Release 4436-00 (CFTC Docket No 97-12)
For Release August 14, 2000
CFTC ACCEPTS SETTLEMENT OFFERS OF CURTIS McNAIR ARNOLD AND LONDON FINANCIAL, INC. IN CASE INVOLVING THE FRAUDULENT SOLICITATION OF CLIENTS
Arnold Is Ordered To Pay A $100,000 Civil Monetary Penalty, Among Other Sanctions
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the issuance of an order accepting offers of settlement from Curtis McNair Arnold and London Financial, Inc. (LFI), both of Jupiter, Florida, in connection with a complaint filed by the CFTC on June 30, 1997 (see CFTC News Release 4039-97, July 31, 1997). The CFTC order finds that Arnold and LFI fraudulently solicited clients to purchase a commodity futures trading system and other advisory services. Arnold and LFI consented to the entry of the order without admitting or denying the findings of the order or the allegations of the complaint.
Specifically, the CFTC order finds that since at least 1994, Arnold and LFI, while acting as commodity trading advisors (CTAs), committed fraud in the course of offering and selling to the public a commodity futures trading system called the Pattern Probability Strategy (PPS) and various advisory services offering the trading signals generated by PPS. The order also finds that Arnold and LFI committed fraud since at least 1996, in connection with the offer and sale of a publication entitled Systems USA, distributed by mail and over the Internet, which, purported to track the performance of various trading systems authored by Arnold and other vendors, and which offered and sold these systems and services related to these systems.
According to the order, in direct-mail promotional literature distributed through two publishers in 1994 and 1995 and directly by Arnold in 1995, Arnold and LFI made material misrepresentations concerning the profits and rates of return generated by Arnold’s trading pursuant to PPS and failed to disclose that many of the representations concerning the performance of PPS were based on hypothetical, rather than actual, trading of PPS. As the order further finds, Arnold and LFI's direct promotion of PPS and the Systems USA publication further failed to provide the warning regarding the limitations of hypothetical trading required by section 4.41(b) of the CFTC's regulations.
The CFTC order finds that Arnold and LFI violated sections 4b(a)(i) and 4o(1) of the Commodity Exchange Act and sections 4.41(a) and (b) of the regulations and:
-- requires Arnold to pay a $100,000 civil monetary penalty within 10 days of the entry of the order;
-- directs them to cease and desist from further violations as charged;
-- prohibits them from trading on or subject to the rules of any contract market for a period of three years; and,
-- requires them to comply with certain undertakings, including never applying for registration or claiming exemption from registration in any capacity.
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