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Commodity Futures Trading Commission 

CEA CASES 

NAME: SERVICE GRAIN COMPANY AND NORVELL D. SEELE 

CITATION: 20 Agric. Dec. 836 

DOCKET NUMBER: 102 

DATE: AUGUST 29, 1961 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 7302) 

In re SERVICE GRAIN COMPANY AND NORVELL D. SEELE. CEA Docket No. 102. Decided 

August 29, 1961. 

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

Privileges -- Consent Order

The registration of Service Grain Company as a futures commission merchant is 

revoked, and all contract markets are ordered to refuse trading privileges to 

both respondents for one year. 

Mr. Benj. M. Holstein, for Commodity Exchange Authority. Respondents pro se. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

The respondents in this administrative proceeding are a Missouri corporation 

registered as a futures commission merchant, and an individual who is the 

president and manager of the corporation and the owner of 95 percent of its 

capital stock. The complaint charges the respondents with improper handling of 

customers' funds and failure to maintain adequate segregation records, in wilful 

violation of the act and the regulations, and with failure to keep the firm's 

books and records in the form and manner required by the act and the 

regulations. 

These charges are based upon allegations that the respondent corporation 

commingled certain of its own trades with transactions of its customers 

(Complaint, para. V) and failed to maintain any record of such trades 

(Complaint, para. VI), and that the total amount of customers' funds which it 

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

customers, the deficits ranging from approximately $ 15,000 to approximately $ 

59,000 (Complaint, para. VII). The complaint also alleges that during a part of 

the period in question respondent corporation did not make any computation of 

funds in segregation, as required, and that during the remainder of such period 

such computation was incomplete and inaccurate (Complaint, para. VIII). 

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

order hereinafter set forth. 

FINDINGS OF FACT

1. Respondent Service Grain Company is a Missouri corporation with its 

principal office and place of business at 5100 Oakland Avenue, St. Louis 10, 

Missouri. The said corporation is now and was at all times material herein a 

registered futures commission marchant under the Commodity Exchange Act. At all 

such times up to April 10, 1961, respondent Service Grain Company enjoyed 
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membership privileges on the Chicago Board of Trade, a duly designated contract 

market. 

2. Respondent Norvell D. Seele, an individual who resides at No. 7 Bellerive 

Acres, St. Louis 21, Missouri, is now and was at all times material herein the 

president and manager of respondent Service Grain Company, the owner of 95 

percent of its capital stock, and a member of the Chicago Board of Trade. 

3. At the times hereinafter stated, respondent Service Grain Company, in the 

normal course of its business, carried accounts for customers who traded in 

commodity futures subject to the provisions of the Commodity Exchange Act and 

regulations. In connection therewith, the said respondent had to its credit 

with a bank or other depository sums of money in varying amounts, held in 

segregated account and identified as customers' funds, representing deposits of 

margin by and trading profits accruing to such customers. During the same 

periods, respondent Service Grain Company traded in commodity futures on the 

Chicago Board of Trade for its own or house account. 

4. Beginning on or about January 18, 1961, and continuing until April 7, 

1961, respondent Service Grain Company executed purchases and sales of commodity 

futures on the Chicago Board of Trade for its own use and benefit and placed 

certain of such trades in its customers' accounts carried with clearing members. 

5. During the period set forth in paragraph 4, with respect to the 

transactions for the house account of respondent Service Grain Company therein 

described, the said respondent failed to prepare and keep a record showing all 

such transactions, including the date, price, quantity, market, commodity and 

future. 

6. As a result of losses incurred by respondent Service Grain Company in 

connection with the trades and contracts executed for its own account and the 

commingling of such trades and contracts with those of its customers as 

described in paragraph 4, respondent Service Grain Company was under-segregated 

in the amount of approximately $ 59,000 at all times between April 

10 and April 30, 1961, in the amount of approxiamately $ 40,000 on May 1, and in 

the amount of approximately $ 15,000 on May 2, 1961, that is, the total amount 

of customers' funds held in segregation was insufficient, by the aforesaid sums, 

to pay all credits and equities due to such customers. 

7. At all times during the period from January 18, 1961, through March 24, 

1961, the computation and record of funds required to be held in segregation, 

which respondent Service Grain Company was obligated to make as of the close of 

the market on each business day, as provided by section 1.32 of the regulations 

(17 CFR 1.32), was incomplete and inaccurate to an extent which made it 

impossible to determine whether the funds so held were in fact sufficient to pay 

all credits and equities due to customers. On each business day from March 25 

through May 2, 1961, respondent Service Grain Company failed to make any daily 

computation or permanent record of funds required to be held in segregation. 

8. The acts and transactions described in paragraphs 4, 5, 6, and 7 were 

ordered and directed by or carried out under the supervision and control of 

respondent Norvell D. Seele in his capacity as president, manager, and principal 

shareholder of respondent Service Grain Company.CONCLUSIONS

The respondents have admitted the facts substantially as alleged in the 

complaint, and these have been adopted as the findings of fact in this 

proceeding. 

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

commission merchant to treat and deal with the funds of a customer "as belonging 

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 
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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. Section 1.32 of the regulations (17 CFR 1.32) requires that each futures 

commission merchant make a daily computation, based upon his accounting records, 

of the amount of money which must be in segregated account in order to comply 

with the provisions of the act. 

Section 4g of the act (7 U.S.C. 1958 ed., § 4g) provides for the suspension 

or revocation of the registration of a futures commission merchant who fails or 

refuses to keep the books and records pertaining to his transactions or those of 

his customers in the form and manner required by the Secretary, and section 1.35 

of the regulations requires a futures commission merchant to keep "full, 

complete, and systematic records of all commodity futures transactions . . . 

made by or through him. . . ." 

It appears that the respondent corporation was in an under-segregated 

condition continuously over a period of some three calendar weeks by reason of 

losses incurred in connection with its own trading which had been commingled 

with the trading of its customers, and that the under-segregation was 

substantial, ranging up to a maximum of $ 59,000. During this period and for 

some time prior and subsequent thereto, the respondent corporation had no record 

showing the details of certain of the trades for its own account, and its 

segregation record was either nonexistent or incomplete and inaccurate to an 

extent which made it impossible to determine therefrom the sufficiency of the 

funds held in segregated account. These acts and omissions were clear 

violations of the provisions of the act and of the regulations. 

The nature of the violations and the extended period over which they occurred 

justify the conclusion that the violations were wilful, as alleged. 

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. It is so concluded. 

ORDER

Effective October 1, 1961, the registration of Service Grain Company as a 

futures commission merchant is revoked. 

Effective October 1, 1961, all contract markets shall refuse all trading 

privileges to Service Grain Company and Norvell D. Seele for a period of one 

year, such refusal to apply to all trading 

done and all positions held by the said Service Grain Company and Norvell D. 

Seele, or either of them, 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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