A precious metals refiner and its former futures trader settled CFTC charges (see here and here) for spoofing trades involving precious metals contracts.
According to the CFTC, a former trader of Heraeus Metals New York LLC ("Heraeus") engaged in spoofing involving Silver and Gold futures contracts traded on the Commodity Exchange. The CFTC found that Heraeus was "vicariously liable" as the employer.
To settle the CFTC charges, the former trader agreed to (i) cease and desist from further violating CFTC rules, (ii) pay a civil monetary penalty of $130,000, (iii) a suspension for four months from associating with any CFTC registrant and (iv) comply with specific provisions and undertakings outlined in the Offer. Separately, Heraeus agreed to (i) cease and desist from further violating CFTC rules, (ii) pay a civil monetary penalty of $900,000 and (iii) comply with specific provisions and undertakings outlined in the Offer.
In a parallel inquiry, the exchange ordered the former trader to pay a $70,000 fine and serve a four-month suspension.
Commentary
While sanctions were imposed on both the trader and his employer, the fine imposed on the latter is considerably more severe ($900,000 for the firm vs. $200,000 for the trader, including a fine imposed on the trader by the exchange), even though the employer immediately suspended (and subsequently terminated) the trader following discovery of the wrongdoing, and even though it had instituted measures to prevent traders from engaging in spoofing. It's not clear why there is such a disparity in punishment since it's also not clear from the Orders the relative level of culpability. One would expect in these circumstances that the firm would have been charged with failure to supervise, but that is not the case. Instead it is being held responsible for the acts of its agent.
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