CFTC strikes back at TFS-ICAP senior managers in flying & printing case

Maria Nikolova

The assertion that “flying is not a material misrepresentation” is entirely unsupported, the CFTC argues.

Less than a month after Jeremy Woolfenden and Ian Dibb challenged claims by the Commodity Futures Trading Commission (CFTC) in a case about illicit practices known as flying and printing, the US regulator has responded to the arguments of the senior managers of TFS-ICAP.

Let’s recall that Jeremy Woolfenden was the Global Head of Emerging Markets broking at TFS-ICAP, whereas Ian Dibb was the CEO of TFS-ICAP from approximately 2011 to 2017.

The CFTC alleges that, from approximately 2008 through 2015, brokers at TFS-ICAP offices in the United States and the United Kingdom attempted to deceive and deceived their clients by engaging in the practices of communicating to them fake bids and offers and fake trades in the foreign exchange options market. The CFTC Complaint alleges that the practices, known as “flying prices” and “printing trades”, were a core part of TFS-ICAP’s broking business.

Following the counter-arguments by Woolfenden and Dibb, the CFTC letters containing the response by the regulator to the defendants’ statements have been filed with the New York Southern District Court. The letters are dated February 22, 2019, but were filed with the Court on March 1, 2019.

In the documents, the CFTC notes that the New York Southern District Court has personal jurisdiction over Mr. Woolfenden because his actions caused the underlying misconduct at issue in this case. TFS-ICAP brokers made misrepresentations to US-based clients because they had been trained and encouraged to do so by Mr. Woolfenden. Though Mr. Woolfenden lived in London, as the Global Head of Emerging Markets FX Options he directly supervised and managed these US- and London-based brokers through at least mid-August 2015. Moreover, he registered with the CFTC in the United State as an associated person of two CFTC-registered entities.

Furthermore, the CFTC argues that the conduct at issue in this case – flying prices and printing trades to US-based clients – is a direct result of Mr. Woolfenden’s own actions. The Complaint alleges that in 2008, Woolfenden introduced the practices of flying and printing to US-based brokers. Specifically, he pressured existing US management at the time to adopt the deceptive practices, stripped them of responsibilities when they resisted, and installed a new manager who would comply. Moreover, Mr. Woolfenden took it upon himself to teach the practices to US-based supervisees.

Regarding Mr Dibb, the CFTC argues that the Complaint contains allegations sufficient to draw a reasonable inference that he knew or, at the very least, “consciously avoided” knowledge that TFS-ICAP brokers flew prices and printed trades to US-based clients or was “willfully blind” to such conduct. The Complaint alleges Mr. Dibb (1) flew prices and printed trades himself before he was CEO; (2) heard London brokers on the floor talk about flying and printing while he was CEO; and (3) on at least one occasion, in 2014, received an email from a New York broker expressing concern about printing trades in a regulated market. Furthermore, the Complaint alleges that Mr Dibb did not implement any policies or procedures-either in New York or London-to deter or detect these deceptive practices. Collectively, these allegations are seen as more than adequate by the CFTC to plead conscious avoidance.

Importantly, the CFTC addresses the question about “flying” violating (or not) the CEA. Declaring that “flying is not a material misrepresentation,” is an entirely unsupported assertion, the CFTC says. The regulator says that the Complaint adequately alleges that the conduct at issue was “material” to traders, the definition of”transaction” under the Act is sufficiently broad, and the statutes and regulations at issue plainly make deceptive practices-like “flying,” as alleged-illegal and thus provide fair notice.

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