The National Futures Association ("NFA") charged an introducing broker ("IB") and two of its associated persons ("APs") with misusing customer block order information in a trading scheme to enrich themselves.

Following an investigation into the IB, which acts as a broker for block trades for large commercial firms and market makers in the energy sector, the NFA found evidence that one of the APs (who was also a principal of the firm) (the "principal") misused customers' information in connection with block trades that he intermediated on their behalf. The NFA alleges, in particular, that the principal first entered futures orders on ICE Futures US ("ICE") for his personal company on the same side of the market as his customer's block trade and then took the opposite side of such customer's block trades, and reported such trades in a manner that ensured the IB would profit. Throughout this scheme, the principal allegedly failed to disclose to his customers that his personal company was the counterparty to their block trades.

The NFA charged the firm and the principal with violating NFA compliance rules 2-4 (high standards of commercial honor), 2-9(a) (supervision), and 2-2(a) (fraud). The firm was also charged with recordkeeping violations, and the second charged AP was also charged with failure to supervise under 2-9(a).

The firm and the principal (among others) previously paid to settle charges brought by ICE. The NFA proceedings are pending, and the NFA reserved the right to impose penalties including a fine of $250,000 per violation and a temporary or permanent bar from NFA membership.

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