U.S. COMMODITY FUTURES TRADING COMMISSION FINDS THAT PRINCETON, NEW JERSEY, COMMODITY TRADING ADVISOR ROYAL BERG, INC. AND ITS PRINCIPAL, GARY BERG, VIOLATED DISCLOSURE OBLIGATION
WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced the simultaneous filing and settlement of an administrative enforcement action against former commodity trading advisor Royal Berg, Inc. (Royal Berg) and its principal and associated person Gary Berg (Berg) of Princeton, New Jersey.
The CFTC order, entered on January 18, 2005, finds that between at least February 2002 and January 2003, Berg solicited clients using a disclosure document that contained a description of Royal Berg’s trading program that Berg knew or should have known was materially inaccurate, in violation of Commission regulation 4.36(c)(2).
According to the order, the disclosure document described Royal Berg’s trading program as “an interest rate sensitive options trading program,” conceived to exploit “relative instability in bond markets,” whose preferred trading strategy was options spreads. The order finds that contrary to those representations, Berg never used options spreads in trading for Royal Berg, trading exclusively in uncovered, or "naked," options and predominantly naked short options.
The CFTC order also finds that Berg failed to distribute an amended disclosure document to existing clients, and used an outdated disclosure document in violation of Commission regulations 4.36(c)(1)(i) and 4.36(b).
The CFTC order requires Berg and Royal Berg to cease and desist from violating Commission regulation 4.36, and to pay a civil monetary penalty of $10,000. In consenting to the entry of the CFTC order, Berg neither admitted nor denied the findings made in the Commission order. A copy of the CFTC Order may be found at http://www.cftc.gov.
The following CFTC Division of Enforcement staff were responsible for this case: Stephen Morris, Armand Nakkab, Michael McLaughlin, David Acevedo, Lenel Hickson, Stephen Obie, and Richard Wagner.
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