Page 1 

Commodity Futures Trading Commission 

CEA CASES 

NAME: RICE COMMODITIES, INC., AND SAM L. RICE, JR. 

DOCKET NUMBER: 213 

DATE: JANUARY 18, 1974 

DOCUMENT TYPE: DECISION AND ORDER 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Rice Commodities, Inc., and Sam L. Rice, Jr., Respondents 

CEA Docket No. 213 

Decision and Order 

Preliminary Statement 

This is an administrative proceeding under the Commodity Exchange Act (7 

U.S.C. Chapter 1), instituted by a complaint and notice of hearing alleging that 

respondent, Sam L. Rice, Jr., is now, and was at all times material herein, 

president of Rice Commodities, Inc., and responsible for the management, 

direction and control of its activities. Respondent Rice Commodities, Inc., was 

at all times material herein registered as a futures commission merchant under 

the Commodity Exchange Act and a member of the Chicago Board of Trade. As a 

registered futures commission merchant, Rice Commodities, Inc., was required to 

meet the working capital rules of the Chicago Board of Trade and if it failed to 

meet such requirements, it was required to meet the working capital requirements 

provided for in section 1.17 of the regulations under the Commodity Exchange Act 

(17 CFR 1.17). The complaint alleges inter alia that the respondent corporation 

engaged in business as a registered futures 

commission merchant notwithstanding that it failed to meet such minimum 

financial requirements as of March 31 and April 21, 1972, and that it submitted 

to the Commodity Exchange Authority a financial report as of March 31, 1972, 

certified by respondent Sam L. Rice, Jr., which did not accurately reflect the 

financial condition insofar as it stated that the respondent corporation had an 

excess of working capital when in fact it failed to meet the minimum financial 

requirements under the Commodity Exchange Act. Such acts were alleged to have 

been wilfull, and in violation of sections 4f and 6(b) of the Commodity Exchange 

Act (7 U.S.C. 6f, 9) and sections 1.17 and 1.35 of the regulations issued 

thereunder (17 CFR 1.17, 1.35). 

No hearing has been held in this proceeding. The respondents have filed a 

stipulation under section 0.4(b) of the Rules of Practice (17 CFR 0.4(b)) in 

which they (1) admit the facts hereinafter set forth in paragraphs 1 and 2 of 

the Findings of Fact, (2) admit, for the purposes of this proceeding and for 

such purposes only, the remaining facts set forth in the Findings of Fact, (3) 

waive oral hearing on the charges in the complaint and (4) consent to the entry, 

without further proceedings, of a Decision and Order containing the facts 

admitted in such stipulation as the findings of fact, conclusions of law based 

on such findings and the Order contained herein. 

Findings of Fact 

1. Respondent Rice Commodities, Inc., an Ohio corporation, with its principal 

place of business at 633 North Reynolds Road, Toledo, 
Page 2 

Ohio, was at all times material herein, registered as a futures commission 

merchant under the Commodity Exchange Act and a member of the Chicago Board of 

Trade. As a futures commission merchant, Rice Commodities, Inc., was required 

to meet the working capital rules of the Chicago Board of Trade and if it failed 

to meet such requirements, it was required to meet the working capital 

requirements provided for in section 1.17 of the regulations under the Commodity 

Exchange Act (17 CFR 1.17). 

2. Respondent, Sam L. Rice, Jr., an individual, whose business address is the 

same as that of the respondent corporation, is now, and was at all times 

material herein, president of Rice Commodities, Inc., and responsible for the 

management, direction and control of its activities. 

3. On March 31, 1972, and on April 21, 1972, the respondent corporation was 

engaged in business as a registered futures commission merchant under the 

Commodity Exchange Act, notwithstanding that on both dates it failed to meet the 

working capital requirements prescribed by the Chicago Board of Trade and the 

minimum financial requirements under section 4f of the Commodity Exchange Act (7 

U.S.C. 6f) and section 1.17 of regulations thereunder (17 CFR 1.17). As of 

March 31, 1972, the respondent corporation lacked approximately $ 11,500 of 

having sufficient capital to meet such minimum financial requirements under the 

Act and on April 21, 1972, it lacked approximately $ 25,500 of having sufficient 

capital to meet the minimum financial requirements. 

4. On April 21, 1972, the respondent corporation submitted to the Commodity 

Exchange Authority a financial report (Form 1-FR) which purported to show its 

financial condition as of March 31, 1972. Such report, certified by the 

respondent Sam L. Rice, Jr., did not accurately reflect the financial condition 

of the respondent corporation, in that the report stated that the corporation 

had an excess of adjusted working capital when in fact it failed to meet minimum 

financial requirements under the Commodity Exchange Act. 

Conclusions 

By reason of the facts set forth in the Findings of Fact, it is concluded 

that the respondents have violated sections 4f and 6(b) of the Commodity 

Exchange Act (7 U.S.C. 6f, 9) and sections 1.17 and 1.35 of the regulations 

issued thereunder (17 CFR 1.17, 1.35). 

The complainant states that the Administrative officials of the Commodity 

Exchange Authority have carefully considered the stipulation submitted by the 

respondents. The Administrative officials believe that the prompt entry of the 

proposed order would constitute a satisfactory disposition of this case, serve 

the public interest and effectuate the purposes of the Act. The complainant 

recommends, therefore, that the stipulation be accepted and the proposed order 

be issued. It is concluded that the complainant's recommendation should be 

adopted. 

Order 

1. The registration of Rice Commodities, Inc., as futures commission merchant 

under the Commodity Exchange Act is revoked. Such revocation shall not preclude 

the Commodity Exchange Authority from giving consideration to any application 

for registration filed by the respondent corporation subsequent to the 

termination of the denial of trading privileges set forth in paragraph three (3) 

of this order. 

2. The respondents, and each of them, shall cease and desist from: 

(a) Engaging as futures commission merchant within the meaning of the 

Commodity Exchange Act without meeting the minimum financial requirements of the 

Act and the regulations thereunder; 
Page 3 

(b) Willfully making any material false or misleading statement in any report 

or application filed under the Commodity Exchange Act; 

(c) Willfully omitting to state any material fact in connection with any such 

application or report; and 

(d) Willfully causing, aiding, counseling, commanding or inducing any person 

to engage in any act or practice from which the respondents are directed to 

cease and desist by this order. 

3. The respondents Rice Commodities, Inc. and Sam L. Rice, Jr., are 

prohibited from trading on or subject to the rules of any contract market for a 

period of two years and all contract markets shall refuse 

all trading privileges to the said respondents during such period. Subject to 

the exceptions enumerated below such prohibition and refusal shall apply to all 

trading done and positions held directly by the said respondents, either for 

their own account or as agent or representative of any other person or firm, and 

also to all trading done and positions held indirectly through persons or firms 

owned wholly or in substantial amount by the said respondents or in any way 

subject to their direction or control. Provided, however, that trading may be 

done and positions held by the respondents and by persons or firms owned wholly 

or substantially by the respondents or in any way subject to their direction or 

control if each of the following conditions is met: 

(a) The trading or positions involve a sale of futures contracts to offset a 

risk resulting from the ownership of, or contract to purchase at a fixed price 

from some person or firm other than one of the persons or firms referred to 

above, an equal or greater quantity of the cash commodity (or the offsetting 

liquidation of such a position); or a purchase of futures contracts to offset a 

risk resulting from a previous or simultanious contract to sell (or offer to 

sell) to such person or firm, other than one of the persons or firms referred to 

above, an equal or greater quantity of the cash commodity at a fixed price (or 

the offsetting liquidation of such position); 

(b) The futures position referred to in paragraph (a) above are liquidated on 

or before the date that the risk in the cash market terminates; 

(c) Reports are filed by the respondents, addressed to the Administrator, 

Commodity Exchange Authority, U.S. Department of Agriculture, Washington, D.C. 

20250, or to such other address as the Administrator shall direct in writing, as 

to the transactions or positions referred to in paragraphs (a) and (b) above, 

including supporting explanation demonstrating that the transactions or 

positions meet the requirements of paragraphs (a) and (b) above, postmarked not 

later than midnight of the day following the day on which the futures 

transactions are entered into or liquidated; and 

(d) The respondents keep books and records showing all details concerning all 

such positions and transactions, including all details as to the cash commodity 

involved in the "hedging" transactions, and makes such books and records 

available to the Commodity Exchange Authority for examination at all reasonable 

times and furnishes to the Administrator of the Commodity Exchange Authority, or 

his employees, any additional pertinent information requested by him. It is 

further provided that this order shall not apply to the said respondents when 

acting as an agent for a futures commission merchant and nothing herein 

contained shall prevent the respondents, Rice Commodities, Inc., and/or Sam L. 

Rice, Jr. or any contract market from permitting said respondents to so act 

under the trading rules of any exchange if the respondents transmit all 

customers' commodity futures orders, together with all money, securities, and 

property received to margin, guaranty, or clear the trades or 
Page 4 

contracts of such customers, to another futures commission merchant for 

execution or clearance, and the latter renders confirmations and statements of 

purchase and sale, and transmits remittances, directly to such customers. 

4. The provisions set forth in paragraphs 1 and 2 of this order shall become 

effective upon the date of service of this order upon the respondents. The 

period of the denial of trading privileges to the respondents, specified in the 

paragraph 3 above, shall become effective on the thirtieth day after the date of 

entry of this order. A copy of this Decision and Order shall be served on each 

of the parties and on each contract market. 

Done at Washington, D. C. 

JAN 18 1974 

[SEE SIGNATURE IN ORIGINAL] 

William J. Weber 

Administrative Law Judge 

Referee 

LOAD-DATE: June 12, 2008 
Page 5