A. MAJOR OFFENSES
No Member, Member Firm, or any employee of the foregoing shall commit a violation of any of the following rules, which shall be deemed major offenses of the Exchange.
(2) to be guilty of fraud or any act of bad faith;
(3) to be guilty of dishonest conduct;
NYMEX RULE 432. GENERAL OFFENSES
It shall be an offense:
B. to engage in fraud, bad faith or in conduct or proceedings inconsistent with just and equitable principles of trade;
C. to engage in dishonest conduct;
L.2. to fail to fully answer all questions and produce all books and records at such hearing or in connection with any investigation, or to make false statements;
On October 7, 2014, a Panel of the Commodity Exchange (“COMEX”) Probable Cause Committee charged member Robert McMahon (“McMahon”) with violating NYMEX Legacy Rules 8.55(A)(2) and 8.55 (A)(3) and Rules 432.B., 432.C., and 432.L.2. based on allegations that on seven different trade dates between July 2007 and April 2010, he intentionally acted in a willful, fraudulent scheme in which he “cherry-picked” trades intended for his customers, thereby causing his customers to be filled non-competively at inferior prices, which resulted in McMahon realizing a profit of $178,490 and his customers being disadvantaged by $188,960.
On February 25, 2015, a Hearing Panel Chair of the COMEX Business Conduct Committee (“BCC”) entered an order finding that McMahon failed to answer the charges against him. The Hearing Panel Chair further ordered that McMahon was deemed to have admitted the charges issued and waived his right to a hearing on the merits of the charges.
On March 18, 2015, a penalty hearing was held before a panel of the COMEX BCC (“BCC Panel”) which found that McMahon had committed the violations charged.
In accordance with NYMEX Rule 402.B (Sanctions), the BCC Panel ordered McMahon to (1) pay a fine in the amount of $100,000; (2) disgorge profits in the amount of $178,490; (3) pay restitution in the amount of $188,960; and (4) be permanently banned from (a) applying for Membership at any CME Group exchange; (b) direct or indirect access to any trading or clearing platform owned or controlled by the CME Group, Inc.; and (c) access to any trading floor owned or operated by any CME Group, Inc. exchange.
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