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April 14, 2015
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NFA orders Memphis, Tenn. firm Wharton Asset Management LLC and its principal, Michael J. Wharton, to pay $105,000 fine
April 14, Chicago — National Futures Association (NFA) has ordered Wharton Asset Management LLC (Wharton Management) and Michael J. Wharton to pay a $105,000 fine. Wharton Management is an NFA Member commodity trading advisor located in Memphis, Tenn. Wharton is the sole principal and associated person of the firm. The Decision, issued by NFA's Business Conduct Committee (BCC), is based on a Complaint, and a settlement offer submitted by Wharton Management and Wharton.
The Complaint alleges that Wharton Management failed to maintain an audit trail of bunched customer order allocations that was objective and specific enough to permit independent verification of the fairness of the allocations and sufficient to demonstrate that the firm used a defined methodology. The Complaint further alleges that Wharton Management failed to enact required procedures regarding allocations from bunched customer orders. The Complaint also charged Wharton with failure to diligently supervise Wharton Management's operations.
Post-execution allocation is a procedure during which an account manager is permitted to bunch customer orders together for execution, and to allocate them to individual accounts by no later than the end of the day. Bunching of orders involves an account manager placing trades for two or more customers at the same time in the same order. After the bunched orders are executed, an account manager must assign the trades to customers' accounts, a process known as allocation.
Wharton Management and Wharton neither admitted nor denied the allegations.