Release: #4136-98 (CFTC Docket No. 95-11)
For Release: April 23, 1998
CFTC ACCEPTS SETTLEMENT OFFER OF GLORIA ALBINO OF MIAMI, FLORIDA, FINDING THAT SHE ENGAGED IN COMMODITY FRAUD
Albino Ordered to be Permanently Barred from the Futures Industry and to Pay a Fine
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced that today it issued an order accepting an offer of settlement from Gloria Albino of Miami, Florida, finding that Albino defrauded investors in options on commodity futures contracts, in violation of the Commodity Exchange Act and the CFTC regulations. Among other sanctions, the CFTC order revokes Albino's registration as an associated person and imposes a $25,000 penalty. Albino agreed to the entry of the order without admitting or denying the findings in the order.
Albino was charged in a CFTC administrative complaint filed on May 24, 1995 with committing sales solicitation fraud (see CFTC Press Release #3874-95, May 25, 1995).
In the settlement order, the CFTC finds that Albino, as an associated person of Commonwealth Financial Group, Inc., of Fort Lauderdale, Florida, willfully misrepresented the profit potential of the options she recommended; failed to disclose that her statements regarding profit potential were not representative of her own or Commonwealth's trading history and experience; and willfully misrepresented, and/or omitted and failed to disclose the true risks associated with trading commodity options, both her and Commonwealth's experience and expertise in recommending commodity option trades, the amount of commissions to be charged, and the effect commissions would have on option profitability.
The CFTC settlement order sets forth detailed findings regarding the nature of Albino's violations. Specifically, the CFTC order finds as follows:
$ Misrepresentations of Profit and Claims Regarding Seasonality
Albino misrepresented the likelihood of profit and grossly exaggerated the size of potential profits during her solicitations of customers and prospective customers. The profit examples used by Albino in her solicitations were not indicative of the performance of her customer accounts, nor of Commonwealth's customer accounts as a whole. From August 1991 through December 1994, her 276 customer accounts lost $2,413,764.41, while they generated $1,089,209.32 in commissions and fees for Albino and Commonwealth.
Albino misrepresented the relationship between the recommended commodity option and the underlying futures contract when discussing the profit potential of options with customers and potential customers. Specifically, while discussing profit potential, Albino claimed that a one penny move in the underlying futures contract would result in a commensurate price increase in the commodity option, when, in fact, a particular movement in the futures contract price does not necessarily result in an equivalent price move in the commodity option.
Albino repeatedly told customers and prospective customers an investment in heating oil or unleaded gasoline options would be profitable because of seasonal trends. Albino made such representations while knowing that seasonal price changes in the market for physical commodities and futures do not ensure profitability in commodity options. Albino also failed to disclose to customers that the commodity options markets incorporate seasonal trends in the prices of physical commodities and futures contracts into the prices of commodity options, and failed to disclose to customers and prospective customers the relationship between historical price moves in futures contracts and corresponding price moves, if any, in commodity options thereon.
$ Misrepresentations Regarding Risk of Loss
Albino misrepresented and downplayed the risk of loss in trading commodity options by citing the seasonal trends in and the historical price moves of heating oil futures. Albino failed to disclose to customers and prospective customers that even with the use of purported trading strategies to limit risk, almost all of her customers lost all or most of their money, and that approximately 45 percent of their losses were attributable to commissions and fees.
$ Misrepresentations Concerning Commissions
Albino failed to disclose the adverse effect that the commissions charged by Commonwealth would have on the profitability of the commodity option accounts, and she frequently contacted the customers of other Commonwealth brokers for the sole purpose of generating commission income, urging them either to send additional money to purchase more commodity options, or to sell existing commodity options and to purchase additional commodity options with the proceeds of the sale.
$ Misrepresentations Concerning Expertise
Misrepresentations concerning both Commonwealth's and Albino's expertise, experience, reputation and ability to recommend profitable commodity option trades were a central theme in Albino's solicitations of customers and potential customers. In particular, Albino falsely informed customers and prospective customers that she possessed greater trading knowledge and ability than other Commonwealth brokers, and had made many profitable trades for her customers. Moreover, Albino exaggerated and misrepresented the research performed by Commonwealth.
Albino Permanently Barred from Futures Industry
The CFTC order: (1) revokes Albino's registration as an associated person; (2) prohibits her from ever seeking registration with the CFTC in any capacity, or from acting in any capacity that would require registration; (3) requires that she cease and desist from further violations of federal commodity law as alleged in the complaint; and (4) orders her to pay a civil monetary penalty of $25,000.
In the order, the CFTC noted that a civil monetary penalty significantly greater than $25,000 would have been appropriate, but it did not impose a greater penalty based upon Albino's demonstrated financial inability to pay a larger amount.