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Commodity Futures Trading Commission 

CEA CASES 

NAME: FRONTIER COMMODITIES, INC. AND EDWIN J. SCHUFFMAN 

CITATION: 31 Agric. Dec. 1137 

DOCKET NUMBER: 191 

DATE: SEPTEMBER 14, 1972 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 14,760) 

In re FRONTIER COMMODITIES, INC. and EDWIN J. SCHUFFMAN. CEA Docket No. 191. 

Decided September 14, 1972. 

Undersegregation of funds -- Minimum financial requirements -- Failure to 

make required financial report -- Customers' accounts -- Stipulation -- Cease 

and Desist

The respondents have consented to the issuance of an order against them to 

cease and desist from the violations as set forth in the order herein. 

John J. Casey, for complainant. 

Joel J. Bellows, Chicago, Illinois, for respondents. 

Harry S. McAlpin, Chief Hearing Examiner. 

Decision by Donald A. Campbell, Judicial Officer.

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 issued on 

June 1, 1972, under section 6 (c) of the Act (7 U.S.C. 13b). The respondents are 

charged with violating sections 4d, 4f, 4g and 4i of the Commodity Exchange Act 

(7 U.S.C. 6d, 6f, 6g and 6i) and sections 1.10, 1.17, 1.20, 1.21, 1.22, 15.00, 

and 17.00 of the regulations thereunder (17 CFR 1.10, 1.17, 1.20, 1.21, 1.22, 

15.00, and 17.00). 

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) withdraw their answer filed herein and admit the facts 

hereinafter set forth in paragraphs 1, 2, and 3 of the Findings of Fact, (2) 

admit for the purposes of this proceeding and for such purposes only, the facts 

hereinafter set forth in paragraphs 4, 5, 6, and 7 of the Findings of Fact, (3) 

waive hearing on the charges in the complaint and the report of the referee, and 

(4) consent to the entry of the order contained herein. 

Respondents in their stipulation stated that any violations of the Commodity 

Exchange Act by reason of the facts therein admitted, were not willful 

violations. 

FINDINGS OF FACT

1. Respondent Frontier Commodities, Inc., a Tennessee corporation with its 

principal offices at 4110 Hillsboro Road, Nashville, Tennessee, was at all times 

material herein, a registered futures commission merchant under the Commodity 

Exchange Act. The respondent corporation is no longer a registrant under the 

Commodity Exchange Act. At all times material herein up until on or about 
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December 15, 1971, the name of the respondent corporation was Frontier 

Securities, Inc. 

2. Respondent Edwin J. Schuffman, an individual whose address is 532 

Glengarry Drive, Nashville, Tennessee, is now, and was at all times material 

herein, the president and a director of the respondent corporation and the owner 

of 50 per cent of its capital stock. At all such times, respondent Schuffman 

had responsibility for the management, direction and control of the respondent 

corporation. 

3. At all times material herein, the respondent corporation in the regular 

course of its business as futures commission merchant, carried accounts for 

customers who traded in commodity futures. 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, the respondent corporation 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. 

4. On January 7, 10, 12, 13, 18 and 31 and February 1, 2, 3, and 4, 1972, the 

respondent corporation was undersegregated within the range of $ 1,223.23 to $ 

30,988.30 -- that is, on the ten days mentioned the total amount of regulated 

commodity customers' funds held in segregation by the respondent corporation was 

from $ 1,223.23 to $ 30,988.30 less than the amount necessary to pay all credits 

and equities due to such customers. 

5. During the period from October 31, 1971 through January 18, 1972, the 

respondent corporation engaged as a registered futures commission merchant under 

the Commodity Exchange Act while failing to meet the minimum financial 

requirements 

prescribed by section 1.17 of the regulations (17 CFR 1.17) issued by the 

Secretary of Agriculture under section 4f of the Act (7 U.S.C. 6f). The 

respondent corporation lacked $ 18,727.17 on October 31, 1971 and $ 109,528.42 

on January 18, 1972, of having enough working capital to meet such minimum 

financial requirements. 

6. Under the regulations issued pursuant to the Commodity Exchange Act (17 

CFR 1.10), the respondent corporation was obligated at all times material herein 

to prepare a written computation of its net worth at least once each month, and 

whenever any such computation showed, or the respondent corporation knew or had 

reason to believe, that its net worth had declined 20 percent or more from its 

net worth as shown in the report of its financial condition which it filed with 

the Commodity Exchange Authority as of September 30, 1971, the respondent 

corporation was obligated to notify immediately the Commodity Exchange Authority 

thereof. The respondent firm's computations of its net worth as of November 30 

and December 31, 1971, showed that its net worth had declined more than 20 

percent of its net worth as shown in its financial report as of September 30, 

1971, but the respondent corporation failed or refused to notify the Commodity 

Exchange Authority thereof, as required under the above-cited section of the 

regulations. 

7. Under the regulations issued pursuant to the Commodity Exchange Act (1 

CR7F 15.00 (b) and (c), 17.00), the respondent corporation was obligated during 

the period specified below to report to the Commodity Exchange Authority for 

each business day with respect to any customer's account on its books which 

showed a position of 25 contracts or more in a single pork belly future, and 

with respect to any customer's account on its books which showed a position of 

200,000 bushels or more in a single soybean future. On December 14, 15, 20, 21, 

1971 and January 5, 6, 7, 10, 14, 17, 18, 19, 26, 31, and February 1, 1972, the 

respondent corporation carried customers' accounts which had such reportable 

position, but the respondent corporation failed or refused to report to the 
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Commodity Exchange Authority with respect to such accounts as required under the 

above-cited sections of the regulations. 

CONCLUSIONS

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

that, as charged in the complaint, the respondents violated sections 4d, 4f, 4g 

and 4i of the Commodity Exchange Act, 

and sections 1.10, 1.17, 1.20, 1.21, 1.22, 15.00, and 17.00 of the regulations 

thereunder. 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 publc 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

Respondents and each of them shall cease and desist from: 

1. failing to treat and deal with customers' funds as belonging to such 

customers as required by section 4d of the Commodity Exchange Act (7 U.S.C. 6d) 

and the regulations thereunder; 

2. failing to hold customers' funds in segregated account as required by 

section 4d of the Commodity Exchange Act (7 U.S.C. 6d) and the regulations 

thereunder; 

3. 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 there under; 

4. failing, while registered as futures commission merchant under the 

Commodity Exchange Act, to prepare a written computation of net worth at least 

once each month and failing to notify the Commodity Exchange Authority whenever 

such respondent knows or has reason to know that its net worth has declined 20% 

or more from the net worth of such respondent shown in the most recent report of 

financial condition filed with the Commodity Exchange Authority; 

5. failing to file, in accordance with the Commodity Exchange Act and the 

regulations thereunder, such reports as they are required to file under such Act 

and regulations; and 

6. 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. 

This Order shall become effective on the date of service on the respondents. 

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