Release:#3888-96

For Release:January 23, 1996

REFCO AGREES TO PAY A $925,000 CIVIL PENALTY TO SETTLE

A CFTC ADMINISTRATIVE PROCEEDING FINDING THAT REFCO VIOLATED CFTC
    SEGREGATION AND SUPERVISION REQUIREMENTS

The CFTC Action Also Finds that Refco's Failure to Supervise
    Diligently its Employees in this Case Violates Previous CFTC Cease and
    Desist Orders Against the Firm

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced
    today that it has issued an order instituting administrative proceedings
    against Refco, Inc., a Chicago-based futures broker with worldwide
    operations, and simultaneously accepted Refco's offer of settlement under
    which Refco will pay a $925,000 civil monetary penalty and modify its
    internal procedures and lines of reporting, among other remedial
    actions.

The Commission's order finds that Refco violated the Commodity Exchange
    Act (CEA) and CFTC regulations by violating segregation requirements,
    failing to supervise diligently its employees, and violating previous
    Commission orders to cease and desist from failure to supervise
    violations.

Refco, by Combining Commodity Pool Account Balances, Violated
    the

Segregation Requirements of Federal Commodity Law and CFTC
    Regulations

Specifically, the CFTC order finds that in April 1992, Refco
    consolidated the balances of the accounts of five separate entities. These
    entities had been formed as unincorporated associations in Germany, and
    were intended to pool money exclusively from German investors and trade,
    among other things, commodity futures contracts.

The CFTC order finds that at the time of the consolidation, four of
    these entities, or pools, owed Refco approximately $3.8 million because of
    their combined net debit balances. The fifth pool had a credit balance of
    approximately $4 million, which represented the amount of funds held by
    Refco for that pool.

By combining the balances of all of the subject accounts, Refco violated
    the segregation requirements of the CEA and CFTC regulations, the order
    finds. Although the organizers and operators of the pools had the same
    parent company, and Refco had attempted to document its right to offset the
    balances of the different accounts, the CFTC order finds that at the time
    of the consolidation no such right of offset existed, and Refco had no
    authority for the consolidation.

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Furthermore, the CFTC order further finds that at various times from May
    1989 through April 10, 1992, Refco failed to supervise diligently the
    handling of these accounts by its employees. The consolidation was approved
    by Refco's Margin and Compliance Departments, but without a review of the
    complete files for the accounts, and without the approval or concurrence of
    a senior Refco officer, the order finds. The CFTC order also finds that
    Refco's failure to supervise violated previous CFTC cease and desist
    orders, in 1983, 1988 and 1990, concerning Refco's failure to supervise its
    employees.

Refco Agrees to Civil Fine and Other Sanctions to
    Settle the CFTC Action

To settle the action, Refco, without admitting or denying the findings
    of facts and findings of violations made by the CFTC, consented to a CFTC
    order finding that Refco violated the provisions of the CEA and CFTC
    regulations, and consented to a cease and desist order prohibiting further
    violations.

In addition, Refco agreed to pay a $925,000 civil monetary penalty and
    further agreed:

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(1) to make changes in its lines of reporting and internal procedures
    concerning the establishment of multiple accounts;

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(2) to require its Director of Compliance and its Senior Officer in
    Charge of Operations (COO) to review and approve in writing the
    establishment of multiple accounts, for the same customer or for different
    customers, with all consolidations of multiple accounts requiring the COO's
    written approval; and

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(3) to make a structural change in its lines of reporting, so that its
    Director of Compliance and its Director of Margins report directly, and on
    a regular basis, to

Refco's COO.

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