SummerHaven Investmen Receives a Huge Fine from the CFTC

CFTC impose a fine of $500,000 on SummerHaven Investment Management LLC.


May 20, 2021, | AtoZ Markets - The United States Commodity Futures Trading Commission (CFTC) impose a fine of $500,000 on SummerHaven Investment Management LLC.

The fine is a part of a settlement with the firm, which was charged with engaging in wash sales and non-competitive transactions on the InterContinental Exchange and various Chicago Mercantile Exchange exchanges, and for failing to diligently supervise its activities.

Read here the full statement

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The order requires SummerHaven to pay a civil monetary penalty of $500,000 and to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations, as charged.

According to the order, SummerHaven engaged in multiple wash sales and non-competitive transactions while moving positions held by a client from one futures commission merchant (FCM) to another.

Specifically, on July 2, 2018, SummerHaven placed offsetting buy and sell orders at each FCM, resulting in a series of pre-arranged offsetting trades in contracts for crude oil, heating oil, gasoil, live cattle, lean hogs, soybean meal, gasoline, cocoa, and cotton.

In total, SummerHaven made more than 100 non-competitive prearranged trades with an aggregate value of more than $570 million.

Do You Want to Know What Is Wash-Sale ?

Wash-sale rule is an Internal Revenue Service (IRS) regulation created to prevent an investor from taking a tax deduction for a product sold.

The regulation defines wash-sale as that which occurs when an investor sells or exchanges a product at a loss within 30 days before or after this sale, when he buys an "equal" share or product.

Wash-sale also occurs if an investor sells a product and the investor's spouse or an investor-controlled company purchases an equivalent similar product.

Investors looking to take advantage of any capital losses need to beware of wash sales, which can derail their attempt to claim a deduction during tax time.

A wash sale is one of the key pitfalls to avoid when trying to take advantage of tax-loss harvesting to reduce your taxes.

Let’s See the Following Example

For example, an investor has a profit of $ 10,000 from the sale of AAA shares. He falls into the highest tax bracket, therefore he will have to pay a 20% capital gains tax, or $ 2,000, to the government.

But if the investor sells the ZZZ shares for a loss of $ 5,000. His net capital gain for tax purposes will be $ 10,000 - $ 5,000 = $ 5,000, which means that he will have to pay only $ 1,000 in capital gains taxes.

Notice how the loss I make in ZZZ reduces the gain in AAA and therefore reduces the investor's tax bill.


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