Clarksons Platou Futures, part of London-listed shipbroking group Clarksons, has settled a fine with a US derivatives regulator after a review found the brokerage violated regulations on trade practice.
A complaint issued in April by the US-based National Futures Association (NFA) threatened the shipbroker’s freight derivatives division with up to $2m in fines, following a review by its Business Conduct Committee.
But Clarksons has settled with the regulator for $250,000 and has neither admitted nor denied the allegations in the complaint, the NFA confirmed.
A spokesperson for Clarksons said: “Following a routine inspection, the NFA identified a number of deficiencies in Clarksons Platou Futures Limited’s compliance programme.
“Clarksons Futures takes its regulatory obligations very seriously and prior to the inspection had already identified many of these deficiencies and commenced a remediation process. We are pleased to have completed the remediation process and agreed to settle this matter with the NFA.”
The derivatives brokerage was charged with failing to retain pre-trade communications and disclosing confidential information.
The regulator also alleged that Clarksons’ brokers quoted prices that were not supported by bids and offers, and changed clients’ bids without their knowledge.
Clarksons was charged with failing to register three individuals as NFA associates, including the head of its wet freight derivatives desk.
The decision also charged the company with failing to supervise the conduct of its employees and brokers diligently.
The charges follow an NFA review of Clarksons’ forward freight agreement desk activity during August 2022.
Previous fine
This is not the first time Clarksons Platou Futures has received fines for breaching rules on communications and disclosures.
In 2022, the futures division agreed to pay a $60,000 fine to the New York Mercantile Exchange (NYMEX), which handles trades for commodity futures.
A review by the NYMEX business conduct committee found that Clarksons submitted multiple block trades with inaccurate execution times on several occasions in February and March 2021.
The division also failed to report multiple block trades to NYMEX within the required time after executing trades for refined products and bunker fuel.
Similar to what was found in the NFA review, NYMEX alleged that Clarksons broke the rules on disclosing counterparty information for several block trades.
The review also found that it failed to properly advise and train its brokers on how to report execution times for trades in compliance with NYMEX rules.
Clarksons neither admitted nor denied the rule violations in settling the fine with the exchange.
Derivatives brokers are bound by rules on communications set by the Commodity Futures Trading Commission, a US-based regulator.
Clarksons is regulated by the NFA as an execution-only introducing broker for block trades of FFAs, fuel oil and iron ore derivatives.
An introducing broker that generates more than $5m in aggregate gross revenue over three years must keep records of all business-related and transaction-related communications and retain them for five years.
Bigger penalty
Clarksons is settling the NFA penalty for almost double what other FFA brokers fined previously have agreed with the regulator.
Braemar Securities agreed to pay $140,000 in November, as did Florida-based Ocean Solutions last year and Freight Investor Services in 2021.
The bigger fine reflects that Clarksons was found to allegedly have violated four different NFA rules, while Braemar and Ocean Solutions were both charged with three counts.
FIS was the first FFA brokerage to be reviewed by the NFA and was found to have broken two of the regulator’s rules. It paid a fine of $140,000 and set the precedent for later penalties.
Market sources have told TradeWinds it is highly likely that other brokerages will be subject to fines from the regulator in the future as the NFA continues its clampdown on trade practices in the sector.
The past few years have seen other big-name derivatives brokers fall foul of NFA rules on communications and disclosures, including Clarksons’ rival Braemar and a former chairman of the Baltic Exchange’s Freight Forward Agreement Brokers’ Association.
Braemar’s freight derivatives desk was fined $140,000 by the NFA in November after a review found it had violated regulations on communications and disclosures.
In March last year, Florida-based commodities and freight derivatives broker Ocean Solutions was fined $140,000 for similar breaches to those made by Braemar.
James W Ronan, senior vice president of Ocean Solutions, was also ordered to pay a $60,000 fine as an “associated person” of the company.
Ronan was chairman of the FFA Brokers’ Association between 2013 and 2014.
The NFA’s hearing panel found that Ocean Solutions disclosed confidential customer information to other customers of the firm.
It also breached compliance rules by failing to keep records of oral and written pre-trade communications and by failing to diligently supervise the firm and its employees, according to the decision document.
It was found that Ocean Solutions and Ronan broke compliance rules by failing to disclose to customers the conflict of interest presented by the firm, and Ronan, brokering trades on behalf of an affiliate in which the firm and Ronan had a management and/or ownership interest.
Ocean Solutions was also found to have broken an NFA bylaw by failing to register its CEO, Matthew LaFiandra, as an associated person and an NFA associate.
Freight Investor Services, the world’s biggest broker of freight derivatives, was fined $140,000 in 2021 in similar circumstances.
The NFA found the shop failed to keep complete records of transaction-related communications and had allowed an unregistered individual to act as an associated person of the company in trading.
