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Commodity Futures Trading Commission 

CEA CASES 

NAME: JAMES E. BAGGOT, JR., DONALD W. MORRISON, AND BAGGOT AND MORRISON 

CITATION: 19 Agric. Dec. 472 

DOCKET NUMBER: 93 

DATE: MAY 26, 1960 

DOCUMENT TYPE: DECISION AND ORDER 

Effective July 1, 1960, all contract markets shall refuse all trading privileges 

to Consolidated Growers Exchange, Inc., and to Harvey A. Baum for a period of 

thirty (30) days, such refusal to apply to all trading done and positions held 

by Consolidated Growers Exchange, Inc., or Harvey A. Baum, directly or 

indirectly. 

A copy of this decision and order shall be served on the respondents and on 

each contract market. 

(No. 6517) 

In re JAMES E. BAGGOT, JR., DONALD W. MORRISON, AND BAGGOT AND MORRISON. CEA 

Docket No. 93. Decided May 26, 1960. 

Customers' Funds -- Suspension of Registration -- Denial of Trading 

Privileges -- Consent Order

Respondents admitted the violations charged, waived hearing, and consented to 

the sanctions imposed. 

Mr. Benj. M. Holstein, for Commodity Exchange Authority. Messrs. Joseph 

Borenstein and Richard A. Griffin, of Chicago, Illinois, for respondents. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

The respondents in this administrative proceeding are a partnership 

registered as a futures commission merchant and two individuals comprising the 

partnership. The complaint (paragraph V) charges the respondents with wilful 

violation of section 4d(2) of the Commodity Exchange Act (7 U.S.C. 1958 ed., § 

6d (2)) and the pertinent sections of the rules and regulations (17 CFR 1.20, 

1.21, 1.22), because of their failure to handle customers' funds as required by 

these sections. 

These charges are based upon allegations that on various dates between 

October 31, 1958, and February 29, 1960, the respondent firm was in an 

undersegregated condition, i.e., the total amount of customers' funds which it 

held in segregation was insufficient to pay all credits and equities due to such 

customers; that the deficits ranged from approximately $ 291 to approximately $ 

37,416; and that the respondents were aware of such deficits. 

No hearing has been held. The respondents have filed a document 

under section 0.4(b) of the rules of practice (17 CFR 0.4 (b)), in which they 

admit the facts alleged in the complaint, waive hearing, and consent to entry of 

the order hereinafter set forth. 

FINDINGS OF FACT
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1. Respondents James E. Baggot, Jr., and Donald W. Morrison, individuals, are 

now and were at all times material herein partners, doing business under the 

firm name of Baggot and Morrison, with offices and a place of business at 141 

West Jackson Boulevard, Chicago, Illinois. The said partnership is now and was 

at all such times a registered futures commission merchant under the Commodity 

Exchange Act. Each of the said individual respondents is now and was at all 

such times a member of the Board of Trade of the City of Chicago, and since June 

29, 1959, respondent James E. Baggot, Jr., has been a registered floor broker 

under the Commodity Exchange Act. 

2. The Board of Trade of the City of Chicago, hereinafter called the Chicago 

Board of Trade, is now and was at all times material herein a duly designated 

contract market under the Commodity Exchange Act. 

3. At the times hereinafter stated, respondent Baggot and Morrison, in the 

regular course of the partnership business, had on its books accounts of 

customers who were trading in commodities for future delivery on or subject to 

the rules of the Chicago Board of Trade. Such accounts, the trading therein, 

and the handling and disposition of funds in connection therewith, were subject 

to the provisions of the Commodity Exchange Act and the rules and regulations 

issued thereunder. At all such times, respondent Baggot and Morrison had to its 

credit with a bank and with the Board of Trade Clearing Corporation, money and 

securities in varying amounts, held in segregated accounts and identified as 

customers' funds, representing deposits of margin by and trading profits 

belonging to such customers. 

4. On the following days, respondent Baggot and Morrison was in an 

undersegregated condition, that is, the total amount of customers' funds held in 

segregation by the firm, as described in paragraph 3, was insufficient to pay 

all credits and equities due to such customers: 

(a) On October 31, 1958, respondent Baggot and Morrison 

was undersegregated in the amount of approximately $ 5,620. The said deficit 

was called to the attention of respondents James E. Baggot, Jr., and Donald W. 

Morrison by the Commodity Exchange Authority and the matter was discussed with 

the said respondents. 

(b) On each business day between March 30, 1959, and April 9, 1959, both 

inclusive, respondent Baggot and Morrison was undersegregated in amounts ranging 

from approximately $ 736 to approximately $ 5,281. The said deficits were 

called to the attention of respondents James E. Baggot, Jr., and Donald W. 

Morrison by a representative of the Commodity Exchange Authority, who again 

discussed with the said respondents the necessity for maintaining sufficient 

funds in segregation to meet the requirements of the Commodity Exchange Act and 

the pertinent regulations. 

(c) On forty (40) business days between October 27, 1959, and December 31, 

1959, both inclusive, respondent Baggott and Morrison was undersegregated in 

amounts ranging from approximately $ 291 to approximately $ 37,416. Within this 

period, the firm was continuously undersegregated from October 27 through 

December 1, 1959, and on each day during November, 1959, the amount of undersegregation exceeded $ 19,000. Respondents James E. Baggot, Jr., and Donald W. 

Morrison were aware of such undersegregated conditions at all times during such 

periods. 

(d) On February 29, 1960, respondent Baggot and Morrison was undersegregated 

in the amount of approximately $ 498. 

CONCLUSIONS

The respondents have admitted the facts alleged in the complaint, which have 

been adopted as the finding of fact in this proceeding. 

Section 4d(2) of the Act (7 U.S.C. 1958 ed., § 6d(2)) requires each futures 

comission merchant to treat and deal with the funds of a customer "as belonging 
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to such customer" and to account separately for such funds, and prohibits the 

commingling of such funds with funds of the futures commission merchant, or the 

use of such funds "to margin or guarantee the trades or contracts, or to secure 

or extend the credit, of any customer or person other than the one for whom the 

same are held." Sections 

1.20, 1.21 and 1.22 of the regulations (17 CFR 1.20, 1.21, 1.22) contain 

additional detailed requirements with respect to customers' funds. 

It appears that within a 17 month period Baggot and Morrison was in an 

undersegregated condition on numerous occasions involving a total of 51 business 

days; that on one occasion this condition existed during nine consecutive 

business days and on another occasion during at least 23 consecutive business 

days; and that the deficits were substantial, reaching a maximum of more than $ 

37,000. These undersegregations were clear violations of the provisions of the 

Act and the regulations. 

The frequency and the continuing nature of the infractions, and the fact that 

most of them occurred after similar infractions had been called to the attention 

of the respondents and they had been informed of the necessity for corrective 

action, justify the conclusion that the violations were wilful as alleged in the 

complaint. 

The complainant states that it has carefully considered the proposed order. 

It is of the opinion that the proposed sanction is sufficient, and that the 

prompt entry of such an order without further proceedings would serve the public 

interest and effectuate the purposes of the Commodity Exchange Act. The 

complainant therefore recommends that the respondents' waiver and consent be 

accepted and that the proposed order be issued, to become effective as soon as 

possible. It is so concluded. 

ORDER

Effective ten days after the entry of this order, the registration of Baggot 

and Morrison as a futures commission merchant is suspended for a period of three 

(3) months, and the registration of James E. Baggot, Jr., as a floor broker is 

suspended for a period of thirty (30) days. 

Effective ten days after the entry of this order, all contract markets shall 

refuse all trading privileges to Baggot and Morrison for a period of three (3) 

months, and to James E. Baggot, Jr., and Donald W. Morrison for a period of 

thirty (30) days, such refusal to apply to all trading done and positions held 

by the said Baggot and Morrison, James E. Baggot, Jr., or Donald W. Morrison, 

directly or indirectly. 

A copy of this decision and order shall be served on the respondents and on 

each contract market. 

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