• NOTICE OF DISCIPLINARY ACTION

      • #
      • CME-14-9938-BC-1
      • Effective Date
      • 26 September 2018
    • FILE NO.:

      CME 14‐9938‐BC

      NON‐MEMBER:

      Lauren Kaemingk

      CME RULE VIOLATIONS:

      CME Rule 432: General Offenses (in part)

      It shall be an offense:

      L.2 to fail to fully answer all questions or produce all books and records at such hearing or in connection with any investigation, or to make false statements;

      W. for any party to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.

      FINDINGS:

      Pursuant to an offer of settlement in which Lauren Kaemingk (“Kaemingk”) neither admitted nor denied the rule violations upon which the penalty is based, on September 18, 2018, a Panel of the CME Business Conduct Committee (“Panel”) found that on numerous occasions between January 2014 and August 2014, a broker employed at Kaemingk’s trading firm, Kooima & Kaemingk Commodities, Inc. (“K&K”), transmitted customer orders that had not been authorized. Specifically, despite the absence of an executed power of attorney or similar document, the K&K broker entered orders to buy and sell Live Cattle futures contracts for numerous customer accounts without the account owners’ knowledge, permission or authority to do so. Though in some cases he received verbal authority to trade with discretion in small quantities, the broker placed trades and established positions in customers’ accounts that far exceeded their risk parameters, sometimes even exceeding customers’ financial ability. As a result of his unauthorized trading, the broker caused more than $11 million in losses for the customers’ accounts. K&K subsequently repaid more than $2 million to affected customers.

      The Panel further found that Kaemingk did not adequately supervise the broker to prevent the unauthorized order entry and customer harm. Specifically, at various times in 2014, Kaemingk and his partner Bradley Kooima knew or should have known the broker was using his own discretion to trade customer accounts despite not having the required written authorization to do so. Indications of such improper activity that should have alerted Kaemingk included several customer complaints, millions of dollars of deposits in the broker’s customers’ accounts and inordinately large positions in small customer accounts.

      In addition, the Panel found that Kaemingk knowingly made false statements to CME Group Inc. Market Regulation staff when he stated during an interview that K&K reimbursed four of the customers for losses based on “bad advice” and that he did not know whether the broker traded the accounts without authorization. The Panel found that Kaemingk knew prior to his interview with Market Regulation that the broker traded certain accounts without customer permission or direction.

      The Panel concluded that Kaemingk thereby violated CME Rules 432.L.2. and 432.W.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered Kaemingk, Kooima and K&K to jointly and severally pay to the Exchange a fine of $1,250,000. The Panel also ordered Kaemingk, Kooima and K&K to jointly and severally pay restitution of $8,700,000 as detailed in the CFTC Order in its related matter. The $8,700,000 in restitution is in addition to the more than $2,000,000 that K&K has already paid to affected customers. The Panel barred Kaemingk from accessing any CME Group Inc. trading floor, and direct and indirect access to all electronic trading and clearing platforms owned or controlled by CME Group Inc., including Globex, for 15 months beginning on the Effective Date. The Panel also permanently barred Kaemingk from handling customer orders in a broker capacity at any CME Group Inc. exchange.

      EFFECTIVE DATE:

      September 26, 2018