The chairman of a U.S. futures industry regulator says a dispute over board nominations at the organization and allegations of improprieties may stem from a director's campaign to hold onto his seat.
National Futures Association board member James Koutoulas has accused the regulator of breaking its own rules for nominating public representatives and falsifying documents to cover up alleged wrongdoing.
The Chicago-based NFA, which is funded by industry fees, denies the accusations, which Koutoulas first made public last month in the midst of a fight to represent commodity trading advisers and commodity pool operators on NFA's board.
An NFA committee in November nominated two candidates to oppose Koutoulas in his bid for re-election. Usually, the committee nominates only the number of candidates needed to fill seats, and Koutoulas saw the move as an attempt to oust him in voting that ends Jan. 20.
Koutoulas, chief executive of Typhon Capital Management, and John Roe, president of Roe Capital Management, won seats on the board in 2013 on a joint campaign to strengthen futures customer protections.
They co-founded the Commodity Customer Coalition in late 2011 to help former clients of failed brokerage MF Global get their money back and advocated for customers of Peregrine Financial Group, which collapsed in 2012 after a 20-year fraud that NFA missed in annual audits.
Koutoulas told Reuters his accusations about last year's public director nominations are unrelated to his re-election bid. He added that he filed a "whistleblower" complaint with the U.S. Commodity Futures Trading Commission.
"These are the regulators," he said of the NFA. "They're supposed to be enforcing the rules."
The CFTC is aware of the allegations, a spokeswoman said.
NFA Chairman Chris Hehmeyer suggested in an interview that Koutoulas was using accusations of improprieties to help his bid to retain his seat.
"There are certainly some that think that was the case," Hehmeyer told Reuters. "I just know the allegations are wholly without merit... James is trying to get elected."
The NFA last year hired Mark Young, a former CFTC assistant general counsel, as an outside lawyer to review Koutoulas' allegations, and Young concluded the nominations were made properly, Hehmeyer said. Young declined to comment.
George Berbeco, a futures executive opposing Koutoulas in the election, called the allegations a distraction.
"The fact that someone doesn't dot an I or cross a T, you deal with it and move on," he said of last year's alleged nomination improprieties.
