FROM: COMMODITY FUTURES TRADING COMMISSION
CFTC Orders R.J. O’Brien & Associates LLC to Pay $125,000 for Violation of Customer Protection Regulation
RJO unlawfully commingled secured foreign futures and options customer funds with segregated domestic futures and options customer funds
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and settling charges against R.J. O’Brien & Associates LLC (RJO), a CFTC-registered Futures Commission Merchant (FCM) based in Chicago, Illinois, for unlawfully commingling secured foreign futures and options customer funds with segregated domestic futures and options customer funds. The CFTC Order requires RJO to pay a $125,000 civil monetary penalty and orders RJO to cease and desist from further violations of CFTC Regulation 30.7(d).
The Commodity Exchange Act (CEA) and CFTC Regulations contain provisions to protect the funds of customers trading on both U.S. and foreign exchanges. In relation to customers trading on foreign exchanges, an FCM must account for and maintain money, securities, and property in an amount at least sufficient to cover or satisfy all of its current obligations to foreign futures and options customers in a separate “secured account.” Regulation 30.7(d) prohibits secured customer funds from being commingled and deposited into the same accounts separately held for segregated domestic futures and options customer funds.
On or about February 10, 2012, RJO, as carrying broker and depository for a non-clearing FCM, transferred $1,586,000 from the non-clearing FCM’s secured omnibus customer account (approximately $605,268 of which represented secured foreign futures or foreign options customer funds) and held, commingled, and deposited the secured customer funds in the non-clearing FCM’s segregated omnibus customer account, the Order finds. RJO transferred the funds to reduce a margin deficiency in the non-clearing FCM’s segregated omnibus account, without knowing whether the funds were part of the non-clearing FCM’s secured account requirements. Further, the Order finds that RJO did not make a margin call to the non-clearing FCM and did not notify the non-clearing FCM that it was transferring the funds from the non-clearing FCM’s secured omnibus account.
According to the Order, on Monday, February 13, 2012, the non-clearing FCM discovered that as a result of the transfer, it had insufficient funds in its secured accounts to meet its obligations to its secured customers. The non-clearing FCM had sufficient funds otherwise available in other accounts to satisfy the segregated funds margin call if RJO had not on its own moved funds from the secured omnibus account. The non-clearing FCM contacted RJO to reverse the transfer, which RJO effected that morning. The non-clearing FCM reported to the CFTC on the same morning that it did not have sufficient funds to meet its obligations to its secured customers.
The CFTC Order finds that RJO, acting as a clearing FCM and depository, failed to comply with Regulation 30.7(d), which prohibits secured customer funds from being commingled with segregated customer funds.
CFTC Division of Enforcement staff members responsible for this matter are Patryk J. Chudy, Michael P. Geiser, Trevor Kokal, Lenel Hickson, Jr., Stephen J. Obie, Manal M. Sultan, Richard B. Wagner, and Vincent A. McGonagle. Kevin Piccoli, Melissa Hendrickson, Robert Laverty, Timothy Wigand, and Frances Gonzales of the CFTC’s Division of Swap Dealer and Intermediary Oversight also assisted in this matter.
Showing posts with label FCM. Show all posts
Showing posts with label FCM. Show all posts
Wednesday, October 2, 2013
Wednesday, August 28, 2013
CFTC PERMANENTLY BARS CPA FROM PRACTICING BEFORE THE COMMISSION
FROM: U.S. COMMODITY FUTURES TRADING COMMISSION
CFTC Permanently Bars Accountant, Jeannie Veraja-Snelling, for Failing to Properly Audit Peregrine Financial Group, Inc.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed and settled charges against Jeannie Veraja-Snelling, d/b/a Veraja-Snelling & Company (Veraja-Snelling), a certified public accountant and sole practitioner from Glendale Heights, Illinois, barring her from practicing before the Commission. The CFTC’s Order charges Veraja-Snelling with failing to audit Peregrine Financial Group, Inc. (Peregrine) in accordance with CFTC Regulation 1.16.
Veraja Snelling was the auditor for Peregrine, a registered Futures Commission Merchant (FCM). On July 10, 2012, the CFTC charged Peregrine and its sole owner and chief executive officer, Russell Wasendorf, Sr. (Wasendorf), with fraud, among other violations, within 24 hours after the discovery that Wasendorf had misappropriated millions of dollars in customer funds (see CFTC Press Release 6300-12). Among the violations that were discovered, Peregrine’s 2011 certified financial statements filed with the Commission were fraudulently overstated by more than $215 million. According to the CFTC’s Order entered today, Wasendorf deceived Veraja-Snelling and others by manufacturing bogus bank statements that overstated Peregrine’s bank balances and by forging documents sent to Veraja-Snelling that purported to provide bank confirmation of the overstated balances.
According to the Order, Wasendorf was able to perpetrate and conceal his fraud in part because Peregrine lacked proper internal accounting controls and was not subject to audits performed in accordance with CFTC Regulations. The Order finds that Veraja-Snelling’s audits of Peregrine’s financial statements were not performed in accordance with generally accepted auditing standards (GAAS) and did not include appropriate review and tests of internal accounting controls and procedures for safeguarding customer assets, as required by CFTC Regulation 1.16.
David Meister, the CFTC’s Director of Enforcement, stated, “As the Peregrine debacle shows, the importance of the independent accountant’s gatekeeper function cannot be overstated. FCMs and, most importantly, their customers, rely on auditors to approach each and every auditing assignment professionally and with due care. There is no place in the CFTC-regulated world for below-standard audits or auditors who do not have a sufficient understanding of the futures industry.”
The Order finds that Veraja-Snelling lacked the necessary technical expertise needed to audit an FCM, failed to adequately staff and plan the Peregrine audits, and failed to exercise due care in performing the Peregrine audits. Among other failures, Veraja-Snelling’s review and testing of Peregrine’s internal controls during the Peregrine audits did not identify that Wasendorf had exclusive control over the customer segregated account and its financial reporting, which reflected a material inadequacy in Peregrine’s internal controls, according to the Order.
In addition, the Order finds that Veraja-Snelling improperly conducted the process to confirm bank account balances, which generally entails an auditor sending a confirmation form to a bank for a bank officer to sign and return to the auditor. Here, Veraja-Snelling relied on Peregrine’s accounting staff to prepare the confirmation request and identify the proper recipient. After Peregrine’s accounting staff provided the confirmation request and envelope to Veraja-Snelling for mailing, she sent the confirmation request to a post office box that was secretly controlled by Wasendorf. Wasendorf responded to the request by forging the signature of a bank employee on the form, confirming the false balance amounts.
The Order concludes that Veraja-Snelling’s failure to conduct the Peregrine audits in accordance with Regulation 1.16 constituted improper, unprofessional conduct, and the Order permanently bars her from appearing or practicing as an accountant before the Commission. In addition, the Order requires her to relinquish her right to receive payment for performing the 2011 audit.
In related actions, the CFTC filed a Complaint on June 5, 2013 against U.S. Bank National Association for unlawfully using and holding Peregrine’s customer segregated funds (see CFTC Press Release 6601-13). Wasendorf was also criminally charged by the United States Attorney’s Office for the Northern District of Iowa, pled guilty, and on January 23, 2013 was sentenced to 50 years in prison and ordered to pay more than $215 million in restitution. United States v. Russell Wasendorf, Sr., 12-cr-2021-LRR.
The CFTC Division of Enforcement appreciates the assistance of the CFTC Division of Swap Dealer and Intermediary Oversight in this matter.
The CFTC Division of Enforcement staff members responsible for this matter are Lindsey Evans, Heather Johnson, Mary Beth Spear, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
CFTC Permanently Bars Accountant, Jeannie Veraja-Snelling, for Failing to Properly Audit Peregrine Financial Group, Inc.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it filed and settled charges against Jeannie Veraja-Snelling, d/b/a Veraja-Snelling & Company (Veraja-Snelling), a certified public accountant and sole practitioner from Glendale Heights, Illinois, barring her from practicing before the Commission. The CFTC’s Order charges Veraja-Snelling with failing to audit Peregrine Financial Group, Inc. (Peregrine) in accordance with CFTC Regulation 1.16.
Veraja Snelling was the auditor for Peregrine, a registered Futures Commission Merchant (FCM). On July 10, 2012, the CFTC charged Peregrine and its sole owner and chief executive officer, Russell Wasendorf, Sr. (Wasendorf), with fraud, among other violations, within 24 hours after the discovery that Wasendorf had misappropriated millions of dollars in customer funds (see CFTC Press Release 6300-12). Among the violations that were discovered, Peregrine’s 2011 certified financial statements filed with the Commission were fraudulently overstated by more than $215 million. According to the CFTC’s Order entered today, Wasendorf deceived Veraja-Snelling and others by manufacturing bogus bank statements that overstated Peregrine’s bank balances and by forging documents sent to Veraja-Snelling that purported to provide bank confirmation of the overstated balances.
According to the Order, Wasendorf was able to perpetrate and conceal his fraud in part because Peregrine lacked proper internal accounting controls and was not subject to audits performed in accordance with CFTC Regulations. The Order finds that Veraja-Snelling’s audits of Peregrine’s financial statements were not performed in accordance with generally accepted auditing standards (GAAS) and did not include appropriate review and tests of internal accounting controls and procedures for safeguarding customer assets, as required by CFTC Regulation 1.16.
David Meister, the CFTC’s Director of Enforcement, stated, “As the Peregrine debacle shows, the importance of the independent accountant’s gatekeeper function cannot be overstated. FCMs and, most importantly, their customers, rely on auditors to approach each and every auditing assignment professionally and with due care. There is no place in the CFTC-regulated world for below-standard audits or auditors who do not have a sufficient understanding of the futures industry.”
The Order finds that Veraja-Snelling lacked the necessary technical expertise needed to audit an FCM, failed to adequately staff and plan the Peregrine audits, and failed to exercise due care in performing the Peregrine audits. Among other failures, Veraja-Snelling’s review and testing of Peregrine’s internal controls during the Peregrine audits did not identify that Wasendorf had exclusive control over the customer segregated account and its financial reporting, which reflected a material inadequacy in Peregrine’s internal controls, according to the Order.
In addition, the Order finds that Veraja-Snelling improperly conducted the process to confirm bank account balances, which generally entails an auditor sending a confirmation form to a bank for a bank officer to sign and return to the auditor. Here, Veraja-Snelling relied on Peregrine’s accounting staff to prepare the confirmation request and identify the proper recipient. After Peregrine’s accounting staff provided the confirmation request and envelope to Veraja-Snelling for mailing, she sent the confirmation request to a post office box that was secretly controlled by Wasendorf. Wasendorf responded to the request by forging the signature of a bank employee on the form, confirming the false balance amounts.
The Order concludes that Veraja-Snelling’s failure to conduct the Peregrine audits in accordance with Regulation 1.16 constituted improper, unprofessional conduct, and the Order permanently bars her from appearing or practicing as an accountant before the Commission. In addition, the Order requires her to relinquish her right to receive payment for performing the 2011 audit.
In related actions, the CFTC filed a Complaint on June 5, 2013 against U.S. Bank National Association for unlawfully using and holding Peregrine’s customer segregated funds (see CFTC Press Release 6601-13). Wasendorf was also criminally charged by the United States Attorney’s Office for the Northern District of Iowa, pled guilty, and on January 23, 2013 was sentenced to 50 years in prison and ordered to pay more than $215 million in restitution. United States v. Russell Wasendorf, Sr., 12-cr-2021-LRR.
The CFTC Division of Enforcement appreciates the assistance of the CFTC Division of Swap Dealer and Intermediary Oversight in this matter.
The CFTC Division of Enforcement staff members responsible for this matter are Lindsey Evans, Heather Johnson, Mary Beth Spear, Ava Gould, Scott Williamson, Rosemary Hollinger, and Richard Wagner.
Subscribe to:
Posts (Atom)