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Commodity Futures Trading Commission 

CEA CASES 

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

DOCKET NUMBER: 158 

DATE: NOVEMBER 25, 1968 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re: Sterling Securities, Inc., Paul J. Miller, and R. Peter Denker, 

Respondents 

CEA Docket No. 158 

Complaint and Notice of Hearing Under the Commodity Exchange Act 

There is reason to believe that the respondents, Sterling Securities, Inc., 

Paul J. Miller and R. Peter Denker, have 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 regulations made pursuant thereto (17 CFR, Part 1), hereinafter 

referred to as the regulations. Therefore, this complaint and notice of hearing 

is issued stating the charges in that respect as follows: 

I 

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 act. 

II 

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. 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. 

III 

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. 

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

April 27, 1967, respondent Sterling Securities, Inc. was undersegregated 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 paragraph III hereof, was 

from $ 873.09 to $ 6,087.34 less than the amount necessary to pay all credits 

and equities due to such customers. 

V 

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. 

VI 

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, 

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. 

VII 

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

of the said Archie Diehl. 

VIII 

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. 

IX 

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. 

X 

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. 

XI 

By reason of the facts alleged in this complaint, the respondents wilfully 

violated sections 4d(2), 4g and 6(b) of the act (7 U.S.C. 6d(2), 

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 (17 CFR 1.20, 1.21, 1.22, 1.32 and 1.35). 

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

served upon the respondents 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 respondents 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 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 respondents are hereby notified 

that unless a hearing is waived, a hearing will be held at 10:00 a.m., local 

time, on January 22, 1969, in Chicago, Illinois, at a place therein to be 

specified later, before a referee designated to conduct such hearing. At such 

hearing, the respondents 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 respondents from 

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

all contract markets refuse all trading privileges to the respondents for such 

period of time as may be determined, (2) directing that the respondents shall 

cease and desist from violating the act and regulations in the manner alleged 
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herein, and (3) suspending or revoking the registration of respondent Sterling 

Securities, Inc. as futures commission merchant. 

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

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

Done at Washington, D. C. 

November 25 1968 

[SEE SIGNATURE IN ORIGINAL] 

John A. Schnittker 

Acting Secretary 

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