UNITED STATES OF AMERICA
COMMODITY FUTURES TRADING COMMISSION
In the Matter of CFTC Docket No. 93-16 JAMES M. MARREN OPINION AND ORDER
The Division of Enforcement ("Division") appeals from the Administrative Law Judge's ("ALJ") order revoking Marren's registration as a floor broker and preventing him from reapplying for five years. The Division contends that the initial decision suggests that the revocation sanction will terminate automatically after five years and allow Marren to become registered at that time. The Division asks us to make clear that under Sections 8a(2)(D) and (E) of the Commodity Exchange Act ("Act"), 7 U.S.C. §§ 12a(2)(D) and (E) (1994), revocation operates without a specific time limit and until an individual successfully rebuts the presumption of disqualification. The Division also argues that Section 9(b), 7 U.S.C. § 13(b) (1994), prohibits Marren from reregistering or reapplying for registration during the term of the trading ban imposed on him by the ALJ. Marren contends that he is entitled to reregistration after five years.
As explained more fully below, the law is clear that a registration revocation continues until specifically terminated by the Commission after consideration of an application by the revoked registrant and that registration will be conferred only upon a revoked registrant who affirmatively shows that he or she poses no threat to the markets.
On May 21, 1993, the Division brought a two-count complaint against Marren.(1) Specifically, the first count alleged that Marren had violated Section 4b(a)(iv) of the Act, 7 U.S.C. § 6b(a)(iv) (1994), by becoming a buyer with respect to a customer sell order. The second count alleged that Marren was statutorily disqualified from registration under Sections 8a(2)(D) and (E) of the Act, 7 U.S.C. §§ 12a(D) and (E) (1994), because on March 9, 1993, Marren pled guilty to and was convicted of one felony count of violating Section 4b(a)(iv) of the Act in the United States Court for the Northern District of Illinois.(2)
The complaint ordered Marren to answer the complaint and the ALJ to hold a hearing to determine whether Marren was subject to a statutory disqualification and, if so, to suspend his registration and order him to show cause why his registration should not be revoked. In September 1993, the ALJ granted the Division's motion for partial summary disposition as to Count I. The ALJ found that Marren's criminal conviction collaterally estopped him from denying the facts upon which his conviction was based. After an evidentiary hearing in November 1993 on Count II of the complaint, the ALJ issued an initial decision in which he ordered Marren to cease and desist from further trading violations, imposed a five-year trading ban, and revoked Marren's registration as a floor broker prohibiting him from reapplying for five years.
This appeal is confined to a single sentence of the judge's decision: "[Marren] may not reapply for registration for a period of five years from the date this order becomes final." Div. Br. at 3. The Division contends that these terms do not accurately reflect the requirements of either Section 8a(2) or Section 9(b) of the Act.
The Division argues that, under Sections 8a(2)(D) and (E) of the Act, a person disqualified for registration, upon reapplication, must demonstrate to the Commission that he should be registered notwithstanding his disqualification. The Division expresses concern that the ALJ's statement could be interpreted to mean that Marren will be presumptively fit for registration after five years.
The Division also points out that Marren was convicted of a felony violation under Section 4b of the Act and therefore is subject to Section 9(b). The Division argues that Section 9(b) requires the Commission to deny registration or reregistration for a term of at least five years. It contends that Section 9(b) is "premised on Congress' conclusion that persons convicted of felonies under Section 9 pose a particularly virulent threat to the public interests protected by the Act, and accordingly should be dealt with more severely than those with other types of disqualifying convictions." Div. Br. at 6. It concludes that the statute requires the Commission to deny registration for at least five years and that any application submitted prior to that time must be rejected summarily.
The Division requests that the Commission confirm that (1) Marren may not apply for registration for five years after the date of the final Commission order and (2) at the conclusion of the five-year period Marren may apply for registration and his application will be judged based upon his showing of rehabilitation.
Marren responds that the ALJ's order entitles him to reregistration of his floor broker license upon completion of the five-year period of revocation. Marren argues that Section 9(b) of the Act addresses debarment from trading privileges, registration, and reregistration, contending that it creates a rebuttable presumption of a five-year registration suspension for a floor broker convicted of a felony violation. Marren asserts that the ALJ revoked his registration for a five-year period and denied him reregistration for the same period after carefully reviewing the evidence. Marren submits that the ALJ's determination is entitled to deference and that, had the ALJ believed that a longer period of time was necessary, the ALJ would have imposed it. Marren maintains that no further proceedings are necessary and that, if additional grounds arise bearing on his unfitness, the Commission can initiate a new proceeding.
Registration revocation under Section 8a of the Act continues until specifically terminated by the Commission in response to an application by the revoked registrant. Section 8a creates the statutory bases for disqualification from registration. The statute does not contemplate a time period after which the registration revocation shall expire and the registrant shall be automatically reinstated. In each case the person applying for registration must demonstrate that he or she no longer poses a threat to the integrity of the markets.
By the same token, the Act does not establish any time limit on an individual's ability to reapply for registration after being revoked. We have held that ordinarily revoked registrants may reapply at any time. In re Hirschberg, [1995-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,573 at 43,523 (CFTC Dec. 27, 1995) citing at n.14, Silverman v. CFTC, 562 F.2d 432, 439 (7th Cir. 1977); Sundheimer v. CFTC, 688 F.2d 150, 153 (2d Cir. 1982); In re Loewinger, [1982-1984 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,804 at 27,343 (CFTC Nov. 27, 1981); In re Cayman Associates, Ltd., [1982-1984 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 21,999 at 28,392 n.10 (CFTC Feb. 10, 1984). Consequently, the ALJ erred by forbidding Marren to submit an application for registration for five years and the time limitation imposed by the ALJ is vacated. However, a future application for registration by Marren will not be granted unless he overcomes the presumption of unfitness for registration raised by his statutory disqualification. See, e.g., In re Ryan, CFTC Docket Nos. 91-10 and SD 93-17, 1997 LEXIS 101, at *43 n.34 (CFTC Apr. 25, 1997).
The trading prohibition and cease and desist order previously imposed by the ALJ and the registration revocation shall become effective 30 days from the date of this order.(3)
IT IS SO ORDERED.
By the Commission (Chairperson BORN, Commissioners TULL, DIAL, SPEARS, and HOLUM).
Jean A. Webb
Secretary of the Commission
Commodity Futures Trading Commission
Dated: June 26, 1997
1. The complaint had its genesis in a sting operation the Federal Bureau of Investigation ("FBI") conducted during 1987-1988 in the Japanese Yen futures pit of the Chicago Mercantile Exchange ("CME"). Marren was a member of the CME. He had been registered with the Commission as a floor broker since 1982.
2. Marren was indicted in August, 1989. The jury failed to return a verdict. In March 1993, Marren entered into a plea agreement in which he pled guilty to one felony violation of Section 4b(a)(iv) of the Act. In May 1993, a judgment order of conviction was entered against Marren based on his guilty plea. The court sentenced Marren to two months incarceration, four months work release, and six months probation. Marren was required to pay the cost of imprisonment at the rate of $1,492 per month, the cost of supervision in the work release program at the rate of $991 per month, and the cost of supervision during probation at the rate of $1,318 per year. The court imposed a $5,000 fine and a special assessment of $50 and required him to pay $250 in restitution.
Marren's floor broker privileges were suspended for one month pursuant to his settlement with the CME of a disciplinary proceeding stemming from his felony conviction. The term of the suspension was reduced by a three-week period when Marren voluntarily refrained from exercising his floor privileges.
3. A motion to stay the effect of this decision pending reconsideration by the Commission or review by a court must be filed within 15 days of the date this order is served. Compare Commission Rule 10.106, 17 C.F.R. § 10.106, (1996).