East West Global, a US-registered asset manager, agreed on Wednesday to pay the National Futures Association a $750,000 fine to settle allegations that it charged from investors in its commodity pool. The case also involved Luke James Adrian, the firm’s chief executive officer and principal.
Mr. Adrian neither admitted nor denied the NFA’s claims that it furthered the interests of his company, rather than the interests of pool participants, by using a strategy that relied on extremely high fees that generated significant revenue for East West Global.
The filing also 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, the NFA alleged.
As part of the settlement, Adrian agreed to notify all former and current clients of the disciplinary proceedings and that they were charged a higher fee than they should have paid.
The its suit against East West Global on August 2018, alleging the commodity trading operator allowed to publish these disclosures although the documents were materially inaccurate and likely to deceive pool participants.
Amended Rules of Trade Costs Disclosure
During the relevant time, East West Global, which is located in Highland Park, Illinois, was a commodity pool operator and an NFA Member. Luke James Adrian was also an associated person (AP), principal and the chief executive officer of East West Global, and an NFA Associate.
Last year, the NFA introduced new amendments that require forex dealer members to that include commissions and any other fees. The amended rule requires STP forex brokers, upon client demand, to disclose the full breakdown of any mark-ups or mark-downs they impose on the price they have received to execute the customer’s orders. For non-STP model, the broker must disclose the mid-point spread cost, which the NFA defines as the difference between the price of order execution and the mid-point of the bid/ask spread at the time of the order execution.
The National Futures Association self-regulates futures trading and is itself supervised by the U.S. Commodity Futures Trading Commission (CFTC). Both watchdogs were given massive responsibilities under the Dodd-Frank law, and have recently launched innovative regulatory programs.