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Commodity Futures Trading Commission 

CEA CASES 

NAME: CLAUD WILKES 

CITATION: 10 Agric. Dec. 138 

DOCKET NUMBER: 52 

DATE: FEBRUARY 12, 1951 

DOCUMENT TYPE: DISMISSAL OF PETITION FOR RECONSIDERATION 

(No. 2686) 

In re CLAUD WILKES. CEA Doc. No. 52. Decided February 12, 1951. 

Denial of Petition for Reconsideration -- Vacation of Stay Order

Respondent's petition for reconsideration of prior order is dismissed, since 

all questions raised and argument made in support of this petition were fully 

considered at the time of issuing the order to which objection is made, and the 

stay order of October 31, 1950, is vacated and, beginning on the 30th day after 

the date of this order, all contract markets shall refuse all trading privileges 

thereon to respondent for a period of 60 days. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject. Index in this issue of Agriculture Decisions. -

- Ed. 

 

Mr. Benjamin M. Holstein for Commodity Exchange Authority. Messrs. Kelleher, 

Hurley & Kohlmeyer, of New Orleans, Louisiana, for respondent. 

Decision by Thomas J. Flavin, Judicial Officer

DISMISSAL OF PETITION FOR RECONSIDERATION

I 

In this disciplinary proceeding under the Commodity Exchange Act (7 U. S. C. 

Chapter 1) a decision and order (9 Agric. Dec. 1194 (9 A.D. 1194)) were entered 

on October 11, 1950. (1) finding that the respondent wilfully violated 

provisions of the act and the regulations by failing to report transactions and 

positions in cotton futures and (2) ordering all contract markets to refuse the 

respondent trading privileges for a period of 60 days. Preceding the issuance 

of this decision and order, there had been a hearing. Following the hearing, 

the complainant filed suggested findings of fact, conclusions and order on May 

29, 1950. The referee who presided at the hearing, John J. Curry, Office of 

Hearing Examiners, filed his report on June 7, 1950, a copy of which was served 

upon the respondent's attorney of record on June 12, 1950. The referee's report 

recommended the issuance of a decision and order similar to the final decision 

and order entered on October 11, 1950. The respondent filed no exceptions to 

the referee's recommended decision and order. Following the entry of the final 

decision and order, however, the respondent filed a petition for 

reconsideration. A stay order was entered in the proceeding on October 31, 1950 

(9 Agric. Dec. 1198 (9 A.D. 1198)), pending action upon the petition for 

reconsideration. 

II 

The petition for reconsideration recites that the decision and order are 

erroneous in finding that the respondent's violations of the act and regulations 
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were wilful. The petition also states that the respondent has been informed by 

J. M. Mehl, Administrator of the Commodity Exchange Authority, that the denial 

of all trading privileges ordered includes the carrying of existing accounts as 

well as making new trades. The petition says that liquidation of the 

respondent's contracts would be out of proportion to the violations involved and 

would be violative of the due process clause of the Constitution. 

An answer to the petition was filed by the complainant and oral argument was 

held before me in Washington, D. C., on December 7, 1950. 

At the oral argument, the respondent was permitted to amend his petition 

orally, that is, to argue some issues not set out in the petition. The 

respondent contends first that the complaint is defective because it charges 

failure to make reports as a violation when there is no such offense under the 

act. He also contends that under section 4i of the act a person reaches 

reporting status only when he makes contracts in one day over the prescribed 

limit for reporting purposes and that since this was not the case here, the 

respondent did not violate 4i. A third point urged is that the decision erred 

in concluding that the respondent's actions were wilful with the result that 

there was no necessity for affording the respondent an opportunity to 

demonstrate or achieve compliance prior to the institution of this proceeding as 

required by Section 9(b) of the Administrative Procedure Act. Finally, the 

respondent claims that the sanction ordered is out of line with the violations 

found and that the impact of the suspension is unusually severe in this case 

because compelling the respondent to liquidate his position means that he will 

lose a great deal of his profits as these would have to be reported for Federal 

income tax purposes as short term capital gains. 

III 

We are not persuaded by the petition for reconsideration or the supporting 

oral argument that any substantial change should be made in the decision and 

order entered. True it is that section 4i of the act n1 makes transactions 

illegal when reporting status has been reached and the required reports are not 

filed, rather than making the failure to report the violation. Paragraphs 3 and 

4 of the complaint recite that the respondent reached reporting status, that he 

became subject to the reporting requirements of section 4i of the act and the 

reporting provisions of the regulations, and that he wilfully failed to make the 

required reports in violation of the act and the regulations. We see little 

practical difference between a charge of failing to make required reports in 

violation of the act and a charge of failing to make reports required to make 

transactions valid under the act. And, as far 

as the regulations are concerned, section 8a (5) of the act authorizes the 

issuance of regulations considered reasonably necessary to effectuate the 

purposes of the act, that is, regulations of the legislative type as well as 

those of the interpretative kind. 

n1 "Sec. 4i. It shall be unlawful for any person to make any contract 

for the purchase or sale of any commodity for future delivery on or subject 

to the rules of any contract market unless such person shall report or 

cause to be reported to the properly designated officer in accordance with 

the rules and regulations of the Secretary of Agriculture (1) whenever such 

person shall directly or indirectly make such contracts with respect to any 

commodity, or any future of such commodity, during any one day in an amount 

equal to or in excess of such amount as shall be fixed from time to time by 

the Secretary of Agriculture; and (2). whenever such person shall directly 

or indirectly have or obtain a long or short position in any commodity or 

in any future of such commodity, equal to or in excess of such amount as 

shall be fixed from time to time by the Secretary of Agriculture . . . ." 
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The respondent's claim that section 4i is violated under any circumstances 

only when there first occurs trading in one day in excess of the maximum 

position fixed is based upon erroneous construction of this part of the act. 

The word "and" preceding 4i (2) is not used in the sense that both the 

eventualities in 4i (1) and 4i (2) must be present for any violation of 4i. 

"And" is preceded by a semicolon and it is clear to us that a violation occurs 

when there is failure to report contracts in one day in excess of the amount 

fixed for such purpose or when there is failure to report long or short 

positions equal to or in excess of the amount fixed for this purpose. 

Therefore, the respondent's view as to section 4i is rejected as well as his 

view that section 3.10 of the regulations is invalid because it is based only 

upon 4i (2) instead of both 4i (1) and 4i (2). 

We concluded in our decision that the respondent's violations were wilful as 

charged in the complaint and that, therefore, there was no lack of compliance 

with Section 9 (b) of the Administrative Procedure Act. The respondent was 

specifically warned on numerous occasions of the reporting requirements and his 

delinquencies. His failures to report involved here cannot be regarded as 

accidental and are either deliberate or so grossly negligent as to be deliberate 

and wilful. 

As to the protests about the sanction ordered, the principal grievance seems 

to be the respondent's income tax status. The order of suspension of trading 

privileges was to be effective on November 10, 1950. Apparently some, if not 

most, of the transactions which would be brought within the six months' short 

term capital gain period if the respondent were compelled to liquidate by 

November 10 were entered into subsequent. to the filing and service of the 

referee's report recommending a 60-day suspension of trading privileges to which 

the respondent did not object. In any event, the passage of time caused by the 

filing of the petition for reconsideration and its consideration has removed 

this objection insofar as the transactions entered into prior to September 1950 

are concerned. In several proceedings involving failures to report. In re 

Cotton Products Company, 9 Agric. Dec. 1189 (9 A.D. 1189) (1950); In re A. 

Feldstein and Company, 5 Agric. Dec. 337 (5 A.D. 337) (1946); In re Raymond G. 

Brown, Sr., et al., 5 Agric. Dec. 745 (5 A.D. 745) (1946), effective suspensions 

of trading privileges equalling or exceeding the 60-day 

suspension ordered for the respondent were imposed. We do not believe that this 

case presents matters justifying a deviation from the sanctions in those cases. 

On the contrary, there were not such numerous and repeated warnings as disclosed 

here. 

IV 

In view of the foregoing, the stay order of October 31, 1950, is vacated and, 

beginning on the 30th day after the date of this order, all contract markets 

shall refuse all trading privileges thereon to the respondent, Claud Wilkes, for 

a period of 60 days. A copy of this order shall be served on the respondent and 

on each contract market. 

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