Release #4131-98 (CFTC Docket No. 98-9)
For Release: April 3, 1998
CFTC FILES ADMINISTRATIVE COMPLAINT AGAINST JOHN F. ACKERMANN AND STERLING INVESTMENTS OF AMERICA, CHARGING SOLICITATION FRAUD AND UNAUTHORIZED TRADING
CFTC Alleges that Ackermann Defrauded Clients by Misrepresenting the Potential Profits and Risk of Loss Associated with Trading Futures and Options
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced the filing of a three-count administrative complaint against three entities collectively known as Sterling Investments, an introducing brokerage firm formerly doing business in Ashland, Oregon, and the principal and co-founder of those entities, John F. Ackermann, alleging that Ackermann and the employees of Sterling Investments committed fraud in the solicitation and trading of client accounts.
The registrations of Ackermann and Sterling Investments with the CFTC have been suspended since September 1996 as a result of unpaid reparations awards assessed against Sterling Investments and Ackermann.
The CFTC complaint, filed on March 31, 1998, alleges that from January 1994 through May 1995, Ackermann and Sterling Investments defrauded clients by materially misrepresenting the probability and magnitude of profits and risk of loss associated with trading futures and options. Among other things, the complaint alleges, Ackermann and Sterling Investments told customers that they used a trading strategy known as "writing strangles," which entailed the writing of a call option at a strike price above the futures price and a put option at a strike price below the futures price, which was a conservative strategy.
The complaint further alleges that once Ackermann and Sterling Investments employees had successfully solicited accounts, Ackermann engaged in unauthorized trading in the management of some accounts and that Sterling Investments employed unregistered persons to solicit accounts by means of telemarketing via an entity called Sterling Marketing Research in 1994.
A public hearing has been ordered to determine whether the allegations are true, and, if so, what remedial sanctions, if any, are appropriate and in the public interest.
Possible sanctions include a cease and desist order against Ackermann and Sterling Investments, a revocation or suspension of the registration of Ackermann and Sterling Investments, a trading prohibition, restitution to customers of damages proximately caused by the violations of the respondents, and the imposition of civil monetary penalties of not more than the higher of $100,000 or triple the monetary gain to the respondents for each violation of the Commodity Exchange Act or CFTC regulations committed prior to November 27, 1996.