In re CBOT's Settlement of Disciplinary Charges of March Wheat Expiration

UNITED STATES OF AMERICA
Before the
COMMODITY FUTURES TRADING COMMISSION

In the Matter of

CBOT'S SETTLEMENT OF DISCIPLINARY CHARGES�� CFTC Docket No. 97-E-1 AGAINST DONALD W. SCHECK RELATED TO THE
MARCH WHEAT EXPIRATION ON MARCH 20, 1996

In the Matter of

CBOT'S SETTLEMENT OF DISCIPLINARY CHARGES�� CFTC Docket No. 97-E-2� AGAINST J. BRIAN SCHAER RELATED TO THE
MARCH WHEAT EXPIRATION ON MARCH 20, 1996 :

In the Matter of

CBOT'S SETTLEMENT OF DISCIPLINARY CHARGES�� CFTC Docket No. 97-E-3 AGAINST JOHN C. BEDORE RELATED TO THE
MARCH WHEAT EXPIRATION ON MARCH 20,1996

In the Matter of

CBOT'S SETTLEMENT OF DISCIPLINARY CHARGES�� CFTC Docket No. 97-E-4 AGAINST GEORGE F. FREY, JR. RELATED TO THE
MARCH WHEAT EXPIRATION ON MARCH 20, 1996

In the Matter of

CBOT'S SETTLEMENT OF DISCIPLINARY CHARGES�� CFTC Docket No. 97-E-5�� AGAINST JAY P. IERONIMO RELATED TO THE
MARCH WHEAT EXPIRATION ON MARCH 20, 1996

In the Matter of

CBOT'S SETTLEMENT OF DISCIPLINARY CHARGES�� CFTC Docket No. 97-E-6 AGAINST PRODUCE GRAIN, INC. RELATED TO THE
MARCH WHEAT EXPIRATION ON MARCH 20, 1996

ORDER

On November 26, 1996, the Commission issued an order ("Order Taking Review") under Section 8c(b) of the Act, 7 U.S.C. � 12c(b) (1994), and Commission Rule 9.31(b), 17 C.F.R. � 9.31(b) (1996), taking sua sponte review of the Chicago Board of Trade's ("CBOT" or "Exchange") settlement of six related disciplinary proceedings. The Order Taking Review was in response to a recommendation of Commission staff that the Commission take review to determine the adequacy of the sanctions imposed by the Exchange in the proceedings. See Report on Chicago Board of Trade March 1996 Wheat Future Expiration on March 20, 1996, Division of Trading & Markets ("T&M") and Division of Enforcement, in Consultation with Division of Economic Analysis ("EA"), November 26, 1996 ("Staff Report" or "Report"). The Order Taking Review directed the Proceedings Clerk to include a copy of the Staff Report in the record of each proceeding and to serve a copy of the Report along with the Order Taking Review on the respondents in the CBOT disciplinary proceedings and on the CBOT. The Order Taking Review also established a schedule for the respondents, the CBOT, and Commission staff to file responses. Responses have been filed by each of the foregoing.

T&M's response to the respondents' and CBOT's submissions contains a motion that the Commission accept as part of the record in this review proceeding (a) the CBOT's files related to the six disciplinary proceedings, and (b) a March 28, 1996 memorandum of EA staff. (Response of T&M at 25-26; id., Appendix A.) The contents of the CBOT's files related to the six disciplinary proceedings are identified in Appendix A to T&M's response.⁽¹⁾ T&M contends that this information can assist the Commission in understanding the issues for purposes of determining whether to remand the disciplinary proceedings and, if so, what instructions to provide to the CBOT. (Id. at 26.)

Although it has not made a similar motion, CBOT asserts that, assuming the validity of the Order Taking Review, all of the witness statements that were taken during the CBOT's investigation, considered by the Business Conduct Committee ("BCC"), and provided to Commission staff should be made a part of the record. (Response of CBOT at 31-32.) Similarly, one of the respondents asserts that the Commission can only judge his settlement with the BCC after examining the transcripts that he and the BCC relied upon in negotiating his settlement. (Submission of Scheck at 1-2.)⁽²⁾

We agree with T&M that it would be useful to have the full record of the Exchange disciplinary proceedings before us for purposes of conducting our review in this proceeding under Section 8c(b) of the Act. Neither the CBOT nor the respondents has opposed T&M's motion. Rather, as noted, the CBOT and one of the respondents appear to be in agreement that review of the disciplinary files--particularly the witness statements--will aid our review of the settlements.

We note that T&M's motion seeks to include in the record on review a document generated by Commission staff--i.e., a March 28, 1996 memorandum of EA staff. Neither the CBOT nor the respondents has objected to the inclusion of this document in the record. Furthermore, the CBOT has a copy of the memorandum, and the memorandum may have been available to the BCC during the course of its deliberations on the settlements. (See Response of CBOT at 17.) Accordingly, on this record, we see no reason not to include the March 28, 1996 mem orandum in the record on review as well.

Accordingly, the Commission grants the motion of T&M to accept as part of the record in this proceeding the items listed in Appendix A to the Response of T&M. CBOT shall file the documents listed in Appendix A under "Exchange Disciplinary Files" with the Proceedings Clerk within 15 days from the date this Order is served.⁽³⁾ T&M shall file the March 28, 1996 memorandum of EA staff, listed under "Other" in Appendix A, with the Proceedings Clerk within 15 days from the date this Order is served. For purposes of complying with this Order, CBOT may separately file in each docket the documents related to the disciplinary proceeding under review or may file a consolidated record in each docket containing the documents related to all six disciplinary proceedings. T&M shall serve its filing containing the March 28, 1996 memorandum on the respondents and the CBOT.

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: July 2, 1997

Attachment: Appendix A to Response of the Division of Trading and Markets to Submissions of the Respondents and the Chicago Board of Trade

1.� Appendix A identifies the following ten categories of documents contained in the CBOT's disciplinary files: (a) Charging Letters , (b) Office of Investigations and Audits ("OIA") Statement Transcripts, (c) OIA memoranda, (d) an OIA Report, (e) CBOT Time and Sales, (f) CBOT Daily Trading Activity, (g) trading cards and order tickets, (h) minutes of Business Conduct Committee ("BCC") meetings, (i) Settlement Agreements, and (j) a transcript of a BCC meeting. The particular documents within each of these categories are specified in Appendix A, a copy of which is attached to this Order.

2.� We note that the Order Taking Review did not place any limitations on the nature or content of the responses to be filed by the parties. Thus, the CBOT and the respondents could have filed the witness statements or any other documents that they viewed to be necessary to the conduct of this review proceeding at the time they filed their responses.

3.� Appendix A includes a list of those documents that one would expect to find in the CBOT's files concerning these disciplinary proceedings and thus appears to be complete. In the event that the list is incomplete, however, and other documents exist that were considered by the CBOT in the course of resolving these disciplinary proceedings, CBOT should include those documents in its filing as well.