26 May AtoZForex, Vilnius – The U.S. Commodity Futures Trading Commission (CFTC) has filed and Order containing proceedings and settling charges against Cypress Wealth Management, Inc. and its former staff members. The charges were set against operators and owners, Richard D. Schrutt of Tampa, Florida and Ted L. Romeo of Pompano Beach, Florida. Considering that they were charged for illegally offering off-exchange financed transactions in precious metals to retail clients. Moreover, they failed to register as a Futures Commission Merchant (FCM), as it is required by the Commission.
According to the announcement, the CFTC fined Cypress Wealth Management for $530,000. The Order requires the respondents to pay $330,764 restitution to their customers. Aside, an additional $100,000 civil monetary penalty needs to be fulfilled by Ted Romeo. Also, the respondents are required to desist from further violations of the Commodity Exchange Act. The order prohibits them to trade on or pursuant to the rules of any registered entity.
Why CFTC fined Cypress Wealth Management?
The CFTC Order states that in the period from January 2012 to March 2013, the respondents solicited the clients to buy and sell precious metals in leveraged, off-exchange transactions. According to the Order, customers paid purchase price percentage for the metals and got financing for the rest of the purchase price, while paying transaction fees and commissions.
Dodd-Frank Act states the off-exchange transactions with retail customers as illegal. According to the Order, financed transactions like those must be subject to the rules of a board of trade produced by CFTC. The Order found transactions to be illegal. The reason for that is that customers were not eligible contract participants or entities.
Why CFTC registration is crucial
It is illegal for any person to act as FCM without proper registration with CFTC. Such registration should not be expired, suspended or revoked. Cypress acted as unregistered FCM and accepted customer’s orders for financed transactions with physical precious metal. In addition to those transactions, it accepted funds from customers, who were not eligible contract participants or commercial entities. Schrutt and Romeo are also responsible for the company’s lack of the registration as they were controlling people of the company.
The CFTC warns that the victims might not get all their money back as the wrongdoers may not have sufficient assets or funds for full restitution and coverage of the money lost.
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