×





Need Help?
Reset Your Password or
Create an Account
By logging in, you agree to our terms of service and privacy policy.
×
Create an Account






Already have an account?
Login »
By logging in, you agree to our terms of service and privacy policy.
Seed SEF
Chapter 9. Disciplinary Rules
Rule 901. General
(a) Jurisdiction.
(i) Seed SEF, acting through its Compliance Department and Disciplinary Panels, shall have the authority to initiate and conduct investigations and prosecute Violations committed by Participants, Clients, Authorized Traders, Supervised Persons, Account Managers, or any market participant that directly or indirectly effects a transaction on Seed SEF and to impose sanctions for such Violations as provided in the Rules.
(ii) Each Participant, upon becoming a Participant, shall file with Seed SEF a written notice designating an agent for receiving service of process documents, and thereafter, notify Seed SEF upon any change to the relevant agent. If a Participant fails to designate an agent, Participant consents to mailing service to its address on file with Seed SEF, and delivery thereof shall be deemed to have occurred as of the date of such mailing.
(iii) Upon becoming a Participant and thereafter, the Participant will, prior to any change of address, file with Seed SEF a written notice designating an address for receiving service of documents.
(iv) The provisions of this CHAPTER 9: shall not apply to or limit the authority of Seed SEF to limit Trading Privileges or take other actions under Rule 307 or Rule 406 or to take Emergency Actions.
(b) Enforcement Authority and Duties.
(i) It shall be the duty of the CCO and Seed SEF’s Compliance Department personnel under the direction of the CCO to enforce the Rules. The CCO shall have the authority to inspect the books and records of all Participants, Account Managers, Authorized Traders, Supervised Person and market participants that directly or indirectly effect a transaction on Seed SEF and to require such persons to appear before it to answer questions regarding possible Violations.
(ii) The Compliance Department may delegate its authority under these Rules to initiate and conduct investigations and prosecute Violations to the Regulatory Services Provider.
(iii) No member of the Compliance Department shall be a Participant, Authorized Trader or Supervised Person or operate under the direction or control of any Person or Persons with Trading Privileges.
(iv) The Compliance Department has the authority to:
(A) initiate and conduct inquiries and investigations;
(B) prepare investigative reports and make recommendations concerning initiating disciplinary proceedings;
(C) determine whether a reasonable basis exists for finding a Violation, and for authorizing the issuance of Notices of Charges against Persons alleged to have committed Violations if the CCO believes the matter should be adjudicated; and
(D) prosecute alleged Violations within Seed SEF's disciplinary jurisdiction
(v) The CCO, upon a good faith determination that there are substantial reasons to believe that such immediate action is necessary to protect the best interests of Seed SEF, may order that any Person be denied access to Seed SEF for a period not to exceed 60 days. Notice shall promptly be given to the Person subject to the access denial. Such notice shall state the reasons for the denial, the effective date, time and the duration of the denial and advise the Person of his right to an expedited hearing before the Disciplinary Panel by filing a request with the CCO within 10 Business Days after receiving the notice. Seed SEF shall immediately notify the CFTC of any denial of access under this Rule 901(b)(v) in accordance with the requirements of CFTC Regulation 9.12(b).
(c) Investigation.
(i) The Seed SEF Compliance Department will determine the nature and scope of its inquiries and investigations and will function independently of any commercial interests of Seed SEF. The Compliance Department will investigate any matter within Seed SEF’s disciplinary jurisdiction
(A) that indicates a reasonable basis for finding that a violation may have or will occur of which it becomes aware; or
(B) upon a request from CFTC staff.
(ii) The Compliance Department shall prepare a written investigative report with respect to any matter investigated. Where the Compliance Department determines that a reasonable basis exists for finding a Violation, the report shall include the reason the investigation was initiated, a summary of the complaint, if any, the relevant facts, the Compliance Department’s analysis and conclusion, and a recommendation as to whether disciplinary action should be pursued.
Where the Compliance Department determines that no reasonable basis exists for finding a Violation, the report shall include the reason the investigation was initiated, a summary of the complaint, if any, the relevant facts, and the Compliance Department’s analysis and conclusions.
(iii) In the event that the Compliance Department determines a reasonable basis exists for finding a Violation, the Person who is the subject of the investigation shall be provided with a copy of the investigative report and shall be given an opportunity to submit written comments to the Compliance Department. Any such written comments must be received by the Compliance Department at least five Business Days prior to distribution of the report to the CCO for decision. Any such comments received from such Person shall be provided to the CCO.
(iv) If the CCO concludes that a Violation may have occurred, the CCO may:
(A) Issue a warning letter to the Person that is the subject of the investigation, informing such Person that there may have been a Violation and that such continued activity may result in disciplinary sanctions. Such a warning letter is neither a penalty nor a finding of a Violation. Issuance of such warning letters shall be subject to the limitations in CFTC Rules 37.203 and 37.206;
(B) Negotiate and enter into a written settlement agreement with such Person, whereby such Person, with or without admitting fault or guilt, may agree to any of the sanctions set forth in Rule 910;
(C) Impose a summary fine under Rule 911, if appropriate; or
(D) Determine to bring formal proceedings before a Disciplinary Panel under this CHAPTER 9:.
(d) The President, the Board, CCO, the Compliance staff, any committee or subcommittee and any panel of any committee or subcommittee, engaged in any investigation of, examination into, or hearing involving any matter pursuant to the Rules shall have the power to summon any Person and any employee of any Participant to appear before him or it, to give testimony under oath or in any other manner required by him or it and to produce any documents, books or records. If any Person or any employee of any Participant fails to obey any such summons or to give any such testimony or to produce any such documents, books or records, such failure shall constitute a violation of this Rule and shall be reported to the Disciplinary Panel for appropriate action.
(e) Each Participant, Account Manager, Authorized Trader, Supervised Person or any market participant that directly or indirectly effects a transaction on Seed SEF:
(i) is obligated to appear and testify and respond in Writing to interrogatories with in the time period required by the Compliance Department in connection with: (A) any Seed SEF Rule; (B) any inquiry or investigation; or (C) any preparation by and presentation during a disciplinary proceeding, summary imposition of fines, summary suspension, or other summary action by Seed SEF;
(ii) is obligated to produce books, records, papers, documents or other tangible evidence in its, his or her possession, custody or control within the time period required by the Compliance Department in connection with: (A) any Seed SEF Rule; (B) any inquiry or investigation; or (C) any preparation by and presentation during a disciplinary proceeding, summary imposition of fines, summary suspension or other summary action by Seed SEF; and
(iii) may not impede or delay any inquiry, investigation, disciplinary proceeding, summary imposition of fines, summary suspension or other summary action.
(f) The Compliance Department will complete all investigations in a timely manner and in all cases within 12 months of commencing an investigation unless the specific nature of the investigation, the number of parties involved, and/or the number of documents and records that must be reviewed cause delay.
Rule 902. Notice of Charges
(a) If the CCO determines that a matter should be adjudicated in a formal hearing before a disciplinary panel, the Compliance Department shall serve a notice of charges (a “Notice of Charges”) on the Respondent.
(b) Such Notice of Charges shall state:
(i) the acts, practices or conduct that the Respondent is alleged to have engaged in;
(ii) the Rule or provision of Applicable Law alleged to have been violated or about to be violated;
(iii) the proposed sanctions;
(iv) the Respondent has a right to a hearing;
(v) the Respondent has the right to be represented by legal counsel or any other representative of its choosing in all succeeding stages of the disciplinary process except by any member of the Board or disciplinary panel, any employee of Seed SEF, or any person substantially related to the underlying investigations, such as a material witness or respondent;
(vi) the period of time within which the Respondent can request a hearing on the Notice of Charges, which will not be less than 20 days after service of the Notice of Charges;
(vii) that any failure to request a hearing within the period stated, except for good cause, will be deemed to constitute a waiver of the right to a hearing;
(viii) that the failure of the Respondent to file an Answer within 20 days after service of the Notice of Charges will be deemed an admission of all of the allegations in the Notice of Charges; and
(ix) that any allegation in the Notice of Charges that is not expressly denied will be deemed to be admitted.
Rule 903. Answer to Notice of Charges; Reply
(a) The Respondent shall serve on the Compliance Department a written answer (an “Answer”) to the Notice of Charges and a written request for a hearing on the charges within 20 days of the date of service of the Notice of Charges.
(b) An Answer shall be signed by the Respondent, or its representative, and contain a statement specifying the allegations that the Respondent:
(i) denies or admits; and
(ii) does not have sufficient information to either deny or admit
(c) Any failure by the Respondent to timely serve an Answer to a Notice of Charges will be deemed to be an admission to the allegations in such Notice of Charges. Any failure by the Respondent to answer one or more allegations in a Notice of Charges will be deemed to be an admission of that allegation or those allegations. Any allegation in a Notice of Charges that the Respondent fails to expressly deny will be deemed to be admitted. A general denial by the Respondent, without more, will not satisfy the requirements of paragraph (b) above.
(d) The Compliance Department may serve on the Respondent a reply to the Answer (a “Reply”) within five days of the date of service of the Answer. The Reply must be limited to the matters set forth in the Answer.
Rule 904. Settlement
(a) A Respondent may at any time propose in writing an offer of settlement related to 
anticipated or instituted disciplinary proceedings.
(b) Any offer of settlement should contain proposed findings and sanctions and be signed by the Respondent and submitted to the Disciplinary Panel presiding over the matter.
(c) A Respondent may offer to settle disciplinary proceedings without admitting or denying the findings contained in the order of the disciplinary proceedings but must accept the jurisdiction of Seed SEF over it and over the subject matter of the proceedings and consent to the entry of the findings and sanctions imposed.
(d) If a Respondent submits an offer of settlement in accordance with paragraph (a) above, the relevant Disciplinary Panel will forward the offer to the CCO. Any preliminary determination by the CCO to accept the offer shall be submitted for review by the Disciplinary Panel. If the Disciplinary Panel agrees, then the CCO shall conditionally accept an offer of settlement, and the settlement will become final upon the expiration of 20 days after an order of the disciplinary proceedings consistent with the terms of the offer of settlement is served on the Respondent.
(e) If an offer of settlement is accepted by the Disciplinary Panel, the Disciplinary Panel accepting the offer must issue a written decision specifying the Violations it has reason to believe were committed, including the basis or reasons for the Disciplinary Panel’s conclusions, and any sanction to be imposed, which must include full customer restitution where customer harm is demonstrated. If applicable, the decision must also include a statement that the respondent has accepted the sanctions imposed without either admitting or denying the Rule Violations.
(f) If an offer of settlement is accepted and the related order of disciplinary proceedings becomes final, the Respondent’s submission of the offer will be deemed to constitute a waiver of the right to notice, opportunity for a hearing and review under the Rules.
(g) If the offer of settlement of a Respondent is not accepted, fails to become final or is withdrawn by the Respondent, the matter will proceed as if the offer had not been made and the offer and all documents relating to it will not become part of the record. Neither a Respondent nor the relevant Disciplinary Panel may use an unaccepted offer of settlement as an admission or in any other manner at a hearing of disciplinary proceedings.
Rule 905. Disciplinary Panel
(a) The CCO shall appoint the members of the Disciplinary Panels in consultation with the Board. The CCO or the Board may remove a member of a Disciplinary Panel for cause.
(b) The Disciplinary Panel will consist of three or five panelists. At least one member of any Disciplinary Panel must be a person who is not a Seed SEF Participant.
(c) Disciplinary Panels shall not include any members of Seed SEF’s Compliance Department or any Person involved in adjudicating any other stage of the same proceeding.
(d) Disciplinary Panels must meet any applicable composition requirements under Part 40 of the CFTC rules.
(e) The Disciplinary Panel shall conduct hearings in connection with any disciplinary proceedings, to make findings, render decisions, and impose sanctions (other than summary fines under Rule 911) pursuant to this CHAPTER 9.
Rule 906. Hearing (Disciplinary Procedures & Sanctions)
(a) A fair hearing will be conducted before members of the Disciplinary Panel.
(b) Following receipt of an Answer from a Respondent, or failure of a Respondent to provide an Answer, the Disciplinary Panel will promptly convene a hearing to conduct the disciplinary proceedings with respect to such Respondent. Parties to a disciplinary proceeding include each Respondent and the Compliance Department.
(c) The chair of the Disciplinary Panel may continue, adjourn or otherwise conduct the hearing, as he or she may deem appropriate. The chair of the Disciplinary Panel will determine all procedural and evidentiary matters and will not be bound by any evidentiary or procedural rules or law. Once admitted during the hearing, the Disciplinary Panel may consider, and attach the weight it believes appropriate to, evidence or other materials.
Rule 907. Respondent Review of Evidence
Prior to the commencement of a hearing, each Respondent will be given the opportunity to review all books, records, documents, papers, transcripts of testimony and other tangible evidence in the possession or under the control of Seed SEF that the Compliance Department will use to support the allegations and proposed sanctions in the Notice of Charges or which the chair of the Disciplinary Panel deems relevant to the disciplinary proceedings. Notwithstanding the foregoing, no Respondent will have the right to review, and Seed SEF will have no obligation to disclose, any information protected by attorney-client privilege.
Rule 908. Hearings
(a) At a hearing conducted in connection with any disciplinary proceedings, the Compliance Department will present its case supporting the allegations and proposed sanctions in the Notice of Charges to the Disciplinary Panel. If a Respondent has timely filed an Answer to the Notice of Charges in accordance with the Rules, the Respondent is entitled to attend and participate in the hearing.
(b) At a hearing conducted in connection with any disciplinary proceedings, the Disciplinary Panel or the Compliance Department and each respondent may:
(i) present evidence and facts determined relevant and admissible by the chair of the Disciplinary Panel;
(ii) call and examine witnesses; and
(iii) cross-examine witnesses called by other parties.
(c) Any Person entitled, or required or called upon, to attend a hearing before a Disciplinary Panel pursuant to paragraph (b) above will be given reasonable notice, confirmed in writing, specifying the date, time and place of the hearing, and the caption of the disciplinary proceedings. All Participants, Supervised Persons of a Participant, Account Managers, Authorized Managers, Authorized Traders and any market participants that directly or indirectly effects a transaction on Seed SEF that are called as witnesses are required to appear at the hearing and, where applicable, produce evidence. Seed SEF will make reasonable efforts to secure the presence of all other Persons called as witnesses whose testimony would be relevant.
(d) The Disciplinary Panel may summarily impose sanctions on any Participant, Authorized Trader or Supervised Person that impedes or delays the progress of a hearing.
(e) If the respondent has requested a hearing, a copy of the hearing shall be made and shall become a part of the record of the proceeding. The record shall not be required to be transcribed unless: the transcript is requested by Commission staff or the respondent, the decision is appealed pursuant to the Rules, or the decision is reviewed by the Commission pursuant to Section 8c of the CEA or 17 C.F.R. Part 9. In all other instances, a summary record of a hearing is permitted.
Rule 909. Decision of Disciplinary Panel
(a) As promptly as is reasonable following a hearing, the Disciplinary Panel will issue a written order rendering its decision based on the weight of the evidence contained in the record of the disciplinary proceedings. A decision by a majority of the Disciplinary Panel will constitute the decision of the Disciplinary Panel.
(b) Seed SEF will serve a copy of the order of the disciplinary proceedings on the Respondent and the Compliance Department. The order will include:
(i) the Notice of Charges or summary of the allegations;
(ii) the Answer, if any, or a summary of the Answer;
(iii) a summary of the evidence introduced at the hearing or, where appropriate, incorporation by reference of the investigative report;
(iv) findings of fact and conclusions concerning each allegation, including a complete explanation of the evidentiary and other basis for such findings and conclusions with respect to each allegation;
(v) each specific Rule and/or provision of Applicable Law that the respondent is found to have violated;
(vi) the sanctions, if any, imposed including the basis for such sanctions and the effective date of each sanction; and
(vii) the availability to the Respondent under CFTC Regulation 9.11(b)(6) of review of any disciplinary action or denial of access.
(c) The order of the disciplinary proceedings will become final upon the expiration of 20 days after the order is served on the Respondent and provided to the Compliance Department.
(d) The Rules do not permit any appeal of a determination by the Disciplinary Panel. Disciplinary actions and denials of access to the Trading system are subject to review by the CFTC in accordance with 17 C.F.R. Part 9
Rule 910. Sanctions; Expenses
(a) If the Disciplinary Panel determines that a Respondent has committed a Violation for which Seed SEF has jurisdiction, the Disciplinary Panel may impose one or more of the following sanctions or remedies:
(i) censure or reprimand,
(ii) restriction, suspension or termination of Trading Privileges,
(iii) a warning letter, subject to the limitations in Applicable CFTC Regulations,
(iv) a cease and desist order,
(v) a fine,
(vi) restitution or disgorgement; or
(vii) any other sanction or remedy determined to be appropriate under the circumstances.
Seed SEF may impose a fine of up to $100,000 for each Violation, together with interest reasonably determined by Seed SEF for the period from date such fine is imposed to the date of payment. Each Participant shall be responsible for paying any fine or other amount imposed on, but not paid by, any of its Authorized Traders, or Supervised Persons.
All disciplinary sanctions, including sanctions imposed pursuant to an accepted settlement offer, shall take into account the Respondent’s disciplinary history. Sanctions shall be commensurate with the violations committed and sufficient to deter recidivism or similar violations by any other Participant, Account Manager, Authorized Trader, Supervised Person or market participant that directly or indirectly effects a transaction on Seed SEF.
In the event of a Violation resulting in demonstrated harm, sanctions shall include full customer restitution, except where the amount of the restitution or to whom it should be provided cannot be reasonably determined.
(b) If the Disciplinary Panel determines that a respondent has violated the Rules or a provision of Applicable Law for which Seed SEF has jurisdiction, the Disciplinary Panel may also require the respondent to pay to Seed SEF an amount equal to any and all out-of- pocket expenses incurred by Seed SEF in connection with the investigation and prosecution of such Violations.
Rule 911. Summary Fines
The Compliance Department may impose summary fines, or provide a warning letter for a first-time violator, on a Participant, Authorized Trader or Supervised Person for Violations of Rules relating to the failure to timely submit accurate records required for verifying each day’s Transactions, without the need for a formal hearing under this CHAPTER 9.
The schedule of summary fines will be established by Seed SEF from time to time and published by Notice.
Rule 912. Effective Date of Penalties
(a) If a Person enters into a settlement agreement with Seed SEF, any penalty included as a part of such settlement agreement shall become final and effective on the date that the CCO approves such settlement agreement.
(b) Any decision (including any penalty) by a Disciplinary Panel shall be the final decision of Seed SEF and shall become effective fifteen (15) days, or such longer time as the Disciplinary Panel may specify, after a copy of the written decision of the Disciplinary Panel has been served on the Respondent and delivered to the Commission; provided, however, that, in any case where the Respondent has consented to the action taken and to the timing of its effectiveness, the Disciplinary Panel may cause the decision involving any disciplinary action (including any penalty) to become effective prior to the fifteen (15) day period.
(c) If a Person fails to pay any fine imposed by the Disciplinary Panel on or before the date on which such fine becomes due and payable, such Person shall be suspended 
automatically without further action by Seed SEF and shall remain suspended until such fine is paid in full and the Person is reinstated; provided, however, that on written application received prior to such date, the Hearing Panel, in its sole discretion, may postpone the date when payment is due.
Rule 913. Publication and Written Notice of Disciplinary Actions
(a) A brief summary of the disposition of a finding by the CCO, or the Disciplinary Panel, and each hearing, settlement, and each imposition of any penalty, shall be kept permanently in the Person’s file. The record of any hearing, together with all of the papers, shall be retained for a period of five (5) years.
(b) All information, records, and documents provided to the Panel, as well as proceedings conducted before the Disciplinary Panel shall be confidential and shall not be disclosed to any Person except:
(i) as required by law or by the Rules;
(ii) in any action or proceeding brought by or against Seed SEF;
(iii) as may be determined from time to time by the Board
(c) In any case where:
(i) a Person enters into any settlement agreement with Seed SEF; or
(ii) the Disciplinary Panel renders a decision finding a Person guilty of any Rule violation;
Seed SEF shall make public its findings and the reason for its action, including any action taken or penalty ordered and written notice of any suspension, expulsion, disciplinary action or denial of access shall be given to the CFTC and to the Person who is suspended, expelled, disciplined or denied access within thirty (30) days of the date such action becomes final, which notice shall include the reasons for the action in the form and manner the CFTC prescribes.
Rule 914. Participant Responsibility Actions
(a) Seed SEF may summarily suspend any Participant or Person exercising Trading Privileges or take other summary action against such a Person if Seed SEF reasonably believes that such immediate action is necessary to protect the best interests of the marketplace.
(b) Any action taken against any Participant or Person exercising Trading Privileges pursuant to this Rule shall be taken after notice and an opportunity to be heard, unless Seed SEF determines that giving such notice or opportunity to be heard before taking such action is not practicable under the circumstances. The notice shall state the action, the reasons for the action, and the effective time and date and the duration of the action. In any case in which action is taken without prior notice and opportunity to be heard, Seed SEF shall give the Participant notice and an opportunity to be heard promptly thereafter.
(c) Any hearing held pursuant to this Rule shall be held before a Disciplinary Panel and shall be conducted in compliance with the procedures in this CHAPTER 9 of the SEF’s Rules.