Release: 4932-04 (CFTC Docket No. 01-10)
U.S. COMMODITY FUTURES TRADING COMMISSION FINDS THAT FLORIDA FIRM FIRST INVESTORS GROUP OF THE PALM BEACHES, INC. AND ITS EMPLOYEES COMMITTED FRAUD IN SOLICITING CUSTOMERS
Respondents William Scott Cordo and Mitchell Stephen Davis Ordered to pay $600,000 in Civil Penalties
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced the issuance of an order finding that William Scott Cordo of Delray Beach, Florida, and Mitchell Stephen Davis of Boynton Beach, Florida, and their firm, First Investors Group of the Palm Beaches, Inc. (FIG), used a misleading television infomercial and telephone misrepresentations to convince customers to trade options on commodity futures contracts.
The CFTC order, entered on May 24, 2004, also finds that Cordo and Davis, the owners of FIG, were responsible for the company’s fraud as controlling persons, and further finds that they failed to adequately supervise their employees. The order settles an administrative action the CFTC had filed against those parties on June 19, 2001 (see CFTC News Release 4527-01, June 19, 2001).
Specifically, the order finds that, from at least June 1998 to February 2000, FIG fraudulently solicited customers through a television infomercial and telephone solicitations. The commercial and solicitations conveyed the false message that customers could expect large profits and reduced risk when trading options according to FIG’s recommendations, the order finds. The infomercial and solicitations also falsely represented that knowledge of seasonal or other existing supply and demand forces would give the options investor an advantage in trading options on energy futures, the order finds. Finally, the infomercial and solicitations made false representations regarding the risks inherent in trading options and FIG’s own track record on behalf of its customers, the order finds.
The order further finds that Cordo and Davis were liable as controlling persons for FIG’s fraud because they exercised day-to-day authority over the company. Additionally, the order finds that Cordo and Davis failed to diligently supervise the handling of FIG’s customer accounts.
The order requires Cordo to pay a $480,000 civil monetary penalty and Davis to pay a $120,000 civil monetary penalty; revokes the registrations of Cordo, Davis, and FIG; requires Cordo, Davis, and FIG to cease and desist from further violations of the Commodity Exchange Act and CFTC regulations; and prohibits Cordo and Davis from trading on or subject to the rules of any registered entity. In consenting to the entry of the CFTC’s order, Cordo, Davis, and FIG neither admitted nor denied the findings made in the order.
A copy of the CFTC order may be found at http://www.cftc.gov.
The following Division of Enforcement staff were responsible for this case: Christine Ryall, John Dunfee, Paul Hayeck, and Joan Manley.
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