CFTC ACCEPTS SETTLEMENT OF CANTOR FITZGERALD

Release: # 3987-97 (CFTC Docket No. 94-14)
For Release: January 28, 1997

CFTC ACCEPTS SETTLEMENT OF CANTOR FITZGERALD & CO. CHARGED WITH AIDING AND ABETTING FRAUD AND REGISTRATION VIOLATIONS OF FEDERAL COMMODITY LAW

Cantor Agrees to Pay a $500,000 C
Civil Penalty, in Addition to Other Sanctions

WASHINGTON--The Commodity Futures Trading Commission (CFTC) announced today that it has issued an order accepting an offer of settlement from Cantor Fitzgerald & Co. (Cantor), a New York partnership, in connection with a complaint filed by the CFTC on May 26, 1994 (CFTC News Release 3766-94, May 27, 1994). Cantor is registered with the CFTC as a futures commission merchant and with the Securities and Exchange Commission as a broker-dealer.

The CFTC order finds that Cantor violated the Commodity Exchange Act (CEA) by aiding and abetting the fraud and registration violations of First Republic Financial Corporation, formerly known as Vancorp Financial Services (VFS), an unregistered commodity pool operator.

The CFTC order finds that, although Cantor became aware that VFS falsely represented the ownership of a securities trading account VFS had opened in its own name, Cantor allowed the account to be traded in VFS' name. The account was actually owned by a commodity pool, the order finds. The order also finds that Cantor failed to determine the ownership of the VFS account, and failed to obtain the trading authority needed to allow VFS to enter trades in this account. In addition, the order finds that Cantor assisted VFS in obtaining $950,000 to which VFS was not entitled by making wire transfer payments to First Republic Securities, a wholly owned subsidiary of VFS, out of customer funds held in the account at Cantor.

Cantor, without admitting or denying the findings of the Commission order, consented to the entry of a CFTC order:

-- finding that Cantor aided and abetted fraud and registration violations (Sections 4m(1) and 4o(1)(B) of the CEA);

-- directing Cantor to cease and desist from further violations; and

-- directing Cantor to pay a $500,000 civil monetary penalty.

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Cantor also agreed to substantial undertakings which address the specific conduct in this matter. Specifically, Cantor has agreed:

to retain, at its own expense, an independent consultant to make written recommendations concerning accounts opened or introduced to Cantor by commodity pool operators and commodity trading advisors;
to adopt the independent consultant's final recommendations;
to employ, at its own expense, an outside auditor to review Cantor's adherence to the procedures adopted and to provide periodic reports to the Commission staff on Cantor's compliance with these procedures for a period of two years;
to make changes in its line of authority with respect to the recommended procedures;
to require that its Director of Compliance periodically report on Cantor's adherence to the recommended procedures; and
to cooperate with the Commission in any ongoing proceeding relating to this matter.

CFTC Enforcement Director Geoffrey Aronow stated: "This settlement sends an important message to firms handling funds on behalf of commodity pools. The diligence of these firms is the customer's first line of defense against improper use of funds or unauthorized or improper trading. Firms cannot ignore warning signals, let alone explicit information, of improper conduct."

Also named in the complaint and remaining as respondents in the continuing litigation are: Jerry W. Slusser of Las Vegas, Nevada and Indianapolis, Indiana; Edward T. Hamlet of Boca Raton, Florida; Hans J. Brinks of Germany; and First Republic Financial Corporation and First Republic Trading Corporation, Indiana corporations currently located in Las Vegas, Nevada. A hearing will be scheduled for the remaining respondents.