Court approves TFS-ICAP’s settlement with CFTC
Shortly after the United States Commodity Futures Trading Commission (CFTC) submitted a proposed consent order that would settle its case against interdealer broker TFS-ICAP, Ian Dibb and Jeremy Woolfenden, the New York Southern District Court has approved the proposed settlement.
Judge John P. Cronan has signed the order that effectively brings the CFTC case to an end.
Under the terms of the settlement:
- TFS-ICAP LLC and TFS-ICAP Ltd. shall pay, jointly and severally, a civil monetary penalty in the amount of $7 million.
- Ian Dibb, who was registered with the CFTC as an Associated Person of TFS- Derivatives Ltd. from December 2014 to October 2016 and as an Associated Person of TFS-ICAP Ltd. from November 2015 to November 2018, will pay a civil monetary penalty in the amount of $500,000.
- Jeremy Woolfenden, who was registered with the CFTC as an Associated Person of TFS-ICAP Ltd. from November 2015 through November 2018 and as an Associated Person of TFS-ICAP Derivatives Ltd. from December 2014 through October 2016, will pay a civil monetary penalty in the amount of $500,000.
In addition, the defendants are permanently restrained, enjoined and prohibited from directly or indirectly deceiving or attempting to deceive other persons in or in connection with any order to make, or the making of, any swap in violation of Section 4b(a)(2) of the Act, 7 U.S.C. § 6b(a)(2) (2018).
The Individual Defendants undertake not to apply for registration or claim exemption from registration with the Commission in any capacity, or engage in any activity requiring such registration or exemption from registration with the Commission for a period of five years.
According to the allegations against the defendants, on multiple occasions between January 2014 and August 2015, TFS-ICAP brokers on the Emerging Markets desks in both London and New York communicated to one or more U.S.-based bank clients bids or offers that had not been directed by a bank client.
On those occasions, TFS-ICAP brokers represented to U.S.-based bank clients that there were bids or offers for an FX option at a particular level when, in fact, no trading institution had bid or offered the option at that level. Communicating unsupported bids and offers was referred to in the FX options industry as “flying” prices.
The TFS-ICAP brokers in New York and London who engaged in the practice of flying did so by posting unsupported bids and offers under one of the various “TFS” aliases.
Between January 2014 and August 2015, TFS-ICAP brokers on the Emerging Markets desks in both London and New York communicated to one more U.S.-based bank clients that trades had occurred when a trade had not, in fact, occurred. This practice was known in the industry as “printing,” “spoofing,” or “calling” of a trade.
Dibb was the CEO of the TFS-ICAP Defendants from on or about February 2012 to at least 2017. As the CEO, he oversaw the day-to-day operations of the joint venture. From at least January 2014 through September 2015, Dibb was ultimately responsible for ensuring that there was a reasonably adequate system of controls in place to supervise TFS-ICAP broker conduct, including brokers on the Emerging Markets desks in the U.S and U.K.
As CEO, Dibb was ultimately responsible for implementing company policies and procedures and ensuring that brokerage conduct was in compliance with the law. From at least January 2014 through September 2015, Dibb was in a position to verify whether or not the brokers under his supervision were flying and printing and, if so, to direct that the misconduct stop.
From at least January 2014 through at least September 2015, Woolfenden, while employed by TFS-ICAP Ltd., held the title of Global Head of Emerging Markets at TFS-ICAP – a position that at least gave him supervisory responsibility over all TFS- ICAP brokers on the Emerging Markets desks in New York and London and authority over hiring emerging market brokers.
From at least January 2014 through September 2015, Woolfenden was in a position to verify whether brokers under his supervision, including those in the U.S., were flying and printing and, if so, to direct that the misconduct stop.
From at least January 2014 through September 2015, both Dibb and Woolfenden were responsible for maintaining and enforcing a reasonably adequate system of internal supervision.
At no point from January 2014 through September 2015 did the TFS-ICAP defendants have a policy that specifically and expressly prohibited flying prices or printing trades.