The US National Futures Association (NFA) has fined Global Asset Advisors, the futures business arm of GAIN Capital (NYSE: GCAP), for lack of “adequate supervisory procedures” to monitor a trading manager and allowing him to trade for his wife’s account even after he was banned from trading.
The industry self-regulator has imposed total fines of $235,000 on the company and two executives, Glenn Swanson who serves as the president of Daniels Trading and Kenneth S. Packard, the chief sales and marketing officer at the registered introducing broker.
In July, R.J. O’Brien & Associates LLC, the oldest and largest independent futures brokerage and Clearing firm in the United States, paid $750,000 in two separate settlements with the CFTC and NFA over claims of inadequate supervision and the violation of prior regulator orders related to Hansen’s trade allocation scheme.
During the relevant time, Global Asset Advisors carried several accounts managed and controlled by Jonathan Hansen, who was assigned an identification ID to process transactions executed through CME Group’s Trading Platform .
Despite Red Flags, Client’s Activities Continued
In 2013, NFA issued a Member and Associate Responsibility Action (MAR) against Hansen for reasons related to a loan of a real estate investment fund that he controlled with others. The NFA further explains that its MRA prohibited Hansen from transferring funds from any trading account without its prior authorization.
Hansen’s loan obligation was not met by the deadline set by the NFA, and therefore he has become subject to a trading ban.
While NFA’s MRA was in effect, Global Asset Advisors permitted an account to be opened for Hansen’s wife, where he entered orders even though he didn’t have a written power of attorney.
In addition, he allegedly mis-allocated his pool’s profitable trades to proprietary accounts and unprofitable or less profitable trades to customer accounts. Orders were frequently placed on a bunched basis, and allocated later each day, says the Chicago-based watchdog.
According to the NFA, Global Asset Advisors ignored various red flags that suggested wrongful post-trade allocations were occurring. Moreover, after the issuance of NFA’s MRA, Global Asset Advisors permitted transfers of funds from Hansen’s wife’s account without NFA’s permission. Finally, even after his trading ban went into effect, Hansen apparently controlled trading in his wife’s account through his Globex’s identification that had not been immediately deactivated by Global Asset Advisors.
The NFA said these matters constituted a failure to supervise by Global Asset Advisors' staff.
