UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

In the Matter of: 

ADM Investor Services Inc., 

Respondent.

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CFTC Docket No. 22-50

ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (d) OF THE COMMODITY EXCHANGE ACT, MAKING 

FINDINGS, AND IMPOSING REMEDIAL SANCTIONS

I. INTRODUCTION

The Commodity Futures Trading Commission (“Commission”) has reason to believe that 

from in or about December 2016 to at least September 2019, ADM Investor Services Inc. 

(“Respondent”) violated Commission Regulation 166.3, 17 C.F.R. § 166.3 (2021) of the 

Commission Regulations (“Regulations”) promulgated thereunder. Therefore, the Commission 

deems it appropriate and in the public interest that public administrative proceedings be, and 

hereby are, instituted to determine whether Respondent engaged in the violations set forth herein 

and to determine whether any order should be issued imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, Respondent has 

submitted an Offer of Settlement (“Offer”), which the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, Respondent consents to 

the entry of this Order Instituting Proceedings Pursuant to Section 6(c) and (d) of the Commodity 

Exchange Act, Making Findings, and Imposing Remedial Sanctions (“Order”), and 

acknowledges service of this Order.1

1

 Respondent consents to the use of the findings of fact and conclusions of law in this Order in this proceeding and 

in any other proceeding brought by the Commission or to which the Commission is a party or claimant, and agrees 

that they shall be taken as true and correct and be given preclusive effect therein, without further proof. Respondent 

does not consent, however, to the use of this Order, or the findings or conclusions herein, as the sole basis for any 

other proceeding brought by the Commission or to which the Commission is a party or claimant, other than: a 

proceeding in bankruptcy or receivership; or a proceeding to enforce the terms of this Order. Respondent does not 

consent to the use of the Offer or this Order, or the findings or conclusions in this Order, by any other party in any 

other proceeding. 
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II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

From at least December 1, 2016 to September 1, 2019 (the “Relevant Period”), 

Respondent, a registered futures commission merchant (“FCM”), failed to diligently supervise 

the handling by its employees and agents of commodity interest accounts carried by Respondent 

and introduced by Respondent’s Guaranteed Introducing Brokers (“the GIBs”), as well as the 

activities of its employees and agents relating to its business as a registered FCM, to ensure 

compliance with the Act and Regulations and to deter and detect wrongdoing, in violation of 

Regulation 166.3, 17 C.F.R. § 166.3 (2021). 

In particular, Respondent’s supervisory system failed to detect repeated incidents in 

which brokers employed by Respondent or Respondent’s GIBs executed improper or fictitious 

trade transfer requests that violated the Commodity Exchange Act and Regulations. Through 

these transfers, which collectively persisted for several years, the brokers executed trades and 

then submitted improper or fictitious trade transfer requests to allocate winning trades to 

preferred customers or to accounts that they controlled or managed, while allocating losing 

trades to other accounts they controlled or managed. 

For much of the Relevant Period, Respondent had no ability to adequately monitor or 

analyze such requests. After being notified by a customer in February 2018 of potential 

unauthorized trading by a broker at one of Respondent’s branch offices, Respondent commenced 

an internal investigation and identified suspicious trade transfers from and between a customer’s 

personal and corporate accounts. As part of its remediation, Respondent developed and 

introduced an Account Change Tool (“Tool”) to improve Respondent’s policies and procedures 

for addressing trade transfer requests and other account change requests. Nevertheless, because 

Respondent failed to timely implement the Tool, and due to the Tool’s own shortcomings and 

other deficiencies in Respondent’s policies and procedures, Respondent failed to detect or 

prevent brokers at the GIBs from making improper or fictitious trade transfers during the 

Relevant Period. In fact, even after the Tool was released and mandated for all Introducing 

Brokers (“IBs”), Respondent’s Compliance Department was only notified by Operations of one 

account change request by those GIB brokers during the Relevant Period. 

In accepting Respondent’s Offer, the Commission recognizes the Respondent’s 

cooperation with the Division of Enforcement’s investigation of this matter. The Commission 

also acknowledges Respondent’s representations concerning its remediation in connection with 

this matter. 

B. RESPONDENT 

ADM Investor Services Inc. is a registered FCM headquartered in Chicago, Illinois. 
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C. FACTS 

During the Relevant Period, employees and agents of Respondent or Respondent’s GIBs 

regularly submitted requests to Respondent to transfer, allocate, or move existing trades between 

or among customers accounts.2 According to the process in place at the beginning of the 

Relevant Period, the GIBs submitted trade transfer and other account change requests via email 

to a group inbox maintained by Respondent’s Operations Department. A smaller team within 

Operations, known as the Customer Service team, primarily addressed such requests. According 

to Respondent’s Compliance Manual in effect during the Relevant Period, requests relating to 

changes older than three days and/or with different tax IDs, among other types of requests, were 

to be referred to Respondent’s Compliance Department. In addition, the Compliance Manual 

stated that certain scenarios “may constitute unusual activity within or among accounts and 

should be sent to Compliance for approval before proceeding, [including] [f]requent or large 

non-routine account transfers, [and] [f]requent movement of funds or positions between/among 

accounts....” Customer Service representatives had discretion to determine whether account 

changes satisfied the general guidelines in the Compliance Manual, and were encouraged to 

make a referral to Compliance if a request appeared suspicious. However, there were no set 

criteria as to what constituted “frequent or large non-routine account transfers,” “frequent 

movement of funds or positions,” or “suspicious” transfer requests. In addition, prior to the 

implementation of the Tool, Respondent had no system or technology in place for tracking or 

analyzing historical account change requests, and so it was difficult to measure the frequency of 

requests and individual brokers were not required to provide a reason for account change 

requests. 

During the Relevant Period, Respondent’s Compliance Manual also addressed how the 

Operations Department handled requests for commission credits by individual brokers, which 

also required approval by the Operations Department. The Compliance Manual provided, among 

other things, that: “Commission credits over $1,000.00 require Compliance approval”; 

“Commission credits should not be a routine occurrence”; and “Anything frequent and/or 

questionable should be presented to Compliance.” However, there were no set criteria as to what 

constituted “routinely occurring,” “frequent,” or “questionable.” Rather, Respondent’s Customer 

Service representatives had discretion to determine whether commission credit requests met the 

Compliance Manual guidelines or to make a referral to Compliance. 

In or about February 2018, Respondent was made aware of a complaint by a customer 

against one of Respondent’s senior brokers. The customer alleged that the broker had engaged in 

unauthorized trading. As part of its internal investigation, Respondent identified suspicious back 

office trade transfers between the customer’s corporate account and the customer’s personal 

account. Respondent terminated the broker and undertook efforts to develop enhanced 

procedures relating to account change requests. 

Beginning in or about May 2018, Respondent began developing an Account Change Tool 

application that was designed to become the primary method through which Respondent’s 

Introducing Brokers and branch offices could request trade transfers. In September 2018, 

 

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 The facts described herein pertain to two of Respondent’s GIBs and a senior broker at one of Respondent’s branch 

offices. 
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Respondent notified all Introducing Broker Managers of the Account Change Tool, and 

announced that effective October 1, 2018, “The Account Change Tool will be the ONLY method 

to request account change[s] involving trade transfers.” 

Despite this initiative, as of the October 1, 2018 deadline, approximately half of 

Respondent’s Introducing Brokers were still not utilizing the Tool, and the Operations 

Department continued to receive email and/or phone requests to make account changes. On 

August 1, 2019, Respondent extended the deadline for using the Tool, issuing a memo to all IBs 

that mandated use of the Tool for moving positions effective September 1, 2019. Since 

September 1, 2019, nearly all of Respondent’s IBs have utilized the Tool to request account 

changes. 

Even after the Account Change Tool was introduced, the application suffered from 

several key deficiencies. In particular, during the Relevant Period, the Account Change Tool had 

limited ability to track or analyze historical account change requests, or to analyze the profit & 

loss (P&L) impact of such requests. As a result, from the time the Account Change Tool was 

introduced through the end of the Relevant Period, Respondent’s Operations and Compliance 

Departments could only review for suspicious trading activity on an ad hoc basis, such as 

account changes that occurred routinely across the same accounts. 

As a result of Respondent’s inadequate policies and procedures prior to introducing the 

Account Change Tool, and shortcomings of the Tool itself, Respondent failed to detect 

additional improper or fictitious trade transfers during the Relevant Period. On or about July 31, 

2019, Respondent discovered that a broker at one of the GIBs had frequently provided 

instructions to change account numbers on various trades in order to improperly allocate 

profitable trades from accounts he serviced to certain other customer accounts that he serviced. 

The broker’s misconduct had gone undetected for years, beginning in November 2012 and 

ending with his termination in August 2019. In addition, the broker also paid his preferred 

customers trading volume “rebates” or commission “adjustments” over a several-year period. 

The practice ended in early 2017 when Respondent contacted the broker and questioned the 

frequency of the broker’s rebates. Moreover, following the broker’s termination, Respondent 

determined that the broker had been the subject of several customer complaints. These 

complaints had been filed with the GIB but never tendered to Respondent, despite the fact that 

they alleged multiple instances of wrongdoing by a single associated person and thus, under 

Respondent’s Compliance Manual, should have been reported to Respondent’s Compliance 

Department. 

Separately, between August 2017 and June 2019, another of the GIBs helped his 

customer improperly allocate winning and losing commodity futures trades between the 

customer and the customers’ family members’ accounts. The broker submitted requests to move 

profitable trades from his customer’s account to the customer’s two family members’ accounts, 

over which the customer had power of attorney. The broker also submitted requests to move 

losing trades from the family members’ accounts to the customer’s account. Respondent was 

also unaware of the improper trade transfers until they were identified by an investigation 

conducted by an exchange with self-regulatory responsibilities. 
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Respondent’s supervisory system failed to detect these incidents of improper or fictitious 

trade transfers, which collectively persisted over the course of several years. Indeed, the 

improper or fictitious trade transfers of both GIBs went undetected by Respondent’s Compliance 

Department. Between June 2018 and the end of the Relevant Period, only one account change 

request by either of the two GIB brokers was forwarded by Respondent’s Operations Department 

and tendered to its Compliance Department. Further, none of their improper or fictitious trade 

transfers were identified by Respondent’s annual GIB audits. 

As noted above, in accepting Respondent’s Offer, the Commission recognizes the 

Respondent’s cooperation with the Division of Enforcement’s investigation of this matter. The 

Commission also acknowledges Respondent’s representations concerning its remediation in 

connection with this matter. Respondent has represented that it has made a number of 

enhancements to its policies and procedures. For example, following the Relevant Period, 

Respondent has represented that it has enhanced the Account Change Tool to analyze the P&L 

impact of trade transfer requests, and to allow for testing of historical account transfer requests 

and thereby identify improper allocations of profitable trades between accounts. In addition, 

Respondent represents that it has hired additional staff since summer 2019 who, among other 

things, are responsible for monitoring and analyzing account changes involving Respondent’s 

IBs and branch offices, ensuring that Respondent’s IBs and branch offices properly implement 

and utilize the Account Change Tool, and coordinating Account Change Tool enhancements. 

III. LEGAL DISCUSSION

Regulation 166.3, 17 C.F.R. § 166.3 (2021), states: 

Each Commission registrant, except an associated person who has no supervisory 

duties, must diligently supervise the handling by its partners, officers, employees 

and agents (or persons occupying a similar status or performing a similar 

function) of all commodity interest accounts carried, operated, advised or 

introduced by the registrant and all other activities of its partners, officers, 

employees and agents (or persons occupying a similar status or performing a 

similar function) relating to its business as a Commission registrant. 

A violation of Regulation 166.3 is demonstrated by showing either that: (1) the 

registrant’s supervisory system was generally inadequate; or (2) the registrant failed to perform 

its supervisory duties diligently. In re Gain Capital Group, LLC, CFTC No. 20-70, 2020 WL 

5876729, at *3 (Sept. 29, 2020) (citing In re Murlas Commodities, CFTC No. 85-29, 1995 WL 

523563, at *9 (Sept. 1, 1995)); Sansom Refining Co. v. Drexel Burnham Lambert, Inc., CFTC 

No. 82-R448, 1990 WL 282783, at *11 (Feb. 16, 1990) (noting that, under Regulation 166.3, 

registrants have “duty to develop procedures for the detection and deterrence of possible 

wrongdoing by [their] agents” (internal quotation omitted)); In re GNP Commodities, Inc., CFTC 

No. 89-1, 1992 WL 201158, at *17-19 (Aug. 11, 1992) (providing that, even if an adequate 

supervisory system is in place, Regulation 166.3 can still be violated if the supervisory system is 

not diligently administered); see also In re Rosenthal Collins Grp., LLC, CFTC No. 12-18, 2012 

WL 1242406, at *6 (Apr. 12, 2012) (consent order) (respondent failed to perform supervisory 

duties diligently by not following its compliance procedures that were in place). Under 

Regulation 166.3, a registrant has a “duty to develop procedures for the ‘detection and deterrence 
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of possible wrongdoing by its agents.’” Samson Refining Co., 1990 WL 282783 at *11 (quoting 

Lobb v. J.T. McKerr & Co., CFTC No. 85-R185, 1989 WL 242384, at *11 (Dec. 14, 1989)). 

Moreover, a violation of Regulation 166.3 is an independent violation for which no underling 

violation is necessary. See In re Collins, CFTC No. 94-13, 1997 WL 761927, at *10 (Dec. 10, 

1997). 

Evidence of violations that “should be detected by a diligent system of supervision, either 

because of the nature of the violations or because the violations have occurred repeatedly” is 

probative of a failure to diligently supervise. In re Paragon Futures Assoc., CFTC No. 88-18, 

1992 WL 74261, at *14 (Apr. 1, 1992) (“The focus of any proceeding to determine whether Rule 

166.3 has been violated will be on whether [a] review [has] occurred and, if it did, whether it was 

‘diligent.’”). 

During the Relevant Period, Respondent was registered with the Commission and had an 

obligation to diligently supervise its employees and agents in their handling of account change 

requests submitted by brokers. Nevertheless, as a result of its inadequate supervision of trade 

transfers, Respondent failed to detect repeated incidents of improper or fictitious trade transfer 

requests submitted by brokers. Prior to Spring 2018, Respondent’s account review policies and 

procedures were inadequate because they failed to provide adequate guidance to Operations 

Department employees regarding how to address account change requests submitted by 

individual brokers. After discovering one of Respondent’s branch office broker’s practice of 

moving profitable and unprofitable trades between a corporate account and a personal account of 

the CEO and owner of the same corporation, Respondent undertook to improve its policies and 

procedures by developing the Account Change Tool. Even after the Account Change Tool was 

rolled out, Respondent failed to detect the above-referenced incidents in which brokers of the 

GIBs improperly transferred trades to benefit themselves or preferred customers. Finally, in 

spite of findings that one of the brokers also routinely issued commission rebates to customers, 

which Respondent stopped in early 2017, Respondent took no action during the Relevant Period 

to improve policies and procedures relating to commission rebates. 

Respondent also failed to perform its supervisory duties diligently. Between June 2018 

and the end of the Relevant Period, only one account change request submitted by either of the 

brokers employed by the GIBs engaging in improper or fictitious trade transfers was referred to 

Respondent’s Compliance Department. After the implementation of the Account Change Tool, 

Respondent failed to detect multiple instances of improper or fictitious trade transfers at the 

GIBs. In addition, Respondent’s audit program also failed to detect any improper or fictitious 

trade transfer requests at either of the brokers’ GIBs or Respondent’s branch office. Moreover, 

Respondent failed to take appropriate steps to ensure that multiple customer complaints against 

one of the GIB’s brokers were escalated to Respondent’s Compliance Department. 

In summary, in failing to supervise its employees and agents to ensure they carried out 

these obligations in their handling of the commodity interest accounts, Respondent violated 

Regulation 166.3. 
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IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that, during the Relevant Period, 

Respondent violated Regulation 166.3, 17 C.F.R. § 166.3 (2021). 

V. OFFER OF SETTLEMENT 

Respondent has submitted the Offer in which it, without admitting or denying the 

findings and conclusions herein: 

A. Acknowledges service of this Order; 

B. Admits the jurisdiction of the Commission with respect to all matters set forth in this 

Order and for any action or proceeding brought or authorized by the Commission based 

on violation of or enforcement of this Order; 

C. Waives: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission’s 

staff in the Commission’s consideration of the Offer; 

6. Any and all claims that it may possess under the Equal Access to Justice Act, 5 

U.S.C. § 504, and 28 U.S.C. § 2412, and/or the rules promulgated by the 

Commission in conformity therewith, Part 148 of the Regulations, 17 C.F.R. 

pt. 148 (2021), relating to, or arising from, this proceeding; 

7. Any and all claims that it may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. L. No. 104-121, tit. II, §§ 201–253, 110 

Stat. 847, 857–74 (codified as amended at 28 U.S.C. § 2412 and in scattered 

sections of 5 U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; 

and 

8. Any claims of Double Jeopardy based on the institution of this proceeding or the 

entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order; 

D. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Respondent has consented in the Offer; and 
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E. Consents, solely on the basis of the Offer, to the Commission’s entry of this Order that: 

1. Makes findings by the Commission that Respondent violated Regulation 166.3, 17 

C.F.R. § 166.3 (2021); 

2. Orders Respondent to cease and desist from violating Regulation 166.3; 

3. Orders Respondent to pay a civil monetary penalty in the amount of five hundred 

thousand dollars ($500,000.00), plus post-judgment interest, within ten days of the 

date of entry of this Order; 

4. Orders Respondent and its successors and assigns to comply with the conditions 

and undertakings consented to in the Offer and as set forth in Part VI of this Order. 

Upon consideration, the Commission has determined to accept the Offer. 

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

1. Respondent shall cease and desist from violating Regulation 166.3, 17 C.F.R. § 166.3 

(2021); 

2. Respondent shall pay a civil monetary penalty in the amount of five hundred thousand 

dollars ($500,000.00) (“CMP Obligation), within ten days of the date of entry of this 

Order. If the CMP Obligation is not paid in full within ten days of the date of entry of 

this Order, then post-judgment interest shall accrue on the CMP Obligation beginning on 

the date of entry of this Order and shall be determined by using the Treasury Bill rate 

prevailing on the date of entry of this Order pursuant to 28 U.S.C. § 1961. 

Respondent shall pay the CMP Obligation and any post-judgment interest by electronic 

funds transfer, U.S. postal money order, certified check, bank cashier’s check, or bank 

money order. If payment is to be made other than by electronic funds transfer, then the 

payment shall be made payable to the Commodity Futures Trading Commission and sent 

to the address below:

MMAC/ESC/AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 266 

Oklahoma City, OK 73169 

9-AMC-AR-CFTC@faa.gov 
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 If payment is to be made by electronic funds transfer, Respondent shall contact Tonia 

King or her successor at the above address to receive payment instructions and shall fully 

comply with those instructions. Respondent shall accompany payment of the CMP 

Obligation with a cover letter that identifies the paying Respondent and the name and 

docket number of this proceeding. The paying Respondent shall simultaneously transmit 

copies of the cover letter and the form of payment to the Chief Financial Officer, 

Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, 

Washington, D.C. 20581. 

3. Respondent and its successors and assigns shall comply with the following conditions 

and undertakings set forth in the Offer: 

1. Public Statements: Respondent agrees that neither it nor any of its successors and 

assigns, agents or employees under its authority or control shall take any action or 

make any public statement denying, directly or indirectly, any findings or 

conclusions in this Order or creating, or tending to create, the impression that this 

Order is without a factual basis; provided, however, that nothing in this provision 

shall affect Respondent’s: (i) testimonial obligations; or (ii) right to take legal 

positions in other proceedings to which the Commission is not a party. 

Respondent and its successors and assigns shall comply with this agreement, and 

shall undertake all steps necessary to ensure that all of its agents and/or 

employees under its authority or control understand and comply with this 

agreement. 

2. Cooperation, in General: Respondent shall cooperate fully and expeditiously with 

the Commission, including the Commission’s Division of Enforcement, in this 

action, and in any current or future Commission investigation or action related 

thereto. Respondent shall also cooperate in any investigation, civil litigation, or 

administrative matter related to, or arising from, this action. 

3. Partial Satisfaction: Respondent understands and agrees that any acceptance by 

the Commission of any partial payment of Respondent’s CMP Obligation shall 

not be deemed a waiver of its obligation to make further payments pursuant to this 

Order, or a waiver of the Commission’s right to seek to compel payment of any 

remaining balance. 

4. Change of Address/Phone: Until such time as Respondent satisfies in full its 

CMP Obligation as set forth in this Order, Respondent shall provide written 

notice to the Commission by certified mail of any change to its telephone number 

and mailing address within ten calendar days of the change. 

5. Until such time as Respondent satisfies in full its CMP Obligation, upon the 

commencement by or against Respondent of insolvency, receivership or 

bankruptcy proceedings or any other proceedings for the settlement of 

Respondent’s debts, all notices to creditors required to be furnished to the 

Commission under Title 11 of the United States Code or other applicable law with 
respect to such insolvency, receivership bankruptcy or other proceedings, shall be 

sent to the address below: 

Secretary of the Commission 

Office of the General Counsel 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street N.W. 

Washington, DC 20581 

The provisions of this Order shall be effective as of this date. 

By the Commission. 

~!--~-

Christopher J. Kirkpatrick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: September 29, 2022 

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