accounts went into deficit. Specifically, as of October 13, 2008, 63 CFS customer accounts at IKON had deficit balances totaling approximately $111,000.

7 . Pursuant to an agreement between CFS and IKON, if a customer did not satisfy a deficit balance in its account at IKON, CFS was liable for the deficit.

8. On October 20, 2008, IKON, at the direction of CFS, reallocated approximately $350,000 of customer funds across customer accounts, debiting some accounts and crediting those accounts in deficit, so that no account was in deficit any longer.

9. IKON made the reallocation requested by CFS without undertaking any inquiry of its own to determine whether such a "reallocation" was appropriate or reasonable.

10. By its acts and omissions, IKON facilitated the misuse of its customer funds by CFS, acted in a manner that was grossly contrary to the interest of its customers, and failed to observe high standards of commercial honor and just and equitable principles of trade.

11. By reason of the foregoing acts and omissions, IKON is charged with violations of NFA Compliance Rule 2-36(c): FAILURE TO OBSERVE HIGH STANDARDS OF COMMERCIAL HONOR AND JUST AND EQUITABLE PRINCIPLES OF TRADE.