UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

___________________________________________________
)
In the Matter of: ) CFTC Docket No. 00-18
)
CHRISTOPHER F. SALTER, d/b/a ) ORDER INSTITUTING PROCEEDINGS

CHRISTOPHER FENWICK

) PURSUANT TO SECTIONS 6(c) AND 6(d)
227 Beach Road ) OF THE COMMODITY EXCHANGE ACT,
Alameda, California 34502, ) MAKING FINDINGS AND IMPOSING

Respondent.

) REMEDIAL SANCTIONS
___________________________________________________ )

I.

The Commodity Futures Trading Commission ("Commission") has reason to believe that Christopher F. Salter ("Salter"), doing business as Christopher Fenwick, has violated Sections 4b(a)(i) and (iii) and 4o(1) of the Commodity Exchange Act, as amended (the "Act"), 7 U.S.C. 6b(a)(i) and (iii) and 6o(1) (1994), and Section 4.41(a) of the regulations promulgated under the Act (hereafter the "Regulation"), 17 C.F.R. 4.41(a). Therefore, the Commission deems it appropriate and in the public interest that public administrative proceedings be, and they hereby are, instituted to determine whether Salter engaged in the violations set forth herein and to determine whether any order should be issued imposing remedial sanctions.

II.

In anticipation of the institution of these administrative proceedings, Salter has submitted an Offer of Settlement ("Offers"), which the Commission has determined to accept. Without admitting or denying the findings herein, Salter acknowledges service of this Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d) of the Act, Making Findings and Imposing Remedial Sanctions ("Order"). Salter consents to the use of the findings contained in this Order in this proceeding and in any other proceeding brought by the Commission or to which the Commission is a party.1

III.

The Commission finds the following:

A. SUMMARY

Salter advertised a home-study futures trading course and solicited customers on an internet web site using claims that he made "huge returns" in his personal trading using the trading system taught in his course. In fact, however, Salter's personal futures trading resulted only in net losses. Salter also overstated the safety and understated the risks of futures trading on the web site.2

B. RESPONDENT

Salter resides at 227 Beach Road, Alameda, California 94502. Salter has never been registered with the Commission in any capacity.

C. FACTS

Salter, using the name "Christopher Fenwick," used the internet to advertise his "home study course" on trading futures entitled "A Common Sense Way to Uncommon Wealth." Salter's web page, www.learntoprofit.com/futures/index.htm, was located on a web site maintained by another person, and offered a five-lesson booklet on how to trade futures using what Salter described as "modern scale position trading." The price of the course was $199.95 and included six months of e-mail support by Salter for customers who had questions regarding the system.

Salter advertised on his web site that his system would "allow you to invest your money with an incredible profit potential and very little risk" and "consistently and safely make you money." Salter represented that he had personally "used this secret trading system over and over again to amass huge returns." However, Salter was not a successful commodities trader. He traded for three years with only minimal profits in the first year and net trading losses in the last two years. As such, Salter's solicitations to actual and prospective customers were false, deceptive and misleading through their misstatement of facts material to the customers' decisions to purchase the trading course.

VIOLATIONS OF THE ACT AND COMMISSION REGULATIONS

1. Respondent Salter Violated Sections 4b(a)(i) and (iii) of the Act

Sections 4b(a) of the Act provide that it shall be unlawful, in or in connection with any order to make or the making of a futures contract, for or on behalf of any other person, (i) to cheat or defraud, or attempt to cheat or defraud, such other person, or (iii) willfully to deceive or attempt to deceive such other person by any means whatsoever in regard to any such order or contract or the disposition or execution of any such order or contract, or in regard to any act of agency performed with respect to such order or contract for such person.

Misrepresentations and omissions of material facts made with scienter regarding futures transactions constitute fraud under Section 4b(a) of the Act.3 Additionally, Sections 4b(a)(i) and (iii) require that the material misrepresentations and omissions of material facts be made "in connection" with futures transactions.4

Respondent knew that he was not a futures trader who had successfully used his own trading methodology to make profits in his trading accounts, but nevertheless misrepresented himself as such to attract paying customers for his trading course. Also, Respondent recklessly overstated the safety, and misrepresented the risks, of trading futures.5 As such, respondent's representations constitute fraud in violation of Sections 4b(a)(i) and (iii), 6 U.S.C. 6b(a)(i) and (iii) (1994).

2. Respondent Salter Violated Section 4o(1) of the Act

Section 4o(1) of the Act prohibits commodity trading advisors ("CTA") from (a) employing any device, scheme or artifice to defraud any client or participant or prospective client or participant, or (b) engaging in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant.

In order to establish a violation of Section 4o of the Act, the Division must prove that the respondent was (i) a CTA or, with respect to Section 4.41 of the Regulations, a principal thereof, and (ii) either (a) employed any device, scheme, or artifice to defraud any client or prospective client, or (b) engaged in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client. Section 4o(1) of the Act, which also requires the use of the mails or any means or instrumentality of interstate commerce, prohibits both registered and unregistered CTAs from defrauding their clients.6

Under Section 1a(5) of the Act, in order to establish that someone is a CTA, it must be shown that the person (i) advised another about the value or advisability of trading in futures contracts, (ii) "either directly or through publications, writings or electronic media," (iii) for compensation or profit, unless that person is "the publisher or producer of any print or electronic data of general and regular dissemination, including its employees" if such publisher's or producer's provision of commodity futures trading advice is "solely incidental to the conduct of [its] business or profession."7 Salter gave commodity futures trading advice for compensation or profit and, therefore, is a CTA.8

Salter made his misrepresentations in the course of soliciting students to take his trading course, whose object was to advise people how to trade futures, and students paid to receive this advice and learn the methodology. Moreover, Salter's furnishing of futures trading advice through his trading course and course materials was not "incidental to the conduct" of his business. Rather, providing futures trading advice was his business. Thus, Salter fits squarely within the definition of a CTA under Section 1a(5) of the Act.

Conduct that violates Section 4b also constitutes a violation of Section 4o(1) of the Act when committed by a person who was acting as a commodity trading advisor. In re R&W Technical Services, Comm. Fut. L. Rep. (CCH) 27,582 (CFTC March 16, 1999) ("Because we have found that [respondents] violated Section 4b(a) of the Act and that they acted as CTAs, further analysis is not needed to conclude that [respondents] also violated Section 4o(1) of the Act"). Therefore, Salter violated Section 4o(1) of the Act. Also, because Salter, while acting as a CTA, advertised in a fraudulent or misleading manner, his conduct violated Regulation 4.41(a).

IV.

OFFER OF SETTLEMENT

Salter has submitted an Offer in which he, without admitting or denying the findings herein: (1) admits the jurisdiction of the Commission with respect to the matters set forth herein; (2) acknowledges service of the Order; (3) waives the filing of a complaint and notice of hearing, a hearing, all post-hearing procedures, judicial review by any court, any objection to the staff's participation in the Commission's consideration of the Offer, all claims which Salter may possess under the Equal Access to Justice Act, 5 U.S.C. 504 (1994) and 28 U.S.C. 2412 (1994), as amended by Pub. L. No. 104-121, 231-32, 110 Stat. 862-63 (1996), and Part 148 of the Commission's Regulations, 17 C.F.R. 148.1, et seq. (1997), relating to or arising from this action, and any claim of Double Jeopardy based upon institution of this proceeding or the entry of any order imposing a civil monetary penalty or any other relief; (4) stipulates that the record basis on which the Order may be entered shall consist solely of the Order and findings in the Order consented to in the Offer; and (5) consents to the Commission's issuance of this Order, which makes findings as set forth below and, as to Salter (a) orders Salter to cease and desist from violating the provisions of the Act and Regulations that he has been found to have violated; (b) imposes on Salter a $10,000 civil monetary penalty; and (c) orders Salter to comply with his undertakings as set forth in the Order.

1. Salter shall not misrepresent, expressly or by implication:

a. the performance, profits or results achieved by, or the results that can be achieved by, users, including him/herself, of any commodity futures or options trading system or advisory service; and

b. the risks associated with trading pursuant to any commodity futures or options trading system or advisory service;

2. Salter shall not present the performance of any simulated or hypothetical commodity interest account, transaction in a commodity interest or series of transactions in a commodity interest unless such performance is accompanied by the following statement, as required by 17 C.F.R. 4.41(b):

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

In doing so, Salter shall clearly identify those hypothetical or simulated performance results which were based, in whole or in part, on hypothetical trading results.

3. Salter shall not make any representation of financial benefits associated with any commodity futures options trading system or advisory service without first disclosing, prominently and conspicuously, that futures trading involves high risks with the potential for substantial losses.

4. Salter shall not represent, expressly or by implication:

a. the performance, profits or results achieved by, or the results that can be achieved by, users, including himself, of any commodity futures or options trading system or advisory service;

b. the risks associated with trading using any commodity futures or options trading system or advisory service;

c. that the experience represented by any user, testimonial or endorsement of the commodity futures or options trading system or advisory service represents the typical or ordinary experience of members of the public who use the system or advisory service; unless: (i) Salter possesses and relies upon a reasonable basis substantiating the representation at the time it is made; and (ii) for two (2) years after the last date of the dissemination of any such representation, Salter maintains all advertisements and promotional materials containing such representation and all materials that were relied upon or that otherwise substantiated such representation at the time it was made, and makes such materials immediately available to the Division of Enforcement for inspection and copying upon request.

5. Public Statements. By neither admitting nor denying the findings of fact or conclusions of law, Salter agrees that neither he nor any of his agents or employees under his authority or control shall take any action or make any public statement denying, directly or indirectly, any findings or conclusions in the Order, or creating, or tending to create, the impression that the Order is without a factual basis; provided, however, that nothing in this provision shall affect Salter's (i) testimonial obligations, or (ii) right to take factual and legal positions in other proceedings to which the Commission is not a party. Salter will undertake all steps necessary to assure that all of his agents and employees under his authority and control understand and comply with this agreement.

V.

FINDINGS OF VIOLATIONS

Solely on the basis of the consent evidenced by the Offer, and without any adjudication on the merits, the Commission finds that Salter violated Sections 4b(a)(i) and (iii) and 4o(1)(A) and (B) of the Act, 7 U.S.C. 6b(a)(i) and (iii) and 6o(1)(A) and (B), and Section 4.41(a) of the Commission's Regulations, 17 C.F.R. 4.41(a).

VI.

ORDER

Accordingly, it is hereby ordered that Salter:

1. Shall cease and desist from further violations of Sections 4b(a)(i) and (iii) and 4o(1)(A) and (B) of the Act, 7 U.S.C. 6b(a)(i) and (iii), 6o(1)(A) and (B), and Section 4.41(a) of the Commission's Regulations;

2. Shall pay a civil monetary penalty in the amount of Ten Thousand Dollars ($10,000.00). Salter shall pay the total amount within ten days of the date of the Order by electronic funds transfer, or by U.S. postal money order, certified check, bank cashier's check, or bank money order, made payable to the Commodity Futures Trading Commission, and sent to Dennese Posey, Division of Trading and Markets, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, under cover of a letter that identifies Salter and the name and docket number of the proceeding; Salter shall simultaneously transmit a copy of the cover letter and the form of payment to Phyllis J. Cela, Acting Director, Division of Enforcement, Commodity Futures Trading Commission, 1155 21st Street, N.W., Washington, D.C. 20581; and

3. Shall comply with his undertakings:

(a) not to misrepresent, expressly or by implication:

(i) the performance, profits or results achieved by, or the results that can be achieved by, users, including him/herself, of any commodity futures or options trading system or advisory service; and

(ii) the risks associated with trading pursuant to any commodity futures or options trading system or advisory service;

(b) not to present the performance of any simulated or hypothetical commodity interest account, transaction in a commodity interest or series of transactions in a commodity interest unless such performance is accompanied by the following statement, as required by 17 C.F.R. 4.41(b):

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

In doing so, Salter shall clearly identify those hypothetical or simulated performance results which were based, in whole or in part, on hypothetical trading results;

(c) not to make any representation of financial benefits associated with any commodity futures or options trading system or advisory service without first disclosing, prominently and conspicuously, that futures trading involves high risks with the potential for substantial losses; and

(d) not to represent, expressly or by implication:

(i) the performance, profits or results achieved by, or the results that can be achieved by, users, including him/herself, of any commodity futures or options trading system or advisory service;

(ii) the risks associated with trading using any commodity futures or options trading system or advisory service; and

(iii) that the experience represented by any user, testimonial or endorsement of the commodity futures or options trading system or advisory service represents the typical or ordinary experience of members of the public who use the system or advisory service; unless: (a) Salter possesses and relies upon a reasonable basis substantiating the representation at the time it is made; and (b) for two (2) years after the last date of the dissemination of any such representation, Salter maintains all advertisements and promotional materials containing such representation and all materials that were relied upon or that otherwise substantiated such representation at the time it was made, and makes such materials immediately available to the Division of Enforcement for inspection and copying upon request; and

(e) Shall not to take any action or make any public statement denying, directly or indirectly, any finding in the Order or finding or allegation in any related Commission proceeding or creating, or tending to create, the impression that the Order or any related Commission proceeding is without a factual basis; provided, however, that nothing in this provision affects: (i) Salter's testimonial obligations; or (ii) Salter's rights to take contrary factual or legal positions in any proceedings to which the Commission is not a party. Salter understands and agrees that the Commission's acceptance of this Offer is conditioned upon his compliance with this agreement in statements made by him and by agents acting under his authority or control.

Dated: May 1, 2000 BY THE COMMISSION
_________________
Jean Webb
Secretary of the Commission
Commodity Futures Trading Commission



NOTES:

1 Salter does not consent to the use of his Offer, this Order, or the findings in this Order consented to in his Offer, as the sole basis for any other proceeding brought by the Commission, other than a proceeding brought to enforce the terms of this Order. Salter also does not consent to the use of his Offer, this Order, or the findings in this Order by any other person or entity in this or in any other proceeding. The findings made in this Order are not binding on any other person or entity named as a defendant or respondent in this or any other proceeding.

2 The Internet is a highly beneficial medium that facilitates the dissemination of information, but which also enables potential violators to reach millions of people worldwide quickly and at very low cost. By this and other proceedings, the Commission is addressing fraud committed on the Internet in order to promote the integrity of promotions made concerning commodity futures and options trading opportunities on the web.

3 In the Matter of R&W Technical Services, Inc., [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) 27,582 at 47,740-47,741 (CFTC Mar. 16, 1999), aff'd in relevant part, R&W Technical Svcs., Inc. v. CFTC, 2000 WL 217498 (5th Cir. Feb. 24, 2000). See, e.g., Saxe v. E.F. Hutton, 789 F.2d 105, 110 (2d Cir. 1986); Kelley v. Carr, 442 F. Supp. 346, 351-54 (W.D. Mich. 1977), aff'd in part, rev'd in part, 691 F.2d 800 (6th Cir. 1980); CFTC v. J.S. Love Associates Options, Ltd., 422 F. Supp. 652, 655 (S.D.N.Y. 1976).

4 For example, fraudulent statements that induce members of the public to purchase software that generates specific buy and sell signals for commodity futures trading satisfy the "in connection with" requirement of Section 4b(a). R&W Technical Svcs., 2000 WL at 217498 . See also Hirk v. Agri-Research Council, Inc., 561 F.2d 96 (7th Cir. 1977) (noting that the "in or in connection with" requirement should be interpreted flexibly to include deceptive conduct that occurs prior to the opening of an actual commodity trading account).

5 Recklessness may support a finding of scienter. Hammond v. Smith Barney, Harris Upham & Co. Inc., [1987-1990 Transfer Binder] Comm. Fut. L. Rep. (CCH) 24,617 at 36,659 (CFTC Mar. 1, 1990); CFTC v. Savage, 611 F.2d 270, 283 (9th Cir. 1979) ("[k]nowledge, of course, exists when one acts in careless disregard of whether his acts amount to cheating").

6 CFTC v. Savage, 611 F.2d 270, 281 (9th Cir. 1979) (enforcement action charging defendant with making false reports to customers, engaging in "wash" trades and holding himself out to the public as a CTA without being registered with the Commission).

7 Section 1a(5) of the Act, 7 U.S.C. 1a(5). Section 4o(1) of the Act and Section 4.41 of the Regulations thus do not apply to a CTA who is "the publisher or producer of any print or electronic data of general and regular dissemination, including its employees" whose "furnishing of [advice] ... is solely incidental to the conduct of their business or profession." This exclusion is designed to protect incidental publishers of advice, such as general magazines and newspapers, not publishers who specifically concentrate on commodities advice. R&W Technical Svcs., 2000 WL at *7.

8 See CFTC v. British American Commodity Options Corp., 560 F.2d 135, 141 (2d Cir. 1977), cert. denied, 438 U.S. 905 (1978)(a firm that "offer[ed] opinions and advice, and issued analyses and reports concerning the value of commodities" to customers, was a CTA under the Act.); Gaudette v. Panos, 644 F. Supp. 826, 839 (D. Mass. 1986) (defendants who represented their advisory skills to be exemplary, suggested that plaintiffs open a commodity account and then recommended certain futures contracts for investment were CTAs).