Weekly Advisory -- November 19, 1999

On November 19, 1999, the Commission will hold a closed meeting to discuss surveillance matters.

CFTC News Releases

CFTC FILES CIVIL ENFORCEMENT ACTION AND OBTAINS RESTRAINING ORDER AGAINST FRED MONTE, JEANNE H. MONTE, AND COMP TECH LTD. INC., ALL OF BOCA RATON, FLORIDA, IN CONNECTION WITH THE ALLEGEDLY FRAUDULENT SALE OF A TRADING SYSTEM FOR FOREIGN CURRENCY FUTURES CONTRACTS

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that, on October 29, 1999, the U.S. District Court for the Southern District of Florida entered a revised restraining order against Fred Monte, Jeanne H. Monte, and Comp Tech Ltd., Inc. all of Boca Raton, Florida, defendants in CFTC v. Fred Monte, Jeanne H. Monte, and Comp Tech Ltd., Inc., Case No.�99-8750-CIV-RYSKAMP, which the CFTC filed on September 29, 1999. Fred Monte and Jeanne Monte are the president and the secretary, respectively, of Comp Tech, a Florida corporation. None of the defendants has ever been registered with the CFTC in any capacity.

On October 1, 1999, U.S. District Judge Kenneth L. Ryskamp had entered a restraining order that froze the defendants' assets, preserved their books and records, and allowed CFTC staff access to their books and records. Following a hearing, the court revised its restraining order to lift the asset freeze and provide for reasonable and necessary living expenses. The court's revised order prevents defendants from diverting or secreting assets.

CFTC Alleges that the Defendants Committed Fraud in Soliciting Customers to Purchase a Foreign Currency Futures Trading System, Among Other Violations of Federal Commodity Law

In its complaint filed on September 29, 1999, the CFTC alleges that the defendants Fred Monte, Jeanne H. Monte, and Comp Tech violated the antifraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations.

According to the complaint, the defendants solicited investors to purchase Comp Tech's trading system for foreign currency futures contracts by falsely stating in various advertisements that defendants earn $300 per day through currency trading and that prospective customers could earn $300 per day through currency trading. The complaint further alleges that, among other things, defendant Fred Monte falsely told investors that Comp Tech's trading system had been successful 83 percent of the time and that he had many years of experience as a broker or trader in the futures industry.

In its ongoing litigation against the defendants, the CFTC is seeking an order permanently enjoining defendants from violating the CEA and requiring an accounting, disgorgement of ill-gotten gains, and restitution to defrauded customers. In addition, the CFTC is seeking the imposition of civil penalties against the defendants not exceeding $110,000 per violation, or triple the monetary gain to defendants.

This is the fourth in a series of cases recently filed by the Commission alleging the fraudulent solicitation of customers to purchase commodity trading courses, newletters, or systems by commodity trading advisors (see CFTC News Release 4297-99, August 2, 1999, CFTC v. Pelton Street Publishing, Inc. and Roger Martin Hoy; Release 4320-99, October 1, 1999, CFTC v. Ca-Ni Industries, Ltd. and Nicholas J. Nickolaou; and Release 4327-99, October 21, 1999, CFTC v. David T. Marantette III, and Troubadour, Inc.).

Florida Court Enters Order of Default and Permanent Injunction Against EuroPacific Equity and Capital Management, Ltd., Tortola Corporation Company, Ltd., International Investment Group, Ltd., and Richard Tichy in CFTC Enforcement Action Charging Commodity Pool Fraud

Order Requires Defendants to Pay in Excess of $10 Million in Restitution and Civil Monetary Penalties

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the entry of an order of default and permanent injunction by U.S. District Judge William P. Dimitrouleas of the U.S. District Court for the Southern District of Florida against EuroPacific Equity and Capital Management, Ltd. (EuroPacific), Tortola Corporation Company, Ltd. (Tortola), International Investment Group, Ltd. (IIG), and Richard Tichy (Tichy).

The order, entered on October 29, 1999, enjoins EuroPacific, Tortola, IIG, and Tichy from violating the antifraud, registration, and disclosure and reporting provisions of the Commodity Exchange Act (CEA) and CFTC regulations, and requires them to pay restitution to defrauded individuals in the amount of $2,595,280 (plus pre- and post-judgment interest), to disgorge all benefits obtained as the result of their illegal acts, and to pay a civil monetary penalty of $7,785,841.

The court's order also enjoins defendants from seeking registration with the CFTC in any capacity, engaging in any business activities related to commodity futures trading, entering into any commodity futures or option transactions, and soliciting or accepting any funds in connection with the purchase or sale of commodity futures or option contracts. In addition, the order enjoins the transfer, withdrawal, or removal of defendants' funds and property, and the destruction, concealment, or alteration of their books and records.

Order Stems from CFTC Enforcement Action Filed in May 1999 Against the Defendants

The order stems from a CFTC enforcement action filed on May 5, 1999, seeking an ex parte statutory restraining order and other injunctive and ancillary relief against EuroPacific, a corporation registered in the British Virgin Islands and in Florida; Tortola, an international corporation registered in the British Virgin Islands; IIG, a corporation registered in the British Virgin Islands; Tichy of Parkland, Florida; and David Michael Loyd of Plantation, Florida. (See CFTC News Release 4264-99, May 19,1999.)

The CFTC complaint alleged that the defendants fraudulently solicited individuals from the United States and Canada to invest funds in a commodity pool variously called the EuroPacific or IIG Fund. The complaint further alleged that the vast majority of investor funds were misappropriated by transferring them to persons and entities unrelated to any commodity pool, and by using them to pay for personal expenses. Finally, the complaint alleged that the defendants violated the registration provisions and the disclosure and reporting requirements of the CEA and CFTC regulations.

The CFTC's litigation in the case continues against David Michael Loyd, the only remaining defendant.

WASHINGTON � Commodity Futures Trading Commission Chairman William J. Rainer today announced that Phyllis J. Cela is the recipient of the Presidential Rank Award for Meritorious Service, an honor given members of the Senior Executive Service for long-term, exceptional performance. Ms. Cela is the Acting Director of the Division of Enforcement and serves permanently as the Chief Counsel of the Division of Enforcement.

"Ms. Cela has made an outstanding contribution to the success of the Commission's enforcement program and in fostering cooperation with authorities around the world," Chairman Rainer said. "She is truly deserving of this award for her accomplishments in addressing challenges presented by fraud and manipulation in a changing global financial marketplace."

Ms. Cela joined the Commission in 1981, and has distinguished herself for her contributions in investigating and prosecuting a number of the most complex fraud and manipulation matters undertaken by the Commission over the years. She also has played a vital role in the development of the Commission's international cooperative enforcement program, establishing formal information sharing arrangements with authorities around the world and working on a case-by-case basis to further the ability of the Commission to investigate wrongdoing across markets and borders. Ms. Cela was particularly effective in the investigation of the Commission's Sumitomo copper manipulation case which involved groundbreaking cooperation and coordination with authorities in the United Kingdom and Japan.

Ms. Cela also has played a critical role in the strategic planning and management of the Division, evaluating performance measures and addressing trends in wrongful activity. Under her leadership, the Division has established a comprehensive Internet Surveillance Program to keep pace with new technological challenges to the Commission's enforcement responsibilities.

CFTC Approves Actions to Advance Regulatory Reform

Washington -- The Commodity Futures Trading Commission today approved two actions aimed at advancing its ongoing program of regulatory reform.

First, the Commission approved final rules that will permit futures exchanges to list new contracts for trading -- and subsequently to amend those contracts pursuant to exchange certification -- without prior Commission approval. This new listing procedure represents an alternative to the regular or fast-track procedures that are currently in place. The rules will be effective 60-days after they are published in the Federal Register.

Second, the Commission will be seeking public comment on a proposal to revise Commission regulation 1.41 to allow futures exchanges to make new rules and rule amendments effective without prior Commission approval. The Commission expects the proposal to be published in the Federal Register shortly and has provided a 60-day comment period.

In commenting on today's Commission actions, Chairman William J. Rainer stated:

"Today, the Commission began the process of modernizing itself as a streamlined, innovative, and effective oversight agency. Our actions recognize that the futures markets have matured greatly under the Commission's careful watch over the past twenty-five years and that the time has come to allow the exchanges to operate in a market environment free from unnecessary government intervention.

In approving final rules to permit futures exchanges to list contracts for trading without prior Commission approval, the Commission granted this authority with enthusiasm and faith in the market's ability to choose for itself which contracts serve an economic purpose. Further, the Commission approved these rules with the utmost confidence that we can continue to assure market integrity through our existing surveillance and enforcement authority.

In proposing to revise Commission regulation 1.41 so as to authorize the futures exchanges to put new and amended rules into effect without prior approval, the Commission is confident that the exchanges will assume responsibility for assuring that their rules comply with the Commodity Exchange Act and that they are fair to all market users. The Commission invites comments from all interested parties and looks forward to a thorough and thoughtful discussion of this proposal."

Copies of the final rules regarding the listing of new contracts and the proposed revisions to Commission regulation 1.41 may be obtained by contacting the Office of the Secretariat, Three Lafayette Centre, 1155 21^st Street, N.W., Washington, D.C. 20581, (202) 418-5100. The Commission also intends to make these documents available in the near future on its website at www.cftc.gov.

Opinions Updates

Seriatim Actions

On November 12, 1999, the Commission authorized for publication in the Federal Register a notice of its 27^th Meeting of the Commission's Agricultural Advisory Committee to be held on December 8, 1999.

On November 17, 1999, the Commission authorized for publication in the Federal Register a notice withdrawing the Commission's Concept Release concerning over-the-counter derivatives.

Federal Register Notices

The Chicago Board of Trade has submitted a proposed amendment to the speculative position limit provision of its Municipal Bond Index futures and futures option contracts. Vol. 64, No. 218, 11/12/99, p. 61606.

The Chicago Board of Trade has proposed amendments to its rough rice futures contract regarding specifications for deliverable rough rice. Vol. 64, No. 218, 11/12/99, p. 61607.

The public meeting of the Commodity Futures Trading Commission's Agricultural Committee formerly scheduled for November 9, 1999, will be held on December 8, 1999, in the first floor hearing room (Room 1000), Three Lafayette Centre, 1155 21^st Street, N.W., Washington, D.C., 1:00 p.m. until 4:30 p.m. Vol. 64, No. 222, 11/18/99, p. 63012.

Comment Periods

All Comment Letters must be received by the Commission no later than the closing date specified in the applicable Federal Register release. Any requests for an extension of the comment period must be made in writing - - before the expiration of the comment period - - to the Commission's Office of the Secretariat.

Comment period concerning the Commission's proposal to adopt new rules allowing the use of electronic signatures in lieu of handwritten signatures for certain purposes under the Commission's regulations ends, November 12, 1999.

Comment period concerning the Chicago Board of Trade's amendment to the speculative position limit provision of its Municipal Bond Index futures and futures option contracts ends, November 29, 1999.

Comment period concerning the Chicago Board of Trade's amendments to its rough rice futures contract regarding specifications for deliverable rough rice ends, November 29, 1999.

Initial Decisions

Dennis Johnson v. Cargill Incorporated. Filed November 15, 1999. The parties submitted a stipulation of dismissal. Accordingly, the complaint was dismissed with prejudice. Administrative Law Judge, Bruce C. Levine. CFTC Docket No. 99-R128.

Jon J. Bourdon v. U.S. Securities & Futures Corporation. Filed November 15, 1999. Jon J. Bourdon and U.S. Securities & Futures Corporation settled this matter and executed a mutual release. On November 12, 1999, Tom Gong, of the Securities & Futures, made payment under the terms of a settlement agreement. Accordingly, Jon J. Bourdon's complaint against U.S. Securities & Futures Corporation was dismissed. Philip V. McGuire, Judgment Officer. CFTC Docket No. 99-R130.

John H. McDaniel v. R B & H Financial Services, L.P., Strauss & Company, and Michael J. Plaia. Filed November 15, 1999. Complainant received full payment under the terms of a settlement agreement. Accordingly, this matter was dismissed. Philip V. McGuire, Judgment Officer. CFTC Docket No. 99-R63.

Opinions and Orders

CFTC Letters

99-48; No-Action; August 10, 1999; The Division of Trading and Markets (Division) issued a letter granting no-action relief to permit Eurex Deutschland (Eurex) members to install additional electronic trading terminals (Eurex Terminals) in the US, to list certain new contracts for trading from Eurex Terminals in the US, and to authorize the use of automated order routing systems (AORSs) without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA. Specifically, the Division agreed not to recommend that the Commission institute enforcement action against Eurex or its members if: (1) Eurex members use Eurex Terminals located in the US to trade for their proprietary accounts through the Eurex electronic trading system (System); (2) Eurex members who are registered futures commission merchants (FCMS) use Eurex Terminals located in the US to submit orders from US customers for transmission to the System; (3) Eurex members who are registered FCMs or who are exempt from such registration pursuant to Rule 30.10 ("Rule 30.10 Firms") accept orders through US AORSs from US customers for transmission to the System; and/or (4) certain additional contracts are made available for trading through the System in the manner set forth in (1), (2), or (3). The Division's no-action position is limited to the contracts specifically delineated in the letter and is subject to compliance with the terms and conditions set forth therein. The conditions include: (1) only Eurex members will have direct access to the System; (2) Eurex members that are not registered FCMs or Rule 30.10 Firms will be permitted to transmit orders through the System only for their proprietary accounts; (3) orders for US customers accepted through an AORS and/or transmitted by Eurex members through the System will be intermediated by a Eurex member that is either a registered FCM or a Rule 30.10 Firm; (4) Eurex will continue to satisfy the criteria for approval as an exchange under applicable German law; (5) applicable German law will continue to require Eurex to maintain fair and orderly markets; prohibit abusive practices, and market manipulation; and provide that such requirements are subject to the oversight of the appropriate regulatory authorities; (6) Eurex will employ reasonable procedures for monitoring and enforcing compliance with the terms and conditions of the no-action relief; (7) Eurex will continue to adhere to the IOSCO Principles for Screen-Based Trading, to the extent consistent with U.S. and German law; (8) Eurex members that are not registered FCMs will be required to represent, in writing, that they submit to the Commission's jurisdiction with respect to activities conducted pursuant to the no-action relief; (9) Eurex and its members that are not registered FCMs will appoint an agent for service of process in the US; (10) Eurex members that are not registered FCMs and that are operating pursuant to the no-action relief will be required to represent that they will provide access to the books and records maintained at their US offices and to the premises where Eurex Terminals are installed or used in the US, upon request; (11) Eurex will submit to the Commission, both quarterly and upon request, specified trade volume information and a listing of the names and US business addresses of its members that have access to the System in the US; (12) Eurex promptly will provide written notice to the Division of: (a) material changes in the information in its no-action request; (b) material changes in its rules or relevant German rules or laws; (c) known matters that may affect the financial or operational viability of Eurex; (d) the default, insolvency, or bankruptcy of any Eurex member known to Eurex that may have a material, adverse impact upon Eurex, Eurex's clearing system, or a US customer or firm; (e) known violations of the terms or conditions of the no-action relief; and (f) specified disciplinary actions taken by Eurex against members operating pursuant to the no-action relief; (13) satisfactory information-sharing arrangements between the Commission and the relevant regulatory authorities will remain in effect; (14) Eurex will provide certain information directly to the Commission and the Commission will be able to obtain sufficient information regarding Eurex and the members of Eurex operating pursuant to the no-action relief necessary to evaluate the continued eligibility of Eurex or its members for the no-action relief, to enforce compliance with the terms and conditions of the relief, or to enable the Commission to carry out its regulatory duties The Division retained the authority to condition further, modify, suspend, terminate or otherwise restrict the terms of the no-action relief, in its discretion. [Section 5 and 5a of the CEAct] (T&M).

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