CHICAGO, June 20 The owners of a U.S. futures brokerage that regulators have ordered to close for helping to misappropriate customer funds will open a new brokerage with the same leadership and staff, company executives said.
The National Futures Association (NFA), which is based in Chicago and funded by industry fees, on Friday ordered Vision Financial Markets to shut its brokerage within six months and pay a $1.5 million fine for "failure to observe high standards of commercial honor."
Company owners Robert Boshnack and Howard Rothman plan to register a new brokerage, High Ridge Futures, with the NFA and have appointed Vision's chief operating officer, Richard DeMatteo, as its chief executive, according to a letter sent to customers this month.
High Ridge will be staffed by former employees of Vision, which will continue to operate as a separate clearing securities and options broker-dealer.
"The process of 'spinning out' Vision's existing business to the new company has already begun," general counsel David Stein said in a statement.
High Ridge, which has not yet applied to register as a broker, will be subject to a "thorough fitness examination," according to the NFA. The regulator said customers who search for High Ridge in disciplinary records would find information about Vision.
The NFA banned Vision after Ace Investment Strategists, a commodity trading advisor that directed most of its business to the firm, was charged with misappropriating client money over three years. Vision could have stopped the financial damage, according to the NFA. The firm paid $2 million in restitution to customers.
Boshnack and Rothman were allowed to form a new brokerage under a settlement agreement with the NFA, Stein said. He added that Vision was not accused of profiting from Ace's abuses. Neither owner was named in the NFA's complaint.
Vision had been the subject of four prior NFA complaints and was also disciplined by the U.S. Commodity Futures Trading Commission.
Vision absorbed the accounts of clients from bankrupt rival Peregrine Financial Group, which failed in 2012 after its founder confessed to stealing from clients over two decades. The NFA failed to detect the fraud despite yearly audits, and its ban on Vision is the first since Peregrine shut.
Vision had $540 million in customer funds in segregated accounts as of April 30, putting it in the lower half of brokers in terms of client assets, according to the CFTC. (Reporting by Tom Polansek; Editing by Richard Chang)