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Commodity Futures Trading Commission 

CEA CASES 

NAME: M. RICHTER SONS, ISADORE RICHTER AND FRED RICHTER 

CITATION: 8 Agric. Dec. 872 

DOCKET NUMBER: 51 

DATE: AUGUST 8, 1949 

DOCUMENT TYPE: DECISION AND ORDER 

(A. D. 2180) 

 

In re M. RICHTER SONS, ISADORE RICHTER AND FRED RICHTER. CEA Doc. No. 51. 

Decided August 8, 1949. 

Disciplinary Proceeding -- Violation of Act -- Futures Commission Merchant -- 

Denial of Trading Privileges on Contract Markets -- Consent Order

Where respondents were charged in the complaint with violations of the act by 

failing to maintain written records showing the true parties to a futures 

contract, commingling customers' funds with their own funds, and reporting 

customers' transactions and positions as belonging to respondent partnership, 

and where respondents consented to the issuance of an order, based upon such 

charges, imposing sanctions, it is held, that the violations in question warrant 

suspension of the registration of M. Richter Sons as a futures commission 

merchant for a period of 15 days, and a concurrent denial of trading privileges 

on contract markets to all the respondents for a like period, these periods to 

begin to run within 5 days after issuance of this order. * 

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

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

Ed. 

Violation of Act and Regulations Thereunder -- Failure to Indicate True 

Parties on Books and Records

Failure of a futures commission merchant to indicate the true parties to a 

futures contract on his books and records constitutes a violation of the act and 

regulations thereunder as shown herein. * 

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

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

Ed. 

Violation of Act -- Commingling of Customer's Funds With Funds of Futures 

Commission Merchant

Permitting customer's profits to remain in the firm's account with the 

clearing house constitutes a commingling of the firm's funds with those of the 

customer and a failure to treat and deal with the latter's money as required by 

the section of the act as indicated herein. * 

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

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

Ed. 

Violation of Act and Regulations Thereunder -- Making False Reports
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The acts of respondents in reporting the trades of A. F. as their own 

necessarily constitute false reports with respect to their own transactions and 

positions, as well as a failure to report correctly with respect to the 

transactions and positions of a customer, in violation of the section of the act 

and the sections of the rules and regulations thereunder as indicated herein. * 

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

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

Ed. 

Violation of Act -- Failure to Observe Obligations Imposed by Act Upon 

Respondents as Traders and as Futures Commission Merchants

Since the evidence disclosed in the record shows that respondents violated 

the obligations imposed upon them as traders, as well as those which they were 

required to observe in their capacities as futures commission merchants, a 

suspension of respondents' registration as futures commission merchants and a 

denial of their trading privileges are warranted. * 

* 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. Benj. M. Holstein for complainant. Mr. Lee A. Freeman, of Chicago, Illinois, 

for respondents. 

 

Decision by Thomas J. Flavin, Judicial Officer

DECISION AND ORDER

This is a disciplinary proceeding under the Commodity Exchange Act (7 U. S. 

C., Chapter 1), initiated by a complaint issued by the Secretary of Agriculture 

on July 21, 1949, charging the respondents with failure to maintain written 

records showing the true parties to a futures contract, commingling customers' 

funds with their own funds, and reporting customers' transactions and positions 

as belonging to the respondent partnership. The complaint alleged that trades 

executed by the respondents for the account of a customer were entered and shown 

on the books of the firm as transactions for the account of the respondent 

partnership, that profits accruing to the customer as a result of these trades 

were caused to be carried on the books of the clearing house as funds belonging 

to the respondents, and that, on four separate occasions, the respondents 

reported such transactions and positions to the Commodity Exchange Authority as 

having been made for the account of the respondent partnership. 

Service of the complaint was made on July 25, 1949. The hearing date set 

forth in the complaint was August 19, 1949. On August 2 

 

 

and 3, 1949, respectively, the respondents, by their attorney, filed an original 

and amended "Waiver of Hearing and Consent to Entry of Order." The amended 

waiver and consent recites that the respondents "hereby waive the filing of an 

answer, waive the right to hearings in the above proceeding and consent to the 

issuance of an order, based upon the allegations of the complaint, imposing 

sanctions in the form of the suspension of the registration of M. Richter Sons 

as a futures commission merchant for a period of not more than fifteen days and 

suspension of the respondents from all trading privileges for a period of not 

more than fifteen days, provided, that these sanctions are imposed within five 

(5) days of the date of the Secretary's order imposing such sanctions." The 

document further recites that in the event the Secretary or the Judicial Officer 

shall be unwilling to enter such an order, the waiver and consent shall be 

considered withdrawn. 

Section 0.4 (b) of the rules of practice (17 CFR, Cum. Supp., 0.4 (b)) 

specifies that, prior to the hearing in any proceeding the Secretary may, in his 
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discretion, allow a respondent to consent to an order, provided that the 

respondent submits, for filing in the record, a stipulation or statement in 

which he admits at least those facts necessary to the Secretary's jurisdiction 

and agrees that an order may be entered against him. The waiver executed by 

these respondents stipulates that they waive hearing and consent to the issuance 

of an order "based upon the allegations of the complaint" and subject to the 

conditions specified. Since the respondents have thus admitted the facts 

charged in the complaint, a hearing is unnecessary. 

Through its attorney, the Commodity Exchange Authority filed suggested 

findings of fact, etc., and recommended that the order consented to by 

respondents be entered. This decision and order adopt the order consented to 

since we do not see any reason for not doing so. 

FINDINGS OF FACT

1. M. Richter Sons is a partnership composed of Isadore Richter and Fred 

Richter, with its principal place of business located at 1114-1116 West Fulton 

Market, Chicago, Illinois. The said partnership was at all times material to 

these findings and is now registered as a futures commission merchant under the 

Commodity Exchange Act. Isadore Richter was at all times material to these 

findings a member of the Chicago Mercantile Exchange, a duly designated contract 

market under the Commodity Exchange Act, and the said partnership had membership 

trading privileges on the Chicago Mercantile Exchange at all such times. 

2. On June 3, June 6, June 8 and June 10, 1949, pursuant to orders given by 

one Albert Feldstein, a customer of the respondent partnership, 

 

 

the respondents purchased October 1949 egg futures on the Chicago Mercantile 

Exchange in the aggregate amount of 72 carlots. On June 9 and June 10, 1949, 

pursuant to orders given by the said Albert Feldstein, the respondents sold 

October 1949 egg futures on the Chicago Mercantile Exchange in the aggregate 

amount of 72 carlots. The aforesaid purchases and sales were for the account 

and risk of the said Albert Feldstein, but were entered and shown on the books 

and records of the respondent partnership as having been made for the account of 

M. Richter Sons, with nothing to indicate that the said Albert Feldstein had any 

interest in the said purchases or sales. 

3. The respondent partnership received no money, securities or property from 

the said Albert Feldstein to margin, guarantee or secure the purchases and sales 

described in paragraph 2 above, but deposited its own funds with the clearing 

house of the Chicago Mercantile Exchange for that purpose, and used its own 

funds to settle the said transactions. Profits accruing to the said Albert 

Feldstein as a result of the said transactions were caused by the respondents to 

be shown on the books of the clearing house of the Chicago Mercantile Exchange 

as funds belonging to M. Richter Sons. 

4. On June 6, 1949, as the result of the purchase of 14 carlots of October 

1949 egg futures on the Chicago Mercantile Exchange by the respondent 

partnership, which purchase was in truth and in fact for the account and risk of 

the said Albert Feldstein, the net long position in October 1949 egg futures on 

the Chicago Mercantile Exchange carried by the respondents for the said Albert 

Feldstein reached a quantity in excess of 25 carlots and remained in excess of 

25 carlots until June 10, 1949. On June 10, 1949, as the result of the sale of 

42 carlots of October 1949 egg futures on the Chicago Mercantile Exchange by the 

respondent partnership, which sales were in truth and in fact for the account 

and risk of the said Albert Feldstein, the net long position in October 1949 egg 

futures on the Chicago Mercantile Exchange carried by the respondent partnership 

in its own name but actually for the account of the said Albert Feldstein was 

entirely liquidated. On June 8, June 9 and June 10, 1949, on each of which 

dates the long position in October 1949 egg futures carried by the respondents 

for the account of the said Albert Feldstein was in excess of 25 carlots as 

above described, additional purchases and sales of October 1949 egg futures were 

executed on the Chicago Mercantile Exchange by the respondent partnership for 
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the account of the said Albert Feldstein. On June 6, June 8, June 9 and June 

10, 1949, the aforesaid purchases and sales and the open contracts resulting 

therefrom were reported to the Commodity Exchange Authority by the respondents 

as having been made for the account of M. Richter Sons whereas, in truth and in 

fact, the 

 

 

said purchases and sales were made for the account of the said Albert Feldstein. 

5. The transactions in commodity futures described in paragraphs 2, 3 and 4 

were capable of being used for hedging transactions in interstate commerce in 

eggs or the products or by-products thereof, or for determining the price basis 

of transactions in interstate commerce in eggs, or for delivering eggs sold, 

shipped or received in interstate commerce. 

CONCLUSIONS

Section 4 of the act declares it to be unlawful for any person to make or 

execute a contract of sale of any commodity for future delivery on or subject to 

the rules of any board of trade unless such contract is evidenced by a record in 

writing which shows, among other things, the parties to the contract. Section 

1.37 of the rules and regulations (17 CFR 1.37) requires each futures commission 

merchant to "keep a record in permanent form which shall show for each commodity 

futures account carried by him the true name and address of the person for whom 

such account is carried * * *." The respondents made entries in their books 

which showed a customer's trades as trades belonging to the firm. The failure 

of a futures commission merchant to indicate the true parties to a futures 

contract on his books and records constitutes a violation of the above 

provisions. In re Irving Weis & Company et al., 7 Agric. Dec. 180 (7 A. D. 

180); Irving Weis & Company et al. v. Charles F. Brannan, 171 F. (2d) 232 (C. C. 

A. 2nd, 1948). 

Section 4d (2) declares it to be unlawful for any futures commission merchant 

to solicit or accept orders for futures contracts to be made on a contract 

market unless he treats and deals with all funds accruing to a customer as funds 

belong to such customer, and prohibits the commingling of such funds with funds 

of the futures commission merchant. Since the trades in question were actually 

for the account of Albert Feldstein, the profits which accrued necessarily 

belonged to him. Permitting such profits to remain in the firm's account with 

the clearing house constituted a commingling of the firm's funds with those of 

Albert Feldstein, and a failure to treat and deal with the latter's money as 

required by section 4d (2). 

Section 4i declares it to be unlawful for any person to make or execute 

futures contracts on or subject to the rules of a contract market unless he 

shall report, in accordance with the rules and regulations of the Secretary, 

whenever contracts made by him with respect to any commodity or future during 

any one day equal or exceed such amount as may be fixed by the Secretary, or 

whenever his long or short position in any commodity or future equals or exceeds 

an amount fixed by the 

 

 

Secretary. Sections 5.04, 5.05, 5.06, 5.07, 5.20 of the rules and regulations 

(17 CFR, 5.04, 5.05, 5.06, 5.07, 5.20), in effect, require each futures 

commission merchant to report to the Commodity Exchange Authority whenever any 

account carried by him for a customer shows open contracts in any one egg future 

equal to or in excess of 25 carlots. Sections 5.10, 5.11, 5.12 and 5.21 of the 

rules and regulations (17 CFR, 5.10, 5.11, 5.12, 5.21) require each trader to 

furnish similar information with respect to his own account. The acts of the 

respondents in reporting the trades of Albert Feldstein as their own necessarily 

constituted false reports with respect to their own transactions and positions, 

as well as a failure to report correctly with respect to the transactions and 

positions of a customer. Such acts were, therefore, in violation of section 4i 

of the act and the above cited sections of the rules and regulations. 
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Section 4g of the act provides for suspension of the registration of any 

futures commission merchant who violates any provision of the act or who fails 

or refuses to keep books and records pertaining to futures transactions in the 

form and manner required by the Secretary. The respondents violated the 

obligations imposed upon them as traders, as well as those which they were 

required to observe in their capacity as futures commission merchants. We are 

of the opinion that the violations in question warrant suspension of the 

registration of M. Richter Sons as a futures commission merchant for a period of 

fifteen days, and a concurrent denial of trading privileges on contract markets 

to all the respondents for a like period. It is recommended that these periods 

begin to run within five days after issuance of the order. 

ORDER

Effective on the fifth day after the date of this order, the registration of 

M. Richter Sons as a futures commission merchant is suspended for a period of 

fifteen (15) days. 

Effective on the fifth day after the date of this order, all contract markets 

shall refuse all trading privileges thereon to M. Richter Sons, Isadore Richter 

and Fred Richter for a period of fifteen (15) days. 

A copy of this decision and order shall be sent by registered mail to each 

respondent and to each contract market under the act. 

 

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