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Commodity Futures Trading Commission 

CEA CASES 

NAME: NOVAK & NOVAK TRADING CO., INC., JAY A. NOVAK AND IRVING OLSHEVER 

CITATION: 31 Agric. Dec. 1131 

DOCKET NUMBER: 186 

DATE: SEPTEMBER 11, 1972 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 14,759) 

In re NOVAK & NOVAK TRADING CO., INC., JAY A. NOVAK and IRVING OLSHEVER. CEA 

Docket No. 186. Decided September 11, 1972. 

Minimum financial requirements -- Accounts and records -- Financial reports -

- Stipulation -- Denial of trading privileges -- Suspension

Where respondents Novak & Novak Trading Co., Inc. and Jay A. Novak willfully 

violated the Act and the regulations and have filed a stipulation and consent to 

the entry of the order herein, said respondents are ordered to cease and desist 

from such violations, are denied trading privileges and suspended as registrants 

under the Act as set forth in the order. The complaint as to respondent 

Olshever is dismissed. 

Richard W. Davis, Jr., for complainant. 

William T. Friedman, New York, N.Y., for respondents Novak & Novak Trading 

Co. and Jay A. Novak. 

Harold R. Kalvin, New York, N.Y., for respondent Irving Olshever. 

John A. Campbell, 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 a notice of hearing issued on September 28, 1971, under the said Act. By 

leave of the Referee, the complaint was amended on April 19, 1972. The 

complaint as amended charges that respondents Novak and Novak Trading Co., Inc., 

and Jay A. Novak willfully violated sections 4f and 4g of the said Act (7 U.S.C. 

6f and 6g) and sections 1.17 and 1.35 of the regulations thereunder (17 CFR 1.17 

and 1.35); that all respondents willfully violated section 6(b) of the said Act 

(7 U.S.C. 9); and that cause exists, pursuant to section 8a(3) of the said Act 

(7 U.S.C. 12a(3)), to find respondent Novak and Novak Trading Co., Inc., unfit 

to engage as futures commission merchant. 

All respondents filed answers to the complaint and the amendments thereto 

which, in general, admitted the jurisdictional allegations and denied the 

substantive allegations. 

A prehearing conference was held at New York, New York on January 11, 1972. 

An oral hearing was held at New York, New York on January 12, February 1, 2, 3, 

4, 28, and 29, March 1, 2, 3, 4, and 7, 1972 before John A. Campbell Hearing 

Examiner, Office of Hearing Examiners, United States Department of Agriculture. 
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On June 9, 1972, at the request of complainant, the hearing was postponed and 

continued without date. 

On September 8, 1972, respondents Novak and Novak Trading Co., Inc., and Jay 

A. Novak filed a stipulation under section 0.4(b) of the rules of practice (17 

CFR 0.4(b)) in which they (1) withdraw the answers previously filed by them, (2) 

admit the facts hereinafter set forth in paragraphs 1 and 2 of the Findings of 

Fact, (3) admit, for the purposes of this hearing and for such purposes only, 

the remaining facts set forth in the Findings of Fact and (4) waive further 

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

consent to the entry, of the order contained herein. In such stipulation, 

respondent Jay A. Novak represents that he will take adequate positive steps to 

insure that full, complete and systematic records of transactions relating to 

the business of dealing in commodity futures and cash commodities will be 

maintained by Novak & Novak Trading Co., Inc., and any other futures commission 

merchant with whom he may be associated in a managerial capacity; that the books 

and records of Novak & Novak Trading Co., Inc., and any such other futures 

commission merchant will clearly and accurately reflect the transactions and 

financial condition of such firm; and that all reports required to be submitted 

to the Commodity Exchange Authority by such firm will be complete and accurate. 

FINDINGS OF FACT

1. Respondent Novak & Novak Trading Co., Inc., a corporation organized and 

existing under the laws of the State of New York, with offices at 105 Hudson 

Street, New York, New York 10013, is now, and was at all times material herein, 

a registered futures 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 Jay A. Novak, an individual whose address is 8429-153 Avenue, 

Howard Beach, New York, was, at all times material herein, the president and a 

shareholder of the respondent corporation and responsible for its management, 

direction and control. 

3. During the period between March 31, 1969, and January 30, 1970, both 

inclusive, 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 issued by 

the Secretary of Agriculture under the Act (17 CFR 1.17). The respondent 

corporation lacked approximately $ 100, $ 14,000, $ 5,000 and $ 3500, on March 

31, 1969, November 28, 1969, December 31, 1969, and January 30, 1970, 

respectively, of having enough working capital to meet such minimum financial 

requirements. 

4. The said respondents submitted to the Commodity Exchange Authority two 

financial reports on behalf of the respondent corporation, prepared by the 

Certified Public Accountant servicing the books of the respondent corporation, 

which purported to give the required financial information as of March 31, 1969 

and November 30, 1969. Such reports signed by the Certified Public Accountant 

did not accurately reflect the financial condition of the respondent 

corporation, in that the report which purported to provide the information as of 

March 31, 1969, stated that the firm had general funds cash in banks and on hand 

of $ 42,835.84, when, in fact, the actual amount of such funds was only $ 15,-

835.84, and the report which purported to provide information 

as of November 30, 1969, stated that the firm had general funds cash in banks 

and on hand of $ 33,987.71, when, in fact, the actual amount of such funds was 

only $ 21,987.71. 
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5. The said respondents did not keep and maintain full, complete and 

systematic records of transactions relating to the business of dealing in 

commodity futures, in that: 

a. On or about November 28, 1968, entries were made in the books and records 

of the respondent corporation which showed a receipt and deposit in the bank of 

$ 27,000, when in fact, no such deposit was made. 

b. The books and records of the respondent corporation show that a cash 

disbursement of $ 15,000 was made on December 1, 1969, to Max Novak when, in 

fact, such disbursement was made on or before November 28, 1969. 

c. At all times in 1969 and in January, 1970, the respondent corporation 

failed to keep and maintain a record of transactions which showed separately for 

each account (including house accounts) all commodity futures transcations 

executed for each such account. 

d. At all times in 1969 and in January, 1970, the respondent corporation 

failed to prepare, within a reasonable time, purchase and sale statements for 

house accounts and to transfer profits and losses on closed trades for such 

accounts from the nonregulated settlement account to individual house accounts. 

e. At all times from March 31, 1969 through and including January, 1970, the 

respondent corporation failed to maintain accounts which clearly and accurately 

reflected the investments of such corporations. 

f. Journals and General Ledgers of the respondent corporation for 1969 and 

January 1970 writte nby the Certified Public Accountant were partially illegible 

to the extent that the financial condition and transaction of the corporation 

represented thereby could not be determined solely by an examination of such 

records. 

CONCLUSIONS

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

that respondents Novak and Novak Trading Co., Inc., and Jay A. Novak have 

violated sections 4f and 4g of the Commodity Exchange Act (7 U.S.C. 6f and 6g) 

and sections 

1.17 and 1.35 of the regulations thereunder (17 CFR 1.17 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 purpose 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 the stipulators. 

The officials of the Commodity Exchange Authority further consider that, in 

view of all the circumstances of this matter and the recommended disposition 

thereof as to the stipulators, a disciplinary action against respondent Olshever 

should not be maintained. The complainant therefore recommends that the 

complaint, insofar as it pertains to respondent Irving Olshever, be dismissed, 

without prejudice, terminating this proceeding. It is concluded that the 

complainant's recommendations should be adopted. 

ORDER

1. The respondents, Jay A. Novak and Novak & Novak Trading Co., Inc., are 

prohibited from trading on or subject to the rules of any contract market for a 

period of six months in any regulated commodity and all contract markets shall 

refuse all such trading privileges to the said respondents during this period. 

Such prohibition and refusal shall apply to trading done and positions held 

directly by the respondents or any of them, either for their own account or as 

the agents or representatives of any other person or firm, and also to all 
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trading done and positions held indirectly through persons or firms owned or 

controlled by the said respondents or any of them, or otherwise. 

2. The registration as futures commission merchant of the respondent Novak & 

Novak Trading Co., Inc., is suspended for a period of six months. 

3. The last four months of the period of prohibition and denial of trading 

privileges to Jay A. Novak and Novak & Novak Trading Co., Inc., specified in 

paragraph 1 of this Order, and the last four months of the suspension of 

registration as futures commission merchant of Novak & Novak Trading Co., Inc., 

specified 

in paragraph 2 of this Order are suspended. However, if the above respondents, 

or either of them, should, after complaint and hearing in accordance with 

established procedure, be found to have violated the Commodity Exchange Act or 

regulations thereunder within three years from the date of issuance of this 

Order, by reason of acts other than those constituting the basis for the charges 

brought in this proceeding, a supplemental Order in this proceeding may be 

issued against the offending respondent or respondents, without further notice, 

making effective forthwith the portion of the sanctions applicable to such 

respondent or respondents suspended by this Order. Such supplemental Order 

shall be in addition to any sanction which may be imposed as a result of such 

subsequent violation. 

4. Respondents Jay A. Novak and Novak & Novak Trading Co., Inc., individually 

and collectively, shall cease and desist from: 

(a) Engaging as futures commission merchant, within the meaning of the 

Commodity Exchange Act, without meeting the minimum financial requirements under 

the Act and the regulations thereunder. 

(b) Failing to keep full, complete and systematic records of transactions 

relating to the business of dealing in commodity futures as required by § 1.35 

of the regulations under the Commodity Exchange act (17 CFR 1.35.) 

(c) Submitting to the Commodity Exchange Authority financial reports 

purporting to represent the true financial condition of a registrant under the 

Act which do not accurately represent such financial condition. 

(d) Willfully causing, aiding, abetting, counseling, commanding or inducing 

any futures commission merchant to engage in activities which if engaged in by 

the respondents Jay A. Novak or Novak & Novak Trading Co., Inc., would be in 

violation of this paragraph. 

5. The perod of the denial of trading privileges and suspension of 

registration specified in paragraphs 1, 2 and 3 of this Order, shall become 

effective on the twentieth day after the date of entry of this Order. The cease 

and desist provision specified in paragraph 4 of this Order shall become 

effective on the date of service of this Order upon the respondents. 

6. The complaint herein, insofar as it pertains to respondent Irving 

Olshever, is dismissed, without prejudice. 

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

and on each contract market. 

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