Before the




CFTC Docket No. 97-R154


On July 28, 1998, the Judgment Officer ("JO") issued the Initial Decision in this reparations case finding that the complainant, Lap Ching Cheung, had established by a preponderance of the evidence that Grace Hsu, a registered associated person and principal of CMB Capital Management Corporation ("CMB"), a former registered introducing broker, had placed unauthorized trades in Cheung's account in violation of Sections 4b and 4d of the Commodity Exchange Act, ("CEA"), 7 U.S.C. 6b and 6d (1994).1 The JO found that CMB was liable for Hsu's violations pursuant to Section 2(a)(1)(A) of the CEA, 7 U.S.C. 2(i) (1994). He also found Alaron Trading Corporation ("Alaron"), a registered futures commission merchant, strictly liable as CMB's guarantor, for these violations. He awarded the complainant damages of $6,690.00 plus interest from May 22, 1997 to the date of payment, and costs for the filing fee.

Shortly thereafter, Alaron filed a notice of appeal and a motion for reconsideration contending that the JO erroneously calculated the damages that he awarded complainant.2 Specifically, Alaron contended that the complainant's claim for damages had included the amount of the deficit, $4,610.19, in his account with Alaron after the unauthorized trades were placed into his account. According to Alaron, the complainant's account with Alaron had a balance of $2,080.09 prior to the unauthorized trades being placed into his account, and that complainant's actual damages only totaled $2,080.09. For this reason, Alaron requests that the Commission modify the Initial Decision to order Alaron to pay $2,080.09 plus interest and costs and credit his Alaron account the amount of $4,610.19 so that no deficit exists in complainant's account. Complainant did not oppose this motion.

Our review of the complainant's monthly statement for May 1997 and his daily confirmation statement from June 12, 1997 for his account with Alaron, show that, as Alaron contends, complainant's account contained a balance of $2,080.09 prior to the unauthorized trades. After the unauthorized trades which lost $6,690.28 were placed in complainant's account, complainant had a deficit balance in his account of $4,610.19. Complainant will be made whole for the losses resulting from the unauthorized trading of his account if his actual damages reflect the amount he had in his account at the time the unauthorized trades were placed in his account, plus interest and costs, and Alaron eliminates the deficit balance in his account. Accordingly, the Initial Decision is modified to order Alaron to pay actual damages of $2,080.09, plus interest to the date of payment and costs, to complainant. Alaron is further ordered to credit complainant's account in the amount of $4,610.19 to eliminate the deficit balance in his account.3


By the Commission (Acting Chairman Spears, and Commissioners HOLUM and NEWSOME) (Commissioner Erickson, not participating).

Jean A. Webb
Secretary of the Commission
Commodity Futures Trading Commission

Dated: June 24, 1999

1 The Judgment Officer found Hsu and CMB in default because of their failure to file an answer by order dated February 3, 1998.

2 Complainant elected a summary decisional proceeding under Part 12 of the Commission's Reparation Rules. Those rules do not provide for a motion for reconsideration. Nevertheless, since Alaron filed a notice of appeal, it's motion for reconsideration will be treated as an appellate submission.

3 Under Sections 6(c) and 14(e) of the Commodity Exchange Act, 7 U.S.C. 9 and 18(e)(1994), a party may appeal a reparation order of the Commission to the United States Court of Appeals for only the circuit in which a hearing was held; if no hearing was held, the appeal may be filed in any circuit in which the appellee is located. The statute also states that such an appeal must be filed within 15 days after notice of the order and that any appeal is not effective unless, within 30 days of the date of the Commission order, the appealing party files with the court a bond equal to double the amount of any reparation award.