Release: 4317-99 (CFTC Docket 99-17)
For Release: September 30, 1999
CFTC FILES ENFORCEMENT ACTION CHARGING THAT FLOOR BROKER CONSTANTINE MITSOPOULOS COMMITTED FRAUD WHILE HANDLING CUSTOMER ORDERS
The CFTC's Action Further Alleges That Mitsopoulos, Margaret Dull, Lisa Budicak, and Richard Marisie Violated Order-Taking and Recordkeeping Requirements In Preparing Customer Orders And That Mitsopoulos Failed to Supervise Diligently Phone Clerks Who Worked For Him
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today the filing of a four-count administrative complaint against Constantine Mitsopoulos of Lake Forest, Illinois, alleging that Mitsopoulos committed fraud while handling customer orders. The CFTC's complaint also alleges that Margaret Dull, Lisa Budicak, and Richard Marisie violated order-taking and recordkeeping requirements. Mitsopoulos is also charged with order-taking and recordkeeping violations and failing to supervise diligently Dull, Budicak, and Marisie.
The charges against Mitsopoulos, a registered floor broker, and Dull, Budicak, and Marisie, phone clerks who worked for Mitsopoulos, arise out of an alleged fraudulent trade allocation scheme undertaken by a registered introducing broker (the IB) over an approximate two-year period. From at least January 1994 through December 1995, the complaint alleges, the IB entered orders for thousands of treasury bond futures and options contracts per day for its customers through Mitsopoulos' floor desk at Refco, Inc. on the Chicago Board of Trade and, for a substantial number of the orders, did not provide account identification until after the trades were executed. As a result, it is alleged, the IB was able to allocate trades at better prices to certain customer accounts and trades at worse prices to other customer accounts. As further alleged, the IB also allocated trades by instructing one of the phone clerks to transfer executed and already assigned trades from one customer account to another by changing the account numbers on the executed trades.
The complaint alleges that Mitsopoulos routinely allowed the IB to delay giving account numbers for trades until after they were executed and to transfer trades between customer accounts after the trades were executed. By such actions, the complaint alleges, Mitsopoulos committed fraud by breaching his duty to pursue the best possible price for customers, failing to inform customers that he routinely accepted orders from the IB without account identification, and allowing trades to be moved from one account to another after execution, in violation of sections 4b and 4c(b) of the Commodity Exchange Act (CEA) and CFTC regulation 33.10.
The CFTC complaint further alleges that Mitsopoulos, Dull, Budicak, and Marisie violated CFTC order-taking and recordkeeping requirements by not placing account identification on order tickets immediately upon receipt of the orders from the IB in violation of section 4g of the CEA and CFTC regulation 1.35(a-1)(2). Mitsopoulos is also charged with violating regulation 166.3 by failing to supervise diligently the activities of Dull, Budicak, and Marisie and failing to design, implement, monitor, and follow a program of supervision and compliance designed to detect and deter violations of the CEA and CFTC regulations.
On May 24, 1999, the CFTC filed and settled a related action against Refco, Inc. charging order-taking and recordkeeping violations and a failure to supervise, arising out of the above-described trade allocation scheme. Refco was ordered to pay $7 million, to cease and desist from further violations, and to conduct an internal review of its compliance polices and procedures (see CFTC News Release #4269-99, May 24, 1999).
A public hearing has been ordered to determine if the charges 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 federal commodity law (the CEA), civil monetary penalties of not more than the higher of $100,000 or triple the monetary gain for each violation, and restitution of the damages proximately caused by the violations of the CEA.
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