UNITED STATES OF AMERICA
COMMODITY FUTURES TRADING COMMISSION
___________________________________________ : VINCENT CAPUTO v. NATIONAL FUTURES ASS'N, : ALLAN ADER v. NATIONAL FUTURES ASS'N : JOHN LUPU v. NATIONAL FUTURES ASS'N, : CFTC Docket Nos. LINDA WATSON v. NATIONAL FUTURES ASS'N : CRAA 97-1, 97-2, RUDOLPH R. JONES v. NATIONAL FUTURES ASS'N : 97-3, 97-4, 97-5, COMMONWEALTH FINANCIAL GROUP and CHARLES : 97-6 and 97-7 P. HOFFECKER v. NATIONAL FUTURES ASS'N, : EVERTON BUCHANAN v. NATIONAL FUTURES ASS'N : ORDER ___________________________________________:
Commonwealth Financial Group, Inc. ("CFG"), CFG's president Charles P. Hoffecker, and CFG associated persons ("APs") Allan Ader, Everton John Buchanan, Vincent Caputo, Rudolph Jones, John Lupu, and Linda Watson (collectively, "petitioners") ask us to stay the April 4, 1997 decision of the National Futures Association ("NFA") in this disciplinary proceeding pending our decision of their appeals on the merits. For the reasons discussed below, we deny each of the stay petitions.
On September 16, 1994, NFA's Business Conduct Committee ("BCC") issued a complaint against petitioners. Following a hearing, an NFA Hearing Committee panel on August 26, 1996, issued a decision finding that the petitioners had repeatedly misled CFG's customers or prospective customers and that they violated NFA sales practice rules in connection with Commonwealth's advertising and telemarketing activities. The Panel also found that CFG and Hoffecker failed properly to supervise employees in violation of NFA Compliance Rules.
The Hearing Committee panel imposed sanctions against petitioners for these violations. CFG was fined $100,000 and expelled from NFA membership, while Hoffecker was permanently barred from associating with and from acting as a principal of any NFA Member and fined $250,000. The other CFG APs were ordered to retake and pass the Series 3 examination, and to complete ethics training and were subject to other conditions and restrictions for periods of either two or three years. In addition, Buchanan, Jones, Lupu and Watson were barred from associating with and from acting as a principal of any NFA Member for six months and each was fined $15,000. Ader and Caputo were fined $10,000 and $2,000, respectively, but were not barred from associating with and from acting as a principal of any NFA Member.
Each of the petitioners appealed to NFA's Appeals Committee which, on April 4, 1997, affirmed the Hearing Committee panel's decision. The Appeals Committee rejected petitioners' claims of insufficiency of the evidence, their challenges based on collateral estoppel and res judicata, and their arguments premised upon various due process violations. The Appeals Committee also rejected petitioners' claims that the sanctions were too harsh. Instead, the Appeals Committee found that sanctions imposed against some of the petitioners were too lenient in light of the seriousness of the violations and failed to provide effective deterrence against similar conduct in the future. Accordingly, the Appeals Committee increased the sanctions against some of the petitioners. Specifically, Ader and Caputo were barred from associating with and from acting as a principal of any NFA Member for eighteen months and one year, respectively, while the suspensions for Jones, Lupu and Watson were increased from six months to two years. The Appeals Committee affirmed the sanctions imposed by the Hearing panel in all other respects.
Commission Rule 171.22(c), 17 C.F.R. 171.22(c) (1997), governs our consideration of petitions to stay the effective date of NFA disciplinary decisions. Parties seeking such stays must show that they are likely to succeed on the merits, that they will suffer irreparable harm if the stay is denied, and that neither the public interest nor the interests of any other party will be adversely affected if a stay is granted.
The petitioners advance several arguments in support of their contention that they are likely to succeed on the merits of their appeals. They contend that there is insufficient evidence to support the findings against them and that the sanctions imposed upon them are unduly excessive and harsh. The individual petitioners also argue that the Appeals Committee improperly increased the sanctions against them. CFG and Hoffecker make several additional arguments. They contend that NFA's case was barred by the doctrines of res judicata and collateral estoppel and argue that they were denied due process in various ways. NFA has filed a responsive pleading opposing the grant of the stays in the strongest possible terms, urging that "[t]he public interest involved here could scarcely be any clearer. At this point, no fewer than five deliberative bodies have recognized Commonwealth Financial Group, Inc. for the boiler room that it is." NFA Opposition at 2. NFA's opposition reviews the evidence supporting its decision and contends that its ruling and the resulting sanctions were clearly correct.
Petitioners' arguments restate the arguments made before the Hearing Committee panel and the Appeals Committee and ask us to reweigh the factual record. However, they have not demonstrated a substantial likelihood of success on the merits. Therefore, we need not reach the remaining prongs of the stay standard except to note that, in light of the large losses CFG customers have sustained and the longstanding nature of the violative conduct at issue, any harm to petitioners in these circumstances is outweighed by the public interest at stake here.
Petitioners have failed to meet their burden of persuasion to show that the effective date of the NFA's decision should be stayed pending our consideration of the merits of their appeals.
Accordingly, the petitions to stay are denied.
IT IS SO ORDERED.
By the Commission (Chairperson BORN and Commissioners DIAL, TULL, HOLUM, and SPEARS).
Jean A. Webb
Secretary of the Commission
Commodity Futures Trading Commission
Dated: May 7, 1997