• NOTICE OF DISCIPLINARY ACTION

      • #
      • CME-14-9938-BC-3
      • Effective Date
      • 26 September 2018
    • FILE NO.:

      CME 14‐9938‐BC

      NON‐MEMBER:

      Kooima & Kaemingk Commodities, Inc.

      CME RULE VIOLATIONS:

      CME Rule 432: General Offenses (in part)

      It shall be an offense:

      U. except where a power of attorney or similar document has been executed pursuant to Rule 956, for any party to accept or transmit a customer order which has not been specifically authorized;

      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 Kooima & Kaemingk Commodities, Inc. (“K&K”) 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 by 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 over $2 million to affected customers.

      The Panel further found that K&K did not adequately supervise its broker to prevent the unauthorized order entry and customer harm. Specifically, at various times in 2014, K&K’s principals, Bradley Kooima and Lauren Kaemingk, 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 his superiors included several customer complaints, millions of dollars of deposits in the broker’s customers’ accounts and inordinately large positions in small customer accounts.

      The Panel concluded that K&K thereby violated CME Rules 432.U. and 432.W.

      PENALTY:

      In accordance with the settlement offer, the Panel ordered K&K, Kooima and Kaemingk to jointly and severally pay to the Exchange a fine of $1,250,000. The Panel also ordered K&K, Kooima and Kaemingk 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 already paid to affected customers.

      EFFECTIVE DATE:

      September 26, 2018