CFTC Orders Farr Financial, Inc. to Pay $280,000 to Settle Supervision Failures and Other Violations

In the Matter of Farr Financial, Inc.., CFTC Docket No. 13-01.  On October 10, 2012, the CFTC announced it issued an order settling charges that  Farr Financial Inc. of San Jose, California, failed to properly invest customer segregated funds and failed to diligently supervise investment activities.  Farr is a futures commission merchant (“FCM”) registered with the CFTC.  Farr was required to segregate customer funds and should have only invested customer funds in certain permitted investments.  Instead, Farr invested funds several accounts did not comply with the relevant regulations, including an investment in a money market mutual fund from which funds could not be withdrawn by the next business day, investments in prohibited savings or money market deposit accounts, and an investment in a prohibited certificate of deposit where the issuer did have the appropriate credit rating.  In addition, Farr did not keep certain records it was required to maintain related to the investments.  Also, Farr’s miscalculated the amount of money that it was obligated to segregate for its customers, understating the amount that should have been segregated.  Lastly, Farr failed to diligently supervise its employees and agents.

Without admitting or denying the CFTC’s allegations. Farr consented to entry of an order imposing $280,000 in civil monetary penalties.  In addition, Farr was ordered to cease and desist from violating Section 4d(a)(2) of the Commodity Exchange Act.

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