Release: 4023-97 (CFTC Docket #97-8)
For Release: May 20, 1997
CFTC FILES ENFORCEMENT ACTION CHARGING KEVIN A. MARSHBURN OF ORLANDO, FLORIDA, WITH FRAUDULENT TRADE ALLOCATION AND PRUDENTIAL SECURITIES WITH FAILURE TO SUPERVISE DILIGENTLY AND WITH RECORDKEEPING VIOLATIONS
Kathleen Chiappone and Kathryn Sarabasa Are Also Charged in the CFTC's Complaint
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) today announced the filing of a four-count administrative complaint against Kevin A. Marshburn of Orlando, Florida; Prudential, Securities, Inc. (Prudential) of New York, New York; Kathleen Chiappone of Winter Park, Florida; and Kathryn Sarabasa of Winter Springs, Florida.
The CFTC complaint charges that Marshburn violated the Commodity Exchange Act (CEA) by cheating, defrauding, and deceiving customers in connection with his handling of commodity futures accounts trading frozen concentrated orange juice futures contracts on the Citrus Associates of the New York Cotton Exchange from May 1993 through March 1994, while employed at the Orlando, Florida, office of Prudential Securities, Inc. Marshburn was registered with the CFTC as an Associated Person (AP) of Prudential at the time of the alleged violations.
Specifically, the CFTC complaint charges Marshburn with fraudulently allocating trades between his personal futures account and customer accounts. The complaint alleges that he gave himself profitable round-turn trades or better prices on specific trades, while giving customers losing trades or worse prices on specific trades. Marshburn is also charged with violations of the CEA and CFTC regulations involving order preparation and recordkeeping, including failure to record account identification on customer orders and failure to retain required records.
CFTC Charges Prudential With Failure to Supervise Diligently and With Recordkeeping Violations
The complaint alleges that Prudential violated the CEA and CFTC regulations by failing to supervise Marshburn diligently while he was employed at Prudential, and by failing to prepare properly, to retain, and to produce certain required records. Specifically, Prudential is charged with failing to establish a supervisory and compliance structure reasonably designed to detect and deter possible fraudulent trade allocation schemes involving an AP's personal futures trading account.
Marshburn, Chiappone, and Sarabasa are charged with aiding and abetting Prudential's alleged recordkeeping violations. Chiappone and Sarabasa, who were also registered with the CFTC as APs of Prudential at the time of the alleged violations, are also charged with order preparation and recordkeeping violations. Chiappone and Sarabasa are currently APs with a registered firm.
A public hearing is to be held to determine whether the allegations against Marshburn, Prudential, Chiappone, and Sarabasa are true, and if so, what sanctions, if any, should be imposed. Possible CFTC sanctions include cease and desist orders, assessment of civil penalties of up to $100,000 for each violation of the CEA and CFTC regulations, trading prohibitions, and suspension or revocation of registrations.