Release: #4238-99 (CFTC Docket No. 98-16)
For Release: March 3, 1999
CFTC Accepts Settlement Offer of International Futures Corporation (IFC), an Introducing Broker in Washington, D.C.; CFTC Finds that IFC Committed Fraud in Soliciting Customers for its Managed Account Trading Program and Acted as an Unregistered CTA; Order Finds that IFC Customers Lost about $400,000 in its Hermes Managed Account Program
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) issued an order accepting an offer of settlement from International Futures Corporation (IFC), a registered introducing broker (IB) located in Washington, D.C., in connection with a complaint filed by the CFTC on August 13, 1998 (see CFTC News Release #4179-98, August 17, 1998).
The CFTC order, issued on February 25, 1999, finds that IFC violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations by fraudulently soliciting clients to open accounts in its Hermes managed commodity futures trading account program. The order further finds that in soliciting and advising clients in connection with its 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.
More specifically, the CFTC order finds that IFC fraudulently 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. According to the order, IFC also acted as a CTA in soliciting clients to trade accounts through its Hermes managed account program, but that IFC failed to register as a CTA as required by the CEA. The order further finds that IFC violated CFTC regulations that require a CTA to provide 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 radio advertisements) for a period of five years. According to the order, IFC customers who opened accounts lost approximately $400,000 trading pursuant to the Hermes program.
IFC, without admitting or denying the findings, consented to the entry of the order:
-- directing it to cease and desist from further violations as charged; and
-- revoking its registration as an IB.
In the order, the CFTC notes that orders of restitution and a civil monetary penalty against IFC would be appropriate in this case, but does not impose them based upon IFC's demonstrated financial condition.
The case continues as to the other respondent named in the CFTC complaint, futures commission merchant LIT Division of First Options of Chicago (LIT). The August 1998 complaint alleges that LIT, which guaranteed IFC, is liable for IFC's statutory and regulatory violations and that LIT failed to diligently supervise IFC as required by CFTC regulation 166.3.
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