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Commodity Futures Trading Commission 

CEA CASES 

NAME: STERLING SECURITIES, INC., PAUL J. MILLER, AND R. PETER DENKER 

CITATION: 28 Agric. Dec. 115 

DOCKET NUMBER: 158 

DATE: FEBRUARY 27, 1969 

DOCUMENT TYPE: DECISION AND ORDER 

(No. 12,285) 

In re STERLING SECURITIES, INC., PAUL J. MILLER, and R. PETER DENKER. CEA 

Docket No. 158. Decided February 27, 1969. 

Customer's funds -- Undersegregation -- False reports -- Cease and desist -- 

Revocation of registration -- Denial of trading privileges -- Stipulation

Respondents are ordered to cease and desist from failing to treat and deal 

with all customers' funds in conformity with provisions of the act, failing to 

prepare and maintain an accurate record as of the close of the market on each 

business day of the amount of money, securities and property which must be in 

segregated account, filing reports containing false or misleading statements of 

material fact and willfully omitting to state in such reports any material fact 

required to be stated therein. The registration of the corporate respondent as 

a futures commission merchant is revoked, and all contract markets are directed 

to refuse all trading privileges to all of the respondents for a period of 6 

months. 

Earl L. Saunders for Commodity Exchange Authority. 

Arthur A. Reiser, Jr., of Hamper & Reiser, Chicago, Ill., for respondents. 

Decision by Thomas J. Flavin, Judicial Officer

PRELIMINARY STATEMENT

This is an administrative proceeding under the Commodity Exchange Act (7 

U.S.C. 1 et seq.), instituted by a complaint and notice of hearing by the Acting 

Secretary of Agriculture. The complaint charges the respondents with wilfully 

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

amended by Public Law 90-258), and sections 1.20, 1.21, 1.22, 1.32 and 1.35 of 

the regulations issued under the act (17 CFR 1.20, 1.21, 1.22, 1.32, 1.35). 

No hearing has been held with respect to this proceeding. The respondents 

have filed separate stipulations under section 0.4(b) of the rules of practice 

(17 CFR 0.4(b)), in which they admit, for the purposes of this proceeding, the 

facts contained herein under "Findings of Fact," waive hearing on the charges, 

and consent to the entry of the order hereinafter set forth. 

FINDINGS OF FACT

1. Respondent Sterling Securities, Inc., an Illinois corporation with its 

principal office and place of business at 308 First Avenue, Sterling, Illinois, 

is now, and was at all times material herein, a registered futures commission 

merchant under the Commodity Exchange Act. 

2. Respondents Paul J. Miller and R. Peter Denker, individuals whose business 

address is 308 First Avenue, Sterling, Illinois, are now, and were at all times 

material herein, the president and treasurer, and the vice-president and 

secretary, respectively, of the respondent corporation. Respondent Paul J. 
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Miller is now, and was at all times material herein, the principal shareholder 

of the respondent corporation. At all such times, respondents Paul J. Miller 

and R. Peter Denker managed and controlled the business of the respondent 

corporation and were responsible for the corporate acts and transactions 

hereinafter described. 

3. At the times hereinafter stated, respondent Sterling Securities, Inc., in 

the regular course of its business as futures commission merchant, handled 

accounts of customers who traded in commodity futures. 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, prior to September 11, 1967, the respondent corporation had to its 

credit with a bank or other depositories, sums of 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. 

4. On eight business days during the period from February 28, 1967 through 

April 27, 1967, respondent Sterling Securities, Inc. was under-segregated in 

amounts within the range of $ 873.09 and $ 6,087.34 -- that is, on the eight 

days mentioned the total amount of customers' funds held in segregation, as 

described in Finding of Fact 3 hereof, was from $ 873.09 to $ 6,087.34 less than 

the amount necessary to pay all credits and equities due to such customers. 

5. In June 1966, and prior to the acts and omissions described above, 

examination of the books and records of respondent Sterling Securities, Inc. by 

the Commodity Exchange Authority disclosed that on 11 business days during the 

period from May 25, 1966 through June 9, 1966, respondent Sterling Securities, 

Inc. was under-segregated in amounts within the range of $ 185.25 and $ 

3,111.50, and that on 47 business days during the period from April 4, 1966 

through June 8, 1966, respondent Sterling Securities, Inc. had not prepared a 

daily record of customers' funds required to be held in segregation. These 

matters were discussed with respondent Paul J. Miller, and on June 23, 1966, the 

Director of the Accounting and Licensing Division of the Commodity Exchange 

Authority wrote a letter to respondent Paul J. Miller in his capacity as an 

officer of the respondent corporation, which letter read as follows: 

A basic purpose of the Commodity Exchange Act is, as you know, to insure that 

regulated commodity customer's funds are separately accounted for and not used 

by the commission merchant to finance his own operations, nor may he use one 

customer's funds to finance the trading of another. 

In order for the commission merchant and our auditors to determine compliance 

with these requirements, section 1.32 of the regulations under the law provides 

that, as of the close of the market each business day, a computation shall be 

made of the amount of money, securities, and property which must be placed in 

segregated accounts to meet the requirements of the act. 

On May 10, 1966, your officers discussed the segregation and recordkeeping 

provisions of the regulations with Mr. G. Edward Piala of our Chicago office. 

Also, we sent you a leaflet on segregation and accounting procedures when you 

were registered as a futures commission merchant. For these reasons your 

responsibilities under the act were known by your management. 

Our recent audit disclosed that you were undersegregated in the amount of $ 

2,900.00 on the audit date, May 31, 1966. Also, you were undersegregated on ten 

other business days from May 25, 1966 through June 9, 1966. Further, you failed 

to prepare the daily computation of segregation requirements on 47 business days 

during the period of April 4, 1966 through June 8, 1966. 

The purpose of this letter is to inform you that these failures to observe 

the provisions of the law and regulations are serious and to afford you an 

opportunity to bring your firm into compliance. 

6. On or about May 6, 1968, respondent Sterling Securities, Inc. deposited in 

its bank account 199-687-5, and for a period of time used for its own benefit, 
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funds in the sum of $ 2,000.00 which it had received from one Alex Hogg, to 

margin, guarantee and secure transactions in commodity futures for the account 

of the said Alex Hogg. 

7. On or about June 13, 1968, respondent Sterling Securities, Inc. deposited 

in its bank account 199-687-5, and for a period of time used for its own 

benefit, funds in the sum of $ 5,000.00 which it had received from one Archie 

Diehl, to margin, guarantee and secure transactions in commodity futures for the 

account of the said Archie Diehl. 

8. On or about April 4, 1968, respondent Sterling Securities, Inc. deposited 

in its bank account 199-687-5, and for a period of time used for its own 

benefit, funds in the sum of $ 4,000.00 which it had received from one John C. 

Pignatelli to margin, guarantee and secure transactions in commodity futures for 

the account of the said John C. Pignatelli. 

9. On or about April 8, 1968, respondent Sterling Securities, Inc. deposited 

in its bank account 199-687-5, and for a period of time used for its own 

benefit, funds in the sum of $ 3,500.00 which it had received from the said John 

C. Pignatelli to margin, guarantee and secure transactions in commodity futures 

for his account. 

10. On June 26, 1968, the respondents filed a report on Form CEA-84 with the 

Commodity Exchange Authority, falsely reporting that since September 13, 1967, 

the accounts of the firm's customers "have been carried on a disclosed basis" 

with another futures commission merchant, and that all commodity futures orders, 

"together with all money, securities and property received to margin, guarantee 

or clear the trades or contracts" of such customers "are transmitted for 

execution or clearance direct to" such futures commission merchant. 

CONCLUSIONS

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

that, as charged in the complaint, the respondents wilfully 

violated sections 4d, 4g and 6(b) of the Commodity Exchange Act and sections 

1.20, 1.21, 1.22, 1.32 and 1.35 of the regulations thereunder. 

The complainant states that the administrative officials of the Commodity 

Exchange Authority have carefully considered the stipulations and waivers, and 

the terms of the suggested order, and that they believe that the proposed 

sanctions are adequate, and that the prompt entry, without further proceedings, 

of the order to which the respondents have consented will constitute a 

satisfactory disposition of this case, serve the public interest, and effectuate 

the purposes of the Commodity Exchange Act. The complainant recommends, 

therefore, that the stipulations and waivers submitted by the respondents be 

accepted, and that the proposed order be issued. It is so concluded. 

ORDER

Respondent Sterling Securities, Inc., shall cease and desist from: (1) 

engaging as futures commission merchant without treating and dealing with all 

customers' funds in conformity with the provisions of section 4d of the 

Commodity Exchange Act (7 U.S.C. 6d); (2) failing to prepare and maintain an 

accurate record as of the close of the market on each business day of the amount 

of money, securities, and property which must be in segregated account in order 

to comply with the requirements of section 4d of the Commodity Exchange Act (7 

U.S.C. 6d); (3) willfully making any false or misleading statement of any 

material fact in any report filed with the Secretary of Agriculture under the 

Commodity Exchange Act; and (4) willfully omitting to state in any such report 

any material fact which is required to be stated therein. 

Respondents Paul J. Miller and R. Peter Denker shall cease and desist from: 

(1) willfully causing, aiding, abetting, counseling, commanding, inducing, or 

procuring the failure of respondent Sterling Securities, Inc., or of any other 

futures commission merchant, (a) to comply with the requirements of section 4d 
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of the Commodity Exchange Act (7 U.S.C. 6d) in the treatment and handling of 

customers' funds, and (b) to prepare and maintain an accurate record, as of the 

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

and property which must be in segregated account in order to comply with the 

requirements of section 4d of the Commodity Exchange Act (7 U.S.C. 6d); and (2) 

wilfully making or causing to be made 

any false or misleading statement of any material fact in any report filed with 

the Secretary of Agriculture under the Commodity Exchange Act, and willfully 

omitting or causing to be omitted from any such report any material fact which 

is required to be stated therein, and willfully aiding, abetting, counseling, 

commanding, inducing, or procuring such an act or omission. 

The registration of respondent Sterling Securities, Inc., as futures 

commission merchant is revoked. The respondents, Sterling Securities, Inc., 

Paul J. Miller, and R. Peter Denker, are prohibited from trading on or subject 

to the rules of any contract market for a period of six (6) months, and all 

contract markets shall refuse all trading privileges to them during this period, 

such prohibition and refusal to apply to all trading done and positions held by 

them, directly or indirectly. 

This order shall become effective on the thirtieth day after the date of its 

issuance, and copies shall be served upon each of the parties and upon each 

contract market. 

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