Release: #4031-97 (CFTC Docket #97-10)
    For Release: June 24, 1997CFTC Files and Settles Administrative Proceeding Against Mitsubishi
    Corp., Merrill Lynch Futures, Inc., Country Hedging, Inc., and Charles B.
    Soule for Wash Sales Violations WASHINGTON -- The Commodity Futures Trading Commission (CFTC)
    announced today that it has issued an order instituting administrative
    proceedings against Mitsubishi Corporation of Tokyo, Japan; Merrill Lynch Futures Inc. of New York, New York; Country Hedging,
    Inc. of St. Paul, Minnesota; and Charles B. Soule of Plymouth,
    Minnesota, and simultaneously accepted offers of settlement from them.

The order, based on the settlement, finds that the respondents had
    engaged in wash sales in violation of the Commodity Exchange Act
    (CEA). Merrill Lynch additionally is found to have violated certain
    regulatory recordkeeping requirements.

Under terms of the settlement order, the respondents are ordered to
    cease and desist from violating the CEA and to pay civil penalties.
    Mitsubishi will pay $150,000, Merrill Lynch will pay $175,000; Country
    Hedging will pay $75,000; and Soule will pay $15,000.

Merrill Lynch and Country Hedging were also ordered to comply with
    certain undertakings related to their compliance procedures to prevent
    similar violations in the future. Soule's registration as an Associated
    Person (AP) was suspended for three months, and both of his CFTC
    registrations (he is also registered as a Floor Broker) are subject to
    conditions for two years. All parties agreed to cooperate with the
    Commission in related proceedings.

Geoffrey Aronow, the CFTC's Director of Enforcement, commented on the
    settlement order: "The Commission's order addresses an important and
    difficult area that lies at the core of the CEA -- wash sales. The
    substantial sanctions here demonstrate the Commission's continuing
    commitment to attack misuse of the markets. The record-keeping finding
    addresses the critical importance of accuracy in identifying owners and
    controllers of regulated trading accounts."

The CFTC's findings in the order, based upon the settlement offers,
    relate to two occasions when Mitsubishi sought to shift futures trading
    profits from one reporting period to another for accounting purposes by
    placing simultaneous orders with its brokerage firm, Merrill Lynch, to buy
    and sell equal quantities of wheat futures spreads at approximately the
    same price. The CFTC found that Mitsubishi was willing to accept small net
    losses on the spread transactions in order to show profits in the nearby
    futures contract and corresponding losses in the deferred contract; and
    that Mitsubishi gave instructions to price the purchase of the nearby
    contract at the day's low price and the sale of the nearby contract at the
    day's high price to accomplish that objective.

According to the CFTC's findings, Merrill Lynch accepted Mitsubishi's
    simultaneous spread orders and transmitted them simultaneously to Soule, an
    employee of Country Hedging, a brokerage firm at the Minneapolis Grain
    Exchange. Soule, in turn, gave the orders simultaneously to an independent
    floor broker who executed them by buying and selling the spreads.

According to the CFTC order, the actions by each entity and person in
    the chain of conduct violated the statutory provision that prohibits wash
    sales. The Commission also found that Merrill Lynch violated a CFTC
    regulation by failing to keep permanent records identifying owners and
    controllers of corporate trading accounts.

In addition to the cease and desist orders and the imposition of civil
    penalties, the Commission ordered Merrill Lynch and Country Hedging, both
    registered futures commission merchants, to comply with undertakings to
    implement and/or maintain certain compliance procedures. The CFTC ordered
    Merrill Lynch to use a daily trade report to monitor customer accounts for
    unusual day trading activity. Country Hedging is required to employ a
    compliance officer as long as the firm carries customer accounts, to
    implement compliance procedures and to train its staff in the proper
    handling of customer orders.

In addition to the three-month suspension of his registration as an AP,
    Soule's registrations as an AP and as a Floor Broker were conditioned for
    two years by requiring that he be supervised by a Country Hedging manager
    and by prohibiting him from supervising registrants and serving on exchange
    disciplinary, arbitration and oversight committees.

CFTC Files Related Action Against Alfred R. Piasio and
    Donald W. Wilson

In a related action, the CFTC announced that it filed a two-count
    complaint against Alfred R. Piasio of Old Brookville, New York and
    Donald W. Wilson of Long Lake, Minnesota, alleging that each
    violated the CEA's wash sale prohibition in connection with simultaneous
    orders to buy and sell equal quantities of wheat spreads at approximately
    the same price.

The CFTC complaint alleges that, on eleven occasions in 1992 and 1993,
    Piasio, then a registered AP employed by Merrill Lynch, accepted such
    simultaneous orders from his customer, Mitsubishi, and transmitted them to
    Soule on the MGE trading floor.

The complaint further alleges that Wilson, an independent floor broker
    at the MGE who is registered with the Commission as a floor broker and an
    AP, accepted the eleven pairs of simultaneous orders from Soule and
    executed eight of them by buying and selling spreads simultaneously.
    According to the complaint, Piasio and Wilson violated their duties by
    accepting such simultaneous orders without seeking clarification of the
    customer's intent.

A hearing in the case will be held before an administrative law judge to
    determine whether the allegations are true and, if so, whether remedial
    sanctions should be imposed against Piasio and Wilson. Possible sanctions
    include civil monetary penalties, cease and desist orders, registration
    restrictions and trading prohibitions. No date has been set for the
    hearing.