The US National Futures Association (NFA) has ordered Coquest Incorporated, an introducing broker (IB) and commodity trading advisor (CTA) based in Dallas, Texas, to pay $275,000 in fines for its compliance and supervisory failures.
Additionally, NFA slammed a $250,000 fine on the UK introducing broker, Marex Spectron International Limited, for a similar offence.
The self-regulatory organization, which said the decision to fine Coquest was reached by its Business Conduct Committee (BCC), announced details of the sanction on Wednesday on its website.
NFA said the decision was based on the complaint issued by the BCC after reviewing an investigative report submitted by the association’s Compliance Department.
The independent body added that the decision was based on a settlement offer submitted by Coquest in which the company neither admitted nor denied the allegations.
Coquest runs several affiliate firms, among them is Woodbine Group LLC, a Texas limited liability corporation, which NFA also disclosed.
Allegations Before Coquest
NFA said it commenced its examination of Coquest in July 2020.
According to the BCC’s complaint file on Coquest seen by Finance Magnates, NFA alleged that Coquest, among other things, violated the NFA Bylaw 1101 by doing futures business with an affiliate, the Woodbine Group, that was not an NFA Member.
In addition, the file disclosed that on August 23, 2010, Woodbine adopted a resolution authorizing John Vassallo and Dennis Weinmann, the President and Vice-President of Coquest, respectively, to trade commodities for present or future delivery and options on futures on its behalf.
The complaint file further read in part: “In or about 2010, Woodbine received capital contributions in the form of Vassallo’s and Weinmann’s personal funds, funds from relatives and funds from outside investors. Woodbine received a total of about $2 million in capital contributions.
“Of this $2 million in capital contributions, more than $400,000 was contributed by outside investors who were not principals, operators or commodity trading advisors of Woodbine, and who were not relatives of any such persons.
“Woodbine pooled these contributions and, in whole or in part, used them to trade commodity interests.”
While Woodbine should have been registered as a Community Pool Operator (CPO) with the US Commodity Futures Trading Commission (CFTC) by Conquest, NFA said the company did not do so.
NFA also alleged that Coquest and Vassallo negligently misrepresented to the futures association that Woodbine was eligible for an exemption from CFTC registration.
Additionally, NFA alleged that Vassallo facilitated a decade-long violation of Bylaw 1101, both while serving as an Associated Person (AP) and principal of a former Member firm, Mega Capital LLC, and as an AP and principal of Coquest.
The BCC charged Vassallo and Weinmann with failing to supervise Coquest’s employees and agents in the conduct of their commodity interest activities for or on behalf of the firm.
NFA’s File of Fines
As a self-regulatory organization and watchdog for the US derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency swaps
Swaps
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term, the NFA in the last few years has issued a number of fines to its erring members to put the industry in check.
In April 2019, the watchdog fined East West Global, a US-registered asset manager, $750,000 for overcharging investors of its commodity pool. NFA’s filing said the company breached fiduciary duty and failed to adequately disclose the high fees and poor overall performance of the pools, which was material information.
Later in September 2019, NFA barred Fortress Capital, Inc. and its former sole principal, George Ashkar, for five years for helping forex
Forex
Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value.
Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value.
Read this Term traders get around the futures association’s regulations. Fortress had told its clients to open their accounts from foreign jurisdictions under the names of their friends.
In 2018, the regulator also fined Global Asset Advisors, the futures business arm of GAIN Capital, $235,000 for lack of “adequate supervisory procedures” to monitor a trading manager who traded with his wife’s account even after he was banned from trading.
The US National Futures Association (NFA) has ordered Coquest Incorporated, an introducing broker (IB) and commodity trading advisor (CTA) based in Dallas, Texas, to pay $275,000 in fines for its compliance and supervisory failures.
Additionally, NFA slammed a $250,000 fine on the UK introducing broker, Marex Spectron International Limited, for a similar offence.
The self-regulatory organization, which said the decision to fine Coquest was reached by its Business Conduct Committee (BCC), announced details of the sanction on Wednesday on its website.
NFA said the decision was based on the complaint issued by the BCC after reviewing an investigative report submitted by the association’s Compliance Department.
The independent body added that the decision was based on a settlement offer submitted by Coquest in which the company neither admitted nor denied the allegations.
Coquest runs several affiliate firms, among them is Woodbine Group LLC, a Texas limited liability corporation, which NFA also disclosed.
Allegations Before Coquest
NFA said it commenced its examination of Coquest in July 2020.
According to the BCC’s complaint file on Coquest seen by Finance Magnates, NFA alleged that Coquest, among other things, violated the NFA Bylaw 1101 by doing futures business with an affiliate, the Woodbine Group, that was not an NFA Member.
In addition, the file disclosed that on August 23, 2010, Woodbine adopted a resolution authorizing John Vassallo and Dennis Weinmann, the President and Vice-President of Coquest, respectively, to trade commodities for present or future delivery and options on futures on its behalf.
The complaint file further read in part: “In or about 2010, Woodbine received capital contributions in the form of Vassallo’s and Weinmann’s personal funds, funds from relatives and funds from outside investors. Woodbine received a total of about $2 million in capital contributions.
“Of this $2 million in capital contributions, more than $400,000 was contributed by outside investors who were not principals, operators or commodity trading advisors of Woodbine, and who were not relatives of any such persons.
“Woodbine pooled these contributions and, in whole or in part, used them to trade commodity interests.”
While Woodbine should have been registered as a Community Pool Operator (CPO) with the US Commodity Futures Trading Commission (CFTC) by Conquest, NFA said the company did not do so.
NFA also alleged that Coquest and Vassallo negligently misrepresented to the futures association that Woodbine was eligible for an exemption from CFTC registration.
Additionally, NFA alleged that Vassallo facilitated a decade-long violation of Bylaw 1101, both while serving as an Associated Person (AP) and principal of a former Member firm, Mega Capital LLC, and as an AP and principal of Coquest.
The BCC charged Vassallo and Weinmann with failing to supervise Coquest’s employees and agents in the conduct of their commodity interest activities for or on behalf of the firm.
NFA’s File of Fines
As a self-regulatory organization and watchdog for the US derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency swaps
Swaps
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term, the NFA in the last few years has issued a number of fines to its erring members to put the industry in check.
In April 2019, the watchdog fined East West Global, a US-registered asset manager, $750,000 for overcharging investors of its commodity pool. NFA’s filing said the company breached fiduciary duty and failed to adequately disclose the high fees and poor overall performance of the pools, which was material information.
Later in September 2019, NFA barred Fortress Capital, Inc. and its former sole principal, George Ashkar, for five years for helping forex
Forex
Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value.
Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value.
Read this Term traders get around the futures association’s regulations. Fortress had told its clients to open their accounts from foreign jurisdictions under the names of their friends.
In 2018, the regulator also fined Global Asset Advisors, the futures business arm of GAIN Capital, $235,000 for lack of “adequate supervisory procedures” to monitor a trading manager who traded with his wife’s account even after he was banned from trading.
Source: https://www.financemagnates.com/binary-options/nfa-fines-us-broker-coquest-275000-for-compliance-failure/