Release: #4182-98 (CFTC Docket No.
For Release: August 25, 1998
CFTC ACCEPTS SETTLEMENT OFFER OF COMPETITIVE STRATEGIES FOR AGRICULTURE, LTD.; CSA INVESTOR SERVICES, INC.; AND LEE D. AMUNDSON ARISING FROM MARKETING OF SO-CALLED "HEDGE-TO-ARRIVE" CONTRACTS
CFTC Order Accepting Settlement Offer Finds Fraud and the Solicitation of Clients to Enter Off-Exchange Futures Contracts in Violation of the Commodity Exchange Act
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it issued an order accepting an offer of settlement from Competitive Strategies for Agriculture, Ltd. (CSA-Iowa), CSA Investor Services, Inc. (CSA-IB), and Lee D. Amundson (Amundson), in connection with a complaint filed by the CFTC on December 22, 1997 (see CFTC News Release #4090-97, December 22, 1997). CSA-IB is registered with the Commission as an introducing broker (IB). Amundson was a co-owner and principal of both CSA-Iowa and CSA-IB and a registered associated person (AP) of CSA-IB.
The CFTC order, filed on August 24, 1998, finds that from mid-1993 through mid-1995, CSA-Iowa, CSA-IB, and Amundson (the CSA respondents) violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC Regulations in their market consulting and advisory services to agricultural producers in Nebraska. The order further finds that Amundson aided and abetted fraud violations, and that Amundson also is liable for CSA-Iowa's and CSA-IB's fraud violations as a controlling person of those entities.
Specifically, the CFTC order finds that the CSA respondents recommended that Nebraska clients use so-called hedge-to-arrive contracts (HTAs) that permitted rolling between crop years, and fraudulently represented to Nebraska clients that their strategies concerning such contracts were risk-free due to the ability to "roll out" of a losing HTA position during unfavorable market conditions. The CSA respondents failed to disclose the material risks that: 1) the futures market might move so adversely that the producer might not be able to "roll out" of the HTAs profitably; and 2) in a period of rising prices, the contracting elevator might not be willing or financially able to permit producers to roll indefinitely.
In addition, the CFTC order finds that the CSA respondents solicited Nebraska clients to enter into a type of HTA which was an off-exchange futures contract which violated of the CEA. The order further finds that Amundson aided and abetted the offer and execution of this off-exchange futures contract.
The CFTC order also finds that CSA-IB violated CFTC Regulation 166.3 by failing to supervise diligently the activities of its Nebraska branch office and its branch office APs. The order further finds that CSA-IB is liable for the failure to use the name of CSA-IB at the branch office for all purposes and the failure to hold the office out to the public as a branch office under the name of CSA-IB, as required by CFTC Regulation 166.4.
The CSA Respondents, without admitting or denying the findings, consented to the entry of the order:
-- directing them to cease and desist from further violations;
-- revoking the registration of CSA-IB as an IB; and
-- directing them to pay a $20,000 civil monetary penalty, for which they shall be jointly and severally liable.
Under the settlement, Amundson also agreed not to seek registration with the CFTC in any capacity, or to engage in any activity requiring such registration, for a period of six years.