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Commodity Futures Trading Commission 

CEA CASES 

NAME: AMERICAN COMMODITY BROKERS, INC., PHYLLIS C. DEMPSTER, AND JOHN WHELAN 

CITATION: 31 Agric. Dec. 992 

DOCKET NUMBER: 185 

DATE: AUGUST 1, 1972 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 14,713) 

In re AMERICAN COMMODITY BROKERS, INC., PHYLLIS C. DEMPSTER, and JOHN WHELAN. 

CEA Docket No. 185. Decided August 1, 1972. 

Futures commission merchant -- Undersegregation of funds -- False financial 

reports -- Stipulation -- Denial of trading privileges

Respondents American Commodity Brokers, Inc., and Phyllis C. Dempster have 

consented to the issuance of an order against them to cease and desist from the 

activities set forth herein and ordering the denial of trading privileges to 

them as set forth herein. The Decision and Order herein terminates this 

proceeding as to these two respondents. 

Richard W. Davis, Jr., for complainant. 

Edwin S. Bean, Detroit, Michigan, for respondents American Commodity Brokers, 

Inc., and Phyllis C. Dempster. 

Harry S. McAlpin, 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. Chap. 1, 1970), instituted by a complaint and notice of hearing issued on 

September 13, 1771, under section 

6(b) and (c) of the said Act (7 U.S.C. 9 and 13b). The respondents are charged 

with violating sections 4b, 4d, 4f, 4g and 6(b) of the said Act (7 U.S.C. 6b, 

6d, 6f, 6g and 9) and sections 1.17, 1.20, 1.32 and 1.35 of the regulations 

issued thereunder (17 CFR 1.17, 1.20, 1.32 and 1.35). 

No hearing has been held in this proceeding as to respondents American 

Commodity Brokers, Inc. and Phyllis C. Dempster. On July 31, 1972, those two 

respondents filed a stipulation under section 0.4(b) of the rules of practice 

(17 CFR 0.4(b)), in which they (1) withdrew the answer previously filed by them, 

(2) admit the facts hereinafter set forth in paragraphs 1 through 3 of the 

Findings of Fact, (3) admit, for the purposes of this proceeding and for such 

purposes only, the remaining facts set forth in the Findings of Fact, and (4) 

waive hearing on the charges in the complaint, waive the report of the Referee 

and consent to the entry of the order contained herein. 

FINDINGS OF FACT

1. Respondent American Commodity Brokers, Inc., a corporation organized and 

existing under the laws of the State of Michigan, with offices at 415 South 

Monroe, Monroe, Michigan, was at all times material herein, a registered futures 
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commission merchant under the Commodity Exchange Act, engaged in trading in 

commodities for future delivery for the accounts of customers and holding for 

such customers sums of money, representing deposits of margin by and trading 

profits accruing to such customers. At all such times, the respondent 

corporation was subject to the minimum financial requirements specified in 

section 1.17 of the regulations under the Commodity Exchange Act (17 CFR 1.17). 

2. Respondent Phyllis C. Dempster, 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 the respondent corporation and responsible for the 

management, direction and control of its activities. 

3. The transactions in commodities for future delivery, referred to herein, 

could have been used for hedging transactions in interstate commerce in such 

commodities or the products or by products thereof, or for determining the price 

basis of transactions in interstate commerce in such commodities, or for 

delivering 

such commodities sold, shipped or received in interstate commerce. 

4. On March 31, 1970, the respondent corporation engaged as a registered 

futures commission merchant under the Commodity Exchange Act, notwithstanding 

that at that time it failed to meet the minimum financial requirements 

prescribed by section 1.17 of the regulations issued by the Secretary of 

Agriculture under the Act. As of March 31, 1970, the respondent corporation 

lacked approximately $ 84,000 of having enough working capital to meet such 

minimum financial requirements. 

5. (a) At the times hereinafter state, the respondent corporation, in the 

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

of customers who traded in commodity futures on contract markets subject to the 

provisions of the Commodity Exchange Act and the regulations thereunder. Such 

accounts, the trading therein, and the handling and disposition of funds in 

connection therewith, were subject to the provisions of the Act and regulations. 

At all such times, the respondent corporation had to its credit with banks or 

other depositories, money in varying amounts, held in segregated accounts and 

identified as customers' funds representing deposits of margin by and trading 

profits accruing to such customers. 

(b) During the period between March 5 and April 9, 1970, both inclusive, the 

respondent corporation was undersegregated, that is, during the period mentioned 

the total amount of customers' funds held in segregation as above described, was 

less than the amount necessary to pay all credits and equities due to such 

customers. As of March 5, March 31 and April 9, 1970, such deficits amounted to 

approximately $ 10,000, $ 18,000 and $ 20,000, respectively. 

(c) During the period from April 10 through August 6, 1970, the respondent 

corporation failed to make any computation or permanent record, as of the close 

of the market on each business day, of the amount of money, securities, and 

property required to be held in segregated account in order to pay all credits 

and equities due to its customers, as provided in section 1.32 of the 

regulations (17 CFR 1.32). 

6. On May 7, 1970, the respondent corporation submitted to the Commodity 

Exchange Authority a financial report (Form 1-FR) as of March 31, 1970, 

certified by respondent Phyllis G. 

Dempster. The said respondents made material false statements in such report, 

in that: (1) they stated the firm had an excess of adjusted working capital in 

the amount of $ 22,971.94, when actually it had an insufficiency of adjusted 

working capital in the amount of approximately $ 84,000; (2) they stated the 

firm had current assets of approximately $ 56,000, when it actually had current 
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assets of approximately $ 20,000; and (3) they stated the firm had current 

liabilities of approximately $ 22,000, when it actually had current liabilities 

of approximately $ 94,000. 

7. As of April 21, 1970, the respondent corporation had failed and refused to 

remit to its customers $ 2,606.95 due and owing by it to such customers in 

connection with transactions in commodities for future delivery which the 

respondent corporation had made for the account and benefit of such customers. 

During March 1970, the respondent corporation issued checks to four customers in 

purported payment of $ 2,518.95 of the aforesaid sum, but such checks were 

returned by the bank upon which they were drawn because of insufficient funds in 

the corporate respondent's account. 

CONCLUSIONS

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

that the respondents American Commodity Brokers, Inc. and Phyllis C. Dempster, 

as charged in the complaint, violated sections 4b, 4d, 4f and 4g of the 

Commodity Exchange Act and sections 1.17, 1.20, 1.32 and 1.35 of the regulations 

issued thereunder (17 CFR 1.17, 1.20, 1.32 and 1.35). 

The complainant states that the administrative officials of the Commodity 

Exchange Authority have carefully considered the stipulation and the terms of 

the proposed order and they believe that the entry of such an order without 

further proceedings would constitute a satisfactory disposition of this case as 

to the stipulators, serve the public interest and effectuate the purposes of the 

Commodity Exchange Act. The complainant, therefore, recommends that the 

stipulation be accepted and the proposed order be issued, terminating this 

proceeding as to respondents American Commodity Brokers, Inc. and Phyllis C. 

Dempster. 

It is noted that respondents American Commodity Brokers, Inc. and Phyllis C. 

Dempster were previously charged with failing 

to meet minimum financial requirements and that action was terminated by a 

consent order to cease and desist. (28 Agric. Dec. 813 (28 A.D. 813)) 

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

ORDER

1. Effective on the date of service of this order upon respondent American 

Commodity Brokers, Inc., it shall cease and desist from the activities set forth 

below. Effective on the date of service of this order upon resspondent Phyllis 

C. Dempster, she shall cease and desist from causing, aiding, abetting, 

counseling, commanding or inducing American Commodity Brokers, Inc., or any 

other futures commission merchant to engage in the activities set forth below. 

a. Engaging as futures commission merchant without meeting the minimum 

financial requirements prescribed by section 1.17 of the regulations issued 

under the Commodity Exchange Act (17 CFR 1.17). 

b. Failing to maintain in segregation sufficient funds to pay all credits and 

equities due to its customers trading in commodity futures subject to the 

provisions of the Commodity Exchange Act. 

c. Failing to make a computation and permanent record, as of the close of the 

market on each business day, of the amount of money, securities, and property 

required to be held in segregated account as provided in section 1.32 of the 

regulations (17 CFR 1.32). 

d. Making material false statements in financial reports submitted to the 

Commodity Exchange Authority. 

e. Failing and refusing to remit to its customers money due and owing by it 

to such customers in connection with transactions in commodities for future 
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delivery which the corporation had made for the account and benefit of such 

customers. 

2. Effective on the thirtieth day after the date this order is issued, 

respondents American Commodity Brokers, Inc. and Phyllis C. Dempster are 

prohibited from trading in any commodity on any contract market subject to the 

provisions of the Commodity Exchange Act for five years and all contract markets 

shall deny trading privileges to such respondents for that period. 

Such prohibition and denial shall apply to all trading by such respondents 

either for their own account or the account of another person, directly or 

indirectly. 

A copy of this Decision and Order shall be served on each of the parties and 

on each contract market. 

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