Does it sometimes feel like the compliance world is always under attack by an endless stream of self-propagating fraudsters? Where are our crime-fighting superheroes?

Earlier this month, the U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against yet another alleged set of evildoers: Jody Dupont of Anderson, SC, and his company, Open Range Trading LLC (Open Range). Despite never ever registering with the CFTC, this dynamic duo is charged with fraudulently soliciting subscriptions to their eponymously-named commodity futures day-trading system (Open Range Trading System), as well as other ancillary trading services.

If it sounds too good to be true…it’s false (advertising)

The CFTC’s Complaint, filed in the U.S. District Court for the District of South Carolina, alleges that, from at least March 2013 to the time of its filing, Dupont and Open Range sold clients on buying their system to provide buy and sell signals indicating:

• what commodity futures contracts to trade;
• when to trade; and at
• what price to trade.

They used a variety of marketing vehicles (website, YouTube, and other social media, written and verbal pitches, and a newsletter) to make false and misleading misrepresentations of material fact, including

1. falsely claiming Dupont had invested and traded futures for over 20 years;
2. falsely claiming the Open Range Trading System generated large profits with minimal risk;
3. falsely and misleadingly claiming that the defendants themselves engaged in actual trading when in fact they did not; and
4. failing to disclose that the performance results reported were based on simulations or hypotheticals, and not actual trading.

Holy cow! Alternative reality trading

According to its website marketing, Open Range touted system-generated profits of between $700 – $13,000+ per month for 30 of the 37 months reported – all while trading just three contracts at a time. Meanwhile, back in the real world, it turns out that Open Range never had a futures account from which to make its purported profits, and Dupont had only two futures accounts — both of which he traded at a loss.

The CFTC is worried that unless Dupont and Open Range (or some variation of Open Range are found guilty, one or the other will rise up to strike again. So it is asking the Court to require full restitution to defrauded clients, disgorgement of ill-gotten gains, a civil monetary penalty, permanent registration and trading bans, and a permanent injunction against futures violations of federal commodities laws. Okaaaay…But can that happen? After all, Open Range and Jody Dupont traded just fine without ever bothering to register with the CFTC in the first place.

Calling all superheroes

Stuff happens. It always happens. Just make sure it doesn’t happen to you! Don’t be that firm. The regulators are out in force hunting for evildoers. Whether you trade futures, are a broker-dealer, or RIA, you know that compliance matters.

Be a compliance superhero

If you are charged with compliance, you know you’re facing increased oversight which requires you to juggle more paper, more files, more data. Regulatory compliance requirements are getting more all-consuming and complying can often times feel like an undertaking without end.

If you don’t have the bandwidth to be your own compliance superhero, hire one. When your compliance function is under pressure to do more with less, you have options?

Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliance recordkeeping specifically designed for the financial services community.

Let’s talk.