Release: #4179-98 (CFTC Docket Nos. 98-15 and
For Release: August 17, 1998
CFTC FILES ENFORCEMENT ACTION ALLEGING FRAUD,
REGISTRATION AND REGULATORY VIOLATIONS BY INTERNATIONAL FUTURES
CORPORATION, AN INTRODUCING BROKER IN WASHINGTON, D.C., AS WELL AS FAILURE
TO SUPERVISE DILIGENTLY BY ITS FUTURES COMMISSION MERCHANT, LIT DIVISION OF
FIRST OPTIONS OF CHICAGO
Complaint Charges that Introducing Broker
Committed Fraud in Soliciting Managed Account Trading Program and Acted as
Unregistered Commodity Trading Advisor, and That Futures Commission
Merchant Failed to Supervise Diligently the Activities of its Guaranteed
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced
today the filing of a five-count administrative complaint alleging that
International Futures Corporation (IFC), a registered
introducing broker (IB) located in Washington, D.C., violated the
anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC
Regulations by fraudulently soliciting clients to trade its "Hermes"
managed account program, a computerized S&P 500 day trading program.
The complaint further alleges that in soliciting and trading the Hermes
program, IFC acted as an unregistered commodity trading advisor (CTA) in
violation of the CEA and also violated several CFTC Regulations governing
the conduct of CTAs. In addition, the complaint alleges that LIT
Division of First Options of Chicago (LIT), a registered futures
commission merchant located in Chicago, Illinois, which guaranteed IFC, is
liable for IFC's statutory and regulatory violations and that LIT also
failed to supervise diligently its guaranteed IB, IFC, as required by CFTC
Regulation 166.3. The CFTC also announced today that it issued an order
instituting administrative proceedings against Robert J.
Rubel, IFC's former Chief Executive Officer and President, and
that simultaneous with the filing of this administrative proceeding, it
accepted Rubel's offer of settlement. Rubel is registered with the CFTC as
an AP of IFC and also as a CTA under the name of Robert J. Rubel, C.T.A.
d/b/a Mt. Olympus Trading.
More specifically, the CFTC complaint alleges that IFC fraudulently
portrayed the Hermes trading program as an established, time-tested trading
program that had achieved phenomenal results for customers over a period of
years. According to the CFTC complaint, IFC misrepresented in its radio
advertisements, written promotional material, and oral representations to
prospective clients that the Hermes program had between three and eight
years of actual performance results when, in fact, all the performance
results provided were hypothetical. The complaint further alleges that IFC
falsely asserted that all or a substantial number of IFC brokers had
invested in the Hermes program.
The CFTC charges that IFC acted as a CTA in soliciting clients to trade,
and in trading, its Hermes managed account program, but that IFC failed to
register as a CTA as required by the CEA. The complaint further charges IFC
with violating CFTC Regulations that require a CTA to deliver a Disclosure
Document for its trading program to prospective clients, file a Disclosure
Document for its trading program with the CFTC, and keep the originals or
copies of promotional materials (including advertisements) for a period of
five years. The nearly 40 IFC clients that traded the Hermes program lost
According to the CFTC complaint, LIT guaranteed IFC from December 1993
until July 1997. The complaint alleges that LIT is liable for the fraud,
registration and regulatory violations committed by its agent, IFC. The
complaint further alleges that LIT approved certain of IFC's fraudulent
radio advertisements and written promotional material regarding the Hermes
program. The complaint charges that LIT failed to supervise diligently the
activities of its guaranteed IB, IFC, in violation of CFTC Regulation
The CFTC order as to Rubel, based on the settlement, finds that he
violated the anti-fraud provisions of the CEA and CFTC Regulations by
fraudulently soliciting clients to trade IFC's Hermes program in radio
advertisements, written promotional literature, and oral representations.
The order further finds that Rubel aided and abetted the IB's fraud,
registration, and regulatory violations, and that Rubel also is liable for
those violations as a controlling person of the company.
Rubel, without admitting or denying the findings, consented to the entry of the order:
-- directing him to cease and desist from further violations;
-- revoking his registrations;
-- imposing a five-year trading ban; and
-- directing him to pay a $15,000 civil monetary penalty.
According to the order, the CFTC believes that a more substantial
monetary sanction would have been appropriate but for Rubel's showing of
his financial condition.
The CFTC's complaint against IFC and LIT institutes a public administrative proceeding to determine if the allegations in the complaint are true and, if so, whether sanctions should be imposed.