UNITED STATES OF AMERICA

Before the

COMMODITY FUTURES TRADING COMMISSION

 

In the Matter of                                                          CFTC Docket Nos. CRAA-97-1                                                                                               through 97-7

COMMONWEALTH FINANCIAL                          ORDER

GROUP, ET AL.

This case is before the Commission on appeal from a final disciplinary action taken by the Appeals Committee of the National Futures Association ("NFA"). The Committee affirmed the liability findings of an NFA Business Conduct Committee hearing panel and increased in part the sanctions imposed by the hearing panel. The case has its origins in a six-count complaint against Commonwealth Financial Group, Inc., its president and sole stockholder Charles Hoffecker, and several associated persons ("APs") of Commonwealth. The complaint alleged that Commonwealth and Hoffecker violated NFA Compliance Rules 2-29(a)(1), 2-29(b)(1) and 2-29(b)(2) in connection with the use of misleading and deceptive promotional material and violated NFA Compliance Rule 2-4 by engaging in a deliberate course of conduct to deceive and defraud Commonwealth customers. Commonwealth and the AP respondents were alleged to have violated NFA Compliance Rule 2-29(a)(1) by engaging in fraudulent and deceptive sales solicitations. Commonwealth and Hoffecker also were charged with failure diligently to supervise Commonwealth employees in violation of NFA Compliance Rule 2-9.

On appeal to the Commission, respondents argued that NFA’s findings are not supported by the weight of the evidence, that the sanctions imposed are excessive, and that the proceedings were inconsistent with fundamental fairness and NFA’s rules. Our review of the record and the parties’ appellate submissions establishes that the result reached in the decision of the NFA is substantially correct.

Respondent Hoffecker’s claim that he was denied the opportunity to cross-examine a key NFA witness merits brief discussion. NFA Compliance Rule 3-9(c) provides that a respondent in an NFA proceeding may examine witnesses, and NFA made this witness available for cross-examination on two separate occasions. On the first occasion, Hoffecker refused to participate in the hearing without sufficient cause and failed to take advantage of the witness’s availability. He thus waived his right to cross-examination. Nonetheless, NFA again made the witness available for cross-examination and gave explicit notice to Hoffecker and other respondents that the witness’s availability was limited to one day. Hoffecker, as president of Commonwealth, clearly was in a position to coordinate his cross-examination with Commonwealth’s counsel, who cross-examined the witness for the full day. Given counsel’s knowledge of the witness’s limited availability and his failure to request additional time from the panel prior to the hearing, Hoffecker’s actions appear more calculated to create an issue for appeal than to enhance his opportunity to question the witness. Cross-examination is appropriately restricted where, as here, the respondent fails to take advantage of the opportunity when it is made available and fails to point to any specific weakness of proof which might have been explored or developed more fully had cross-examination been allowed. Cellular Mobile Systems of Pennsylvania v. FCC, 782 F.2d 182, 198 (D.C. Cir. 1985). See Salem v. U.S. Lines Co., 370 U.S. 31 (1962); Dolcin Corp. v. FTC, 219 F.2d 742, 747 (D.C. Cir. 1954). Accordingly, the NFA’s decision is affirmed.

IT IS SO ORDERED.

By the Commission (Chairperson BORN and Commissioners TULL, HOLUM and SPEARS).

__________________________

Jean A. Webb

Secretary of the Commission

Commodity Futures Trading Commission

Dated: March 18, 1998