For Release: March 31, 1999
CFTC FILES ENFORCEMENT ACTION ALLEGING COMMODITY OPTIONS FRAUD AGAINST WELLINGTON FINANCIAL GROUP, INC.
RESPONDENT ALLEGEDLY SOLICITED CUSTOMERS THROUGH INFOMERCIALS
AND TELEPHONE SALES SOLICITATIONS
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it has filed an administrative complaint against Wellington Financial Group, Inc. of Fort Lauderdale, Florida, alleging it has violated the anti-fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations by fraudulently soliciting prospective customers to open accounts to trade options on commodity futures contracts.
The CFTC complaint alleges that Wellington, a registered introducing broker, made false, deceptive, and misleading statements regarding the trading of commodity options in radio infomercials and advertisements, and in direct telephone solicitations of prospective customers, in violation of section 4c(b) of the CEA and Commission regulation 33.10.
Specifically, the CFTC complaint alleges that Wellington fraudulently misrepresented, among other things, that customers who purchase options on futures contracts will profit from seasonal and other existing and known supply and demand forces that affect the prices of certain commodities in the cash market. The complaint further alleges that Wellington made fraudulent misrepresentations and failed to disclose material facts concerning, among other things:
-- the likelihood of profit from trading commodity options;
-- the risk of loss involved in trading commodity options; and
performance record for its customers.
In addition, the complaint alleges that 109 of approximately 120 customer accounts opened by Wellington from March 1997 through September 1998 lost money, and that total net losses, including commissions, were approximately $800,000.
The CFTC's complaint institutes a public administrative proceeding to determine if the allegations in the complaint are true and, if so, what sanctions, if any, are appropriate and in the public interest. Possible sanctions include an order directing the respondents to cease and desist from violating the CEA and Commission regulations, revocation or suspension of Wellington's registration, civil monetary penalties of not more than the higher of $110,000 or triple the monetary gain for each violation, and restitution to customers of damages proximately caused by the violations of the respondent.