CFTC: Cost Management Solutions Must Pay $100,000 for Failing to Register as Introducing Broker

The Commodity Futures Trading Commission (CFTC) said Monday (Aug. 12) that it required Cost Management Solutions (CMS) to pay a $100,000 civil monetary penalty after finding that the company failed to register as an introducing broker (IB).

The regulator issued an order that both filed and settled the charges against the Texas company Monday, according to a press release.

The CFTC also said it ordered CMS to cease and desist from “further violating the CEA [Commodity Exchange Act], as charged,” per the release.

Cost Management Solutions did not immediately reply to PYMNTS’ request for comment.

The company primarily served propane retailers who were buying propane, heating oil and crude oil and were looking to hedge risk, according to the release.

On behalf of its clients, CMS contacted potential counterparties for a quote; negotiated with those counterparties on the client’s behalf; and, if the quote was acceptable to the client, executed the swap agreement or option transaction on their behalf, according to the release.

The CFTC’s order found that by soliciting and accepting orders for swap and options transactions for its clients, CMS acted as an unregistered IB, per the release.

“CMS’s IB activities included: identifying counterparties; price discovery; negotiating trades; and trade execution,” CFTC said in the release. “CMS did not accept any money, securities or property to margin, guarantee or secure these transactions. CMS received fees from its clients for its brokerage services.”

In another CFTC action, it was reported Wednesday (Aug. 7) that the regulator reached a settlement with fallen cryptocurrency platform FTX and its sister company Alameda Research.

Under the agreement, FTX and Alameda will pay back $8.7 billion to investors defrauded by Sam Bankman-Fried, the now-jailed founder of FTX, and will pay a $4 billion “disgorgement” for “gains received in connection with the violations” mentioned in the CFTC’s complaint against the defendants.

The order also bans FTX and Alameda Research from “cheating or defrauding” commodity customers, and engaging in transactions involving “digital asset commodities,” either by themselves or on behalf of third parties. However, the agreement does not require the companies to pay a civil penalty.