Aggregated News From Investment Management Regulators

CFTC Fines New York and UK-Based Firms for Net Capital Deficiencies


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— The Commodity Futures Trading Commission today issued orders filing and settling charges against Marex North America LLC, a registered futures commission merchant with its principal place of business in New York, New York, and Marex Spectron International Limited, a registered introducing broker with its principal place of business in London, United Kingdom, for failure to meet minimum adjusted net capital requirements.

The orders require Marex and Marex Spectron to pay civil monetary penalties of $250,000 and $120,000, respectively, and require both entities to cease and desist from any further violations of the Commodity Exchange Act and CFTC regulations, as charged.

“The Division of Enforcement will remain vigilant in enforcing minimum capital requirements for registered entities as they serve as important safeguards for the industry and its customers,” said Division of Enforcement Director James McDonald.

Division of Swap Dealer and Intermediary Oversight Director Joshua B. Sterling added, “We will continue to work closely and cooperatively with the Division of Enforcement to address deficiencies in required minimum adjusted net capital.”

Case Background

The orders find that, in computing their adjusted net capital, Marex and Marex Spectron each improperly accounted for deductions arising out of an agreement they entered to guarantee a revolving line of credit for an affiliated company. During the period in which Marex and Marex Spectron were guarantors, funds were periodically drawn on the line of credit for the benefit of the affiliated company, in amounts ranging from $10 million to $95 million. However, neither Marex nor Marex Spectron deducted the amount of the guaranteed drawdowns in their calculation of adjusted net capital as required. 

If the affiliate’s drawdowns had been correctly taken as deductions Marex, as a guarantor, would have been undercapitalized for 33 months with net capital deficits ranging from approximately $4 million to $75 million in the months when there were drawdowns. Likewise, Marex Spectron would have been undercapitalized in six of the 10 six-month periods Marex Spectron was bound as a guarantor, with resulting deficits ranging from approximately $14 million to $51 million. Introducing brokers report adjusted net capital every six months.

The Division of Enforcement staff members responsible for these cases are Jon J. Kramer, David A. Terrell, Scott R. Williamson, and Robert T. Howell.

Lisa M. Marlow and Tamara M. Dervin from the Division of Swap Dealer and Intermediary Oversight also contributed to this matter.

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Regulator Information

Abbreviation: CFTC
Jurisdiction: USA

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