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Commodity Futures Trading Commission 

CEA CASES 

NAME: DAVID L. HOFER 

DOCKET NUMBER: 156 

DATE: NOVEMBER 6, 1968 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: David L. Hofer, Respondent 

CEA Docket No. 156 

Complaint and Notice of Hearing Under the Commodity Exchange Act 

There is reason to believe that the respondent, David L. Hofer, has violated 

the Commodity Exchange Act, as amended (7 U.S.C. 1 et seq.; Public Law 90-258), 

hereinafter referred to as the act, and the rules and regulations made pursuant 

thereto (17 CFR, Part 1), hereinafter referred to as the regulations. There is 

also reason to believe that under the provisions of section 8a of the act, as 

amended (7 U.S.C. 12a; Public Law 90-258), the respondent's application for 

registration as futures commission merchant, filed August 2, 1968, should be 

denied. Therefore, this complaint and notice of hearing is issued alleging the 

following: 

I 

Respondent, David L. Hofer, an individual whose business address is 110 North 

Franklin Street, Chicago, Illinois, was at all times material herein, engaged as 

futures commission merchant within the meaning of the term "futures commission 

merchant" as used in the act. On August 2, 1968, the respondent filed an 

application for registration as futures commission merchant under the act, but 

registration has not been granted. 

II 

At all times during the period from June 18 through August 16, 1968, 

inclusive, the respondent, acting in the capacity of futures commission merchant 

under the act, carried accounts for customers who traded in commodity futures 

subject to the provisions of the act and regulations, and had received funds 

belonging to such customers, representing deposits of margin by and trading 

profits accruing to such customers. 

III 

During the period specified in paragraph II above, the respondent failed and 

refused to segregate and to account separately for the funds belonging to his 

customers, commingled such funds with the funds of the respondent, used 

customers' funds for the respondent's own benefit, and except for one day - 

August 15, 1968 - failed and refused to prepare a daily record setting forth the 

amount of customers' money and equities required to be kept in segregation in 

accordance with the provisions of section 4d of the act (7 U.S.C. 6d). The 

segregation record prepared by the respondent for August 15, 1968, showed that 

he had excess funds in segregation on that day. However, in such record, the 

respondent improperly included as segregated funds two accounts receivable 

totaling $ 21,440.00 which did not constitute funds in segregation. The 

segregation record, when adjusted to compensate for such amount, showed that the 

respondent was under-segregated by $ 18,055.52 - that is, the total amount of 
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customers' money, securities and property held in segregation was, according to 

the respondent's segregation record 

for August 15, 1968, when so adjusted, insufficient by $ 18,055.52, to pay all 

credits and equities due to the respondent's customers. 

IV 

In the registration application, filed by the respondent with the Commodity 

Exchange Authority on August 2, 1968, the respondent wilfully made a material 

false statement, in that, in such application, the respondent answered "no" to 

the following question: 

Have you or any general partner, officer, holder of more than 10 per cent of 

the capital stock, or any person participating in managing your business or any 

of your offices been subject to any of the following actions which have not been 

previously reported to this agency: * * * 2. Any action by the United States 

Securities and Exchange Commission, the securities commission or equivalent 

authority of any State? 

In truth and in fact, the respondent was subject to such an action in 

November 1967, before the Insurance Commissioner of the State of Iowa, and on 

November 7, 1967, the Insurance Commissioner entered an order in that action 

which, inter alia, ordered the respondent to "cease and desist from further 

solicitation and sale" of certain securities in the State of Iowa. 

V 

On August 2, 1968, the respondent, in connection with his application for 

registration as futures commission merchant, wilfully submitted 

to the Commodity Exchange Authority a false financial report as of June 30, 

1968, overstating his assets by more than $ 100,000, and concealing the fact 

that as of June 30, 1968, he lacked more than $ 52,000 of having enough funds to 

pay his customers' credits and equities. 

VI 

During the period from June 18 through August 16, 1968, the respondent acted 

as futures commission merchant in soliciting and accepting orders for the 

purchase and for the sale of commodity futures subject to the act, without being 

registered with the Secretary of Agriculture as futures commission merchant. 

VII 

By reason of the facts alleged in this complaint: (1) the respondent wilfully 

violated sections 4d, 4f, and 6(b) of the act (7 U.S.C. 6d, 6f, and 9, as 

amended by Public Law 90-258) and sections 1.7, 1.10, 1.20, 1.21, 1.32 and 1.35 

of the regulations issued under the act (17 CFR 1.7, 1.10, 1.20, 1.21, 1.32, 

1.35), and (2) the respondent's application for registration as futures 

commission merchant should be denied under the provisions of section 8a of the 

act (7 U.S.C. 12a, as amended by Public Law 90-258). 

WHEREFORE, it is hereby ordered that this complaint and notice of hearing be 

served upon the respondent and this proceeding shall be governed by sections 

0.1, 0.2, 0.4(b), 0.5 through 0.22, and 0.28 of the rules of practice under the 

act (17 CFR 0.1 0.2, 0.4(b), 0.5 through 0.22, 0.28). The respondent will have 

twenty (20) days after the receipt 

of this complaint in which to file with the Hearing Clerk, United States 

Department of Agriculture, Washington, D.C. 20250, an answer with an original 

and three copies, fully and completely stating the nature of the defense and 
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admitting or denying, specifically and in detail, each allegation of this 

complaint. Allegations not answered will be deemed admitted for the purpose of 

this proceeding. Failure to file an answer will constitute an admission of all 

allegations of this complaint and a waiver of hearing. The filing of an answer 

in which all of the material allegations of fact contained in this complaint are 

admitted likewise shall constitute a waiver of hearing unless a hearing is 

requested. The respondent is hereby notified that unless a hearing is waived, a 

hearing will be held at 10:00 a.m., local time, on December 11, 1968, in 

Chicago, Illinois, at a place therein to be specified later, before a referee 

designated to conduct such hearing. At such hearing, the respondent will have 

the right to appear and show cause, if any there be, why an appropriate order 

should not be issued in accordance with the act, (1) prohibiting the respondent 

from trading on or subject to the rules of any contract market, and directing 

that all contract markets refuse all trading privileges to the respondent for 

such period of time as may be determined, (2) denying the respondent's 

application for registration as futures commission merchant, and (3) directing 

that the respondent shall cease and desist from violating the act and 

regulations in the manner alleged herein. 

It is ordered that this complaint and notice of hearing be served on the 

respondent at least twenty (20) days prior to the date set for hearing. 

Done at Washington, D. C. 

November 6 1968 

[SEE SIGNATURE IN ORIGINAL] 

Ted J. Davis 

Assistant Secretary 

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