Nadex takes disciplinary action against member over failure to inform of previous suspension, investigation

North American Derivatives Exchange (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), has taken a disciplinary action against one of its members over his failure to comply with the Exchange’s rules. In a notice on its website, Nadex explains that, as a result of Carlos Evertsz’s violations of Exchange Rules 3.3 and 5.19, his membership has been revoked.

After Evertsz had submitted his Membership application to the Exchange on April 29, 2018 and had deposited the requisite minimum deposit amount, Nadex’s Compliance Department received an alert from its third party background service regarding prior regulatory action pertaining to Evertsz. The alert indicated that he was the subject of two Financial Industry Regulatory Authority (FINRA) matters, both of which resulted in trading suspensions. Moreover, he had been barred from affiliation with any FINRA member in any capacity.

Evertsz was also found to have been party to a customer compliant filed in 2017 alleging claims of unsuitability and to be party to a second customer complaint, also filed in 2017, alleging breach of fiduciary duty.

Nadex notes that Evertsz failed to disclose the incidents on his April 2018 application in response to the Qualifying Questions which ask “Have you had trading privileges suspended, been denied access to or membership in, or been the subject of any formal or informal investigation by a regulated exchange, brokerage, or association?” and “Are you currently party to any actions, or is there a charge pending against you, the resolution of which could result in a Yes answer to any of the question above?”. He also failed to inform the Exchange of these incidents after becoming a Member.

Nadex’s Compliance Department has determined that Evertsz violated Nadex Rule 3.3(d)(i), which requires a Member to immediately notify Nadex in writing of any trading privileges suspension, access or membership denial, or in the event the Member is the subject of any formal or informal investigation by a regulated exchange, brokerage, or association, and Rule 5.19(k), which prohibits a Member from intentionally providing erroneous or fraudulent information on a membership application when he failed to disclose his previous suspension and open investigation and instead answered “No” to the relevant application questions.

Similar action was taken against another Nadex member in August 2018. Back then, the Exchange banned Dwayne Hans over his violation of Rule 3.3, as he failed to inform the Exchange of his felony plea agreement.

In July this year, the Exchange revoked the membership of Rodney Bowman and Phil Shaheen for violations of the same rule (3.3).

Phil Shaheen failed to disclose that he had pled guilty to two counts of wire fraud, and that he had taken part in a fraudulent fund-raising scheme for charities. Additionally, Shaheen had failed to inform the Exchange that he had been convicted of operating a telemarketing scam, which defrauded investors out of $7 million.

Rodney Douglas Bowman did not disclose that he had been barred from association with any NASD member firm in any capacity. Bowman had actually been the subject of two NASD regulatory actions; the first involving allegations of securities fraud and manipulation in which a temporary bar, fines and restitution were assessed, and the second, in which Bowman failed to comply with requests for information and documentation in connection with a routine examination of a NASD member firm.