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Commodity Futures Trading Commission 

CEA CASES 

NAME: GRAPPEL TRADING CO. 

DOCKET NUMBER: 153 

DATE: APRIL 4, 1968 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Grappel Trading Co., Respondent 

CEA Docket No. CEA 153 

Complaint and Notice of Hearing 

There is reason to believe that the respondent, Grappel Trading Co., violated 

the Commodity Exchange Act (7 U.S.C. 1 et seq.), and the rules and regulations 

made pursuant thereto (17 CFR, Part I), and in accordance with the provisions of 

section 6(b) of the said act (7 U.S.C. 9), this complaint and notice of hearing 

is issued alleging as follows: 

I 

The respondent, a partnership with offices at 6 Harrison Street, New York, 

New York, is now and was at all times material to this complaint a registered 

futures commission merchant under the Commodity Exchange Act with membership 

privileges on the New York Mercantile Exchange, a duly designated contract 

market under the said act. 

II 

At the times hereinafter stated, the respondent in the regular course of its 

business as futures commission merchant, carried accounts for customers who 

traded in commodity futures on the New York Mercantile Exchange. Such accounts, 

the trading therein, and the 

handling and disposition of funds in connection therewith, were subject to the 

provisions of the Commodity Exchange Act and the rules and regulations issued 

thereunder. At all such times, the respondent had to its credit with a bank or 

other depository, sums of money in varying amounts, held in segregated account 

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

trading profits accruing to such customers. 

III 

On the 64 business days between April 12 and July 13, 1967, both inclusive, 

the respondent was under-segregated in amounts within the range of $ 1,086 and $ 

3,606 -- that is, on the 64 business days mentioned the total amount of 

customers' funds held in segregation by the respondent, as described in 

paragraph II hereof, was from $ 1,086 to $ 3,606 less than the amount necessary 

to pay all credits and equities due to such customers. The under-segregation 

mentioned above came about because the respondent used the funds belonging to 

certain customers to finance the trading of other customers. 

IV 

Examination of the respondent's records by the Commodity Exchange Authority 

as of December 30, 1966, disclosed that on 30 business days between April 29 and 
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July 7, 1966, both inclusive, the respondent was under-segregated in amounts 

within the range of $ 49 and $ 2,101. On February 9, 1967, the Director of the 

Accounting and Licensing Division 

of the Commodity Exchange Authority wrote a letter to the respondent as follows: 

The Commodity Exchange Authority audits the records of firms operating as 

futures commission merchants. The audits are made to determine compliance with 

the provisions of the Commodity Exchange Act and related regulations. This 

letter concerns the audit made of your records as of December 30, 1966. 

This law, as you know, regulates futures trading in commodities mentioned in 

section 2. Section 4d(2) provides standards for handling regulated customers' 

accounts. With reference to the money, securities, and property received from 

or accruing to such customers, it provides: 

1. They shall be treated as belonging to the customer depositing them. 

2. They shall be separately accounted for and not be commingled with those of 

the commission merchant. 

3. They shall not be used to margin the trades of any person except the one 

for whom held. 

This requires that money or property held for customers shall be placed in 

segregated accounts. The money or property held in such accounts must be 

sufficient to pay amounts due customers. 

Sections 1.23 and 1.32 of the regulations provide for a record of segregated 

condition. Your records show many failures to keep sufficient funds in 

segregated accounts. They show under-segregation on thirty business days in the 

period beginning April 29 through July 7, 1966. The amounts of undersegregation range from $ 49 to $ 2,101. 

Our representative told you that this under-segregation was a serious failure 

to comply with the law. This letter is to confirm the audit findings as 

discussed by our accountant. Also, we wish to afford you an opportunity to 

achieve compliance. 

V 

By reason of the facts alleged in this complaint, the respondent knowingly 

and wilfully failed to treat and deal with all money received by it to margin, 

guarantee, and secure the trades and contracts of customers, or accruing to such 

customers as a result of such trades and contracts, as belonging to such 

customers, and used such money to margin and guarantee the trades and contracts 

and to secure and extend the credit of persons other than those for whom such 

money was held, in violation of section 4d(2) of the Commodity Exchange Act (7 

U.S.C. 6d(2)), and sections 1.20, 1.21, 1.22 of the rules and regulations 

thereunder (17 CFR 1.20, 1.21, 1.22). 

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

served upon the respondent. 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 

admitting or denying, specifically and in detail, each allegation of this 

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

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

the 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 the 

complaint are admitted likewise shall constitute a waiver of hearing unless a 

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

be held at 10:00 a.m., local time, on May 15, 1968, in New York, New York, 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 order should not be made suspending or revoking 

the registration of the respondent as futures commission merchant, and directing 

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

such period of time as may be determined. 

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. 

April 4, 1968. 

[SEE SIGNATURE IN ORIGINAL] 

Assistant Secretary 

George L. Mehren 

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