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Commodity Futures Trading Commission 

CEA CASES 

NAME: SECRETARY OF AGRICULTURE V. W. G. EDWARDS 

DOCKET NUMBER: 18 

DATE: JULY 11, 1940 

DOCUMENT TYPE: DECISION AND ORDER 

UNITED STATES OF AMERICA 

BEFORE THE SECRETARY OF AGRICULTURE 

C. E. A. Docket No. 18 

Secretary of Agriculture, Complainant, v. W. G. Edwards, Respondent. 

Proceedings, Findings of Fact, Conclusions, and Order. 

PROCEEDINGS 

On March 22, 1940, the Assistant Secretary of Agriculture issued a complaint 

charging W. G. Edwards with having violated the Commodity Exchange Act (7 U.S.C. 

and Supp. V, §§ 1-17a). It was alleged that the respondent, while trading as W. 

G. Edwards & Company, a registered futures commission merchant, in Billings, 

Montana, and Rapid City, South Dakota, during 1938 and 1939, had not kept the 

required records, had not segregated customers' funds, had incorrectly reported 

to customers, and had bucketed customers' orders. The respondent was directed 

to show why his registration should not be revoked and his trading privileges on 

contract markets denied, at a hearing to be held in Washington on April 5, 1940. 

The complaint was served upon the respondent by registered mail on March 26, 

1940. 

On March 29, the referee wrote the respondent that if he wished to be heard at a 

place other than Washington, he should so request. No such request was made. 

The Hearing was held in Washington at the appointed time, before Jack W. 

Bain, Esquire, the referee designated by the Assistant Secretary. Charles W. 

Bucy, Esquire, Office of the Solicitor, Department of Agriculture, appeared for 

the Government, and T. B. Thorson, Esquire, of Rapid City, South Dakota, 

appeared for the respondent. Judicial notice was taken of the designation of 

the Chicago Board of Trade and the Minneapolis Chamber of Commerce as contract 

markets. Douglas B. Bagnoll, in charge of the Division of Violations and 

Complaints, Commodity Exchange Administration, Department of Agriculture, called 

by the Government, produced the report of an audit of the respondent's firm made 

in June 1939. This shows that there wore, insufficient funds in segregated 

account, but that this situation was corrected when the audit was completed. 

Some twenty trades confirmed to customers were either not executed on contract 

markets or were executed at prices different from those reported to the 

customers. Confirmations used by the respondent were different from those in 

general use, and showed that the respondent, as principal, took the other side 

of the customer's trade. The witness identified some correspondence between the 

respondent and the Commodity Exchange Administration regarding his method of 

handling trades, and said that he, the respondent, discontinued the handling of 

commodity futures business in September 1939. 

The respondent testified in his own behalf. According to his testimony, upon 

going into business for himself in 1938, he consulted attorneys and an 

accounting firm, and thought he had established lawful accounting and trading 
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methods. His customers wore unwilling to pay a commission large enough to yield 

him a profit, but were willing for him to take their trades as principal and 

make a profit on them if he could. He would confirm their trades to them, and 

then attempt to execute the trades at a price that would give him a profit. It 

was unintentional when a trade was not executed at all, such usually resulting 

from the customer's closing out before the respondent had had opportunity to got 

execution of the trade at a profit. He did not intend to bucket trades nor to 

violate the law. Ho profited on some trades, lost on others. No customer lost 

as a result of the respondent's methods of handling trades. He does not now 

handle controlled commodity futures, nor does he intend to. 

After the close of the hearing, the referee's report, proposed findings of 

fact and conclusions, and recommended order were served upon the respondent, 

Government counsel, and the Commodity Exchange Administration. A period of 

twenty days from the receipt thereof was given for filing exceptions, briefs, 

and a request for oral argument before the Secretary. The time has elapsed, and 

none has been filed. 

FINDINGS OF FACT 

1. W. G. Edwards, the respondent, trading as W. G. Edwards & Company, in 

Billings, Montana, and Rapid City, South Dakota, from about 

May 1938 until September 1939, engaged as a futures commission merchant and 

registered with the Secretary of Agriculture as such for the calendar years 1938 

and 1939. 

2. The respondent failed to segregate and account separately for funds 

received from and accruing to his customers in connection with sales of wheat, 

and other commodities named in the Commodity Exchange Act, for future delivery 

on The Board of Trade of the City of Chicago and the Minneapolis Chamber of 

Commerce, contract markets, with the result that there was a shortage of $ 

3,237.16 on May 31, 1939, and of $ 949.92 on June 24, 1939, in segregated funds. 

3. Between July 1938 and June 1939, the respondent, a correspondent of 

members of contract markets, in many instances reported prices to customers 

different from the actual prices at which their commodity futures trades were 

executed on contract markets. 

4. During the same period, the respondent, in some instances, did not execute 

commodity futures trades, confirmed to his customers, on contract markets, but 

bucketed such trades. 

5. The commodity futures contracts mentioned herein could have been used for 

hedging or determining the price basis of transactions in interstate commerce in 

the commodity involved. 

CONCLUSIONS 

While it does not appear that the respondent attempted to cheat or defraud 

his customers, or that his acts resulted in a loss to them, or that he 

specifically intended to violate the law, the evidence 

clearly shows that he did violate various provisions of the act, and warrants 

the issuance of an order denying him trading privileges on contract markets 

until further notice. As his registration has expired, it need not be revoked. 

ORDER 

IT IS ORDERED that all contract markets, until further notice by the 

Secretary of Agriculture, refuse all trading privileges thereon to W. G. 

Edwards. 
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IT IS FURTHER ORDERED that a copy hereof be sent by registered mail to W. G. 

Edwards, 517 Sixth Street, Rapid City, South Dakota, and to each contract 

market, and that this order shall be effective 15 days after the date hereof. 

(SEAL) 

Done at Washington, D. C. this 11th day of July 1940. Witness my hand and 

the seal of the Department of Agriculture. 

(Signed) 

CLAUDE R. WICKARD 

Under Secretary of Agriculture. 

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