CFTC News Release 4471-00
For Release: November 7, 2000
CFTC FILES ADMINISTRATIVE COMPLAINT AGAINST
FREDERIC J. MERSCH, CHARGING HIM WITH VIOLATING EXCHANGE TRADING LIMITS
Complaint Also Alleges that Mersch Filed False Reports, Failed To Update An Inaccurate Report And Traded While The Report Remained Inaccurate
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a four-count complaint against Frederic J. Mersch of Sioux City, Iowa, alleging that Mersch, a commodities trader, exceeded contract market trading limits for pork belly futures on five separate dates while trading his own account and several other accounts in the names of family members and others at the Chicago Mercantile Exchange (CME), in violation of section 4a(e) of the Commodity Exchange Act (CEA).
Furthermore, the CFTC complaint alleges that Mersch filed two false reports with the Commission in violation of section 6(c) of the CEA and CFTC regulation 18.04(a)(5); filed two inaccurate reports with the Commission, in violation of CFTC regulations 18.04(a)(5), 18.04(a)(9)(ii), and 18.04(d); failed to update an inaccurate form while holding or controlling a reportable position, in violation of regulation 18.04(d); and entered into futures trading or held reportable futures positions without updating the inaccurate report with the Commission, in violation of section 4i of the CEA.
More specifically, the complaint alleges that at various times during the period of August 2, 1996 through March 31, 1999, Mersch traded his own account and controlled the trading in at least eight other accounts carried respectively in the names of his wife and four adult children, and three other acquaintances. As alleged, when aggregated, futures positions in the accounts controlled by Mersch exceeded the position limits for frozen pork belly futures at the CME on one day in August 1996 and four days in March 1998. In addition, Mersch is alleged to have filed two false reports with the Commission that failed to disclose that he controlled certain family and acquaintance accounts. Mersch also allegedly failed to update one of his inaccurate reports and held or controlled reportable positions on at least 160 trading days, and traded commodities on at least 100 days while the report remained inaccurate.
A public hearing has been ordered to determine whether the allegations are true and, if so, what sanctions are appropriate in the public interest. Possible sanctions include an order directing Mersch to cease and desist from violating the CEA and CFTC regulations, imposing a trading prohibition and requiring Mersch to pay a civil monetary penalty of not more than $100,000 or triple the monetary gain, whichever is greater, for each violation committed on or prior to November 27, 1996 (or $110,000 or triple the monetary gain for violations committed after November 27, 1996).
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