NOTICE OF SUMMARY ACTION

FILE NO.:

COMEX RSRH-21-6113

MEMBER FIRM:

Loomis International (US) Inc.

COMEX RULE VIOLATIONS:

703.A Conditions for Approval and 512 Reporting Infractions

703.A Conditions for Approval

(7) The facility shall be required to report inventory to the Exchange as prescribed herein. The inventory shall include eligible, pledged and registered metal. Eligible metal shall mean all such metal that is acceptable for delivery against the applicable metal futures contract for which a warrant has not been issued. Registered metal shall mean an eligible metal for which a warrant has been issued. Pledged metal shall mean registered metal for which the warrant that has been issued is on deposit at the Clearing House as performance bond. All information pursuant to this section shall be transmitted to the Registrar no later than 2:00 p.m., or as prescribed by the Registrar’s Office, for gold stock for delivery against the Gold Kilo futures contract, 6:00 p.m. local Hong Kong time, on the business day following the day on which the facility comes into possession of relevant information. In addition to containing all relevant information for the preceding business day, notifications pursuant to this section sent by 2:00 p.m., for gold stock for delivery against the Gold Kilo futures contract, 6:00 p.m. local Hong Kong time, on a Tuesday shall include all relevant information for the last business day as well as the Saturday and Sunday immediately preceding the Tuesday on which the notification is made.

In addition, on a daily basis, the facility shall provide, in an Exchange-approved format, the following information regarding its stocks:

a.   The total quantity of registered metal stored at the facility.

b.   The total quantity of pledged metal stored at the facility.

c.   The total quantity of eligible metal stored at the facility.

d.   The quantity of eligible metal and registered metal received and shipped from the facility.

703.B. Load-Out

A. In the event that a depository has not permitted the load out of metal represented by a NYMEX or COMEX cancelled warrant within five (5) business days after such warrant has been cancelled for load out (all applicable charges paid) then the depository shall immediately notify the Exchange, in writing, of the reason(s) for the delay. Upon receipt of such notification, the Exchange, at its discretion, may direct the depository not to accept additional metal for deposit until the Exchange directs it to do otherwise.With the exception of gold deliverable against the Gold Kilo futures (GCK) contract, in the event that loading orders for precious metal represented by a NYMEX or COMEX cancelled warrant are received by the depository by the 20th day of the month, all precious metal represented by a NYMEX or COMEX cancelled warrant must be released for shipment no later than the close of business on the last day of that month, provided, however, that all storage charges are paid and warrant holder has presented the depository with all documents necessary to establish good title. If the depository fails to comply with the preceding sentence, the depository shall not charge the warrant holder for additional storage charges, provided, however, that the delay was not caused by the holder of a NYMEX or COMEX warrant cancelled for load out or their agent.

For load-out of gold deliverable against the Gold Kilo futures (GCK) contract, the depository is required to ship out of the depository gold at a minimum guaranteed daily load out rate of 2,000 gold bars each weighing 1 kilogram (equivalent to 2,000 contract units) per day for each business day, unless such day is a Hong Kong general holiday. If the depository fails to comply with the gold delivery and load-out Rules as prescribed above, the depository shall not charge the warrant holder for additional storage charges, provided, however, that the delay was not caused by the holder of a COMEX warrant cancelled for load out or their agent.

512.A. General

All data, records and other information required by the rules to be reported to the Exchange or the Clearing House, as applicable, must be submitted in an accurate, complete and timely manner.

FINDINGS:

Violation of COMEX Rule 703.A:  Loomis International (US) Inc., for the duration of approximately 7 months (September 2020 until discovery) had been submitting daily stocks of metal figures to the Exchange that included registered metal at a location other than the one being reported for.  In anticipation of a future regulatory approval and facing capacity constraints, Loomis began moving material to alternate, non-regular locations, while continuing to report the metal as eligible/registered in Registrar Reporting. The Exchange, when notified, engaged the firm in an effort to collect as much information on the scope, timing, etc. in order to fully contextualize the violation. The firm’s explanation of how the error occurred largely related to staffing turnover and lack of training.

Violation of COMEX Rule 703.B:  In the following days, another violation occurred that involved improper operational procedures relating to the movement of metal between regular facilities. In the process of reshuffling inventory related to an approval of two additional facilities, the firm physically moved registered metal from their Carlstadt location prior to cancelling those warrants. Those bars were immediately returned to their original location and properly moved in accordance to Exchange loadout procedures.

PENALTY:

On July 28, 2021, Loomis International (US) Inc., pursuant to Rule 512 (“Reporting Infractions”), was issued a $5,000 fine by the 512 Committee for their violations of Rule 703.A and Rule 703.B.

EFFECTIVE DATE:

August 12, 2021