Release: #3935-96    

      For Release:September 4, 1996    

**CFTC TAKES ACTION AGAINST TRADING ADVISORS IN CYBERSPACE;**

**TWO UNREGISTERED COMMODITY TRADING ADVISORS OPERATING OVER THE      INTERNET HALTED FROM VIOLATING FEDERAL COMMODITY LAWS**

      WASHINGTON -- In what are the first enforcement proceedings brought by      the Commodity Futures Trading Commission (CFTC) based exclusively on *Internet* activities, the CFTC announced today that it has ordered **Steven Jay Marks** of Ocala, Florida, and **J. Spencer Brown**, of      Fort Worth, Texas, doing business as **ProTrade**, to halt operating      over the *Internet* in violation of federal commodity law.    

      In separate consent orders filed on September 3, 1996, the two      respondents agreed to stop providing advisory services to *Internet*      subscribers until they register with the CFTC as commodity trading      advisors (CTAs) and to provide customers and file with the CFTC the      mandatory Disclosure Document. Marks also agreed to provide restitution      to his subscribers.    

      Citing the unique challenges in regulating the *Internet* and the      Worldwide Web, the CFTC orders state that the *Internet* and the Web      enable unscrupulous operators to commit fraud or other violations of the      federal commodity futures laws with virtual anonymity, and then to      disappear quickly into cyberspace, leaving behind little or no evidence      of wrongdoing. Both orders also emphasize that the CFTC's      registration requirements, and the related recordkeeping and disclosure      requirements, are essential tools in overseeing this rapidly growing area      of technology. These requirements provide the CFTC, as well as      prospective customers, with basic information about individuals and      entities providing advice regarding investments in commodity futures and      options.    

      According to CFTC Director of Enforcement Geoffrey Aronow: "In      recent years, personal computers have gained widespread entry into the      mass market, and technological advances have enabled increasing numbers      of computer users to access the *Internet* and the Web. As the *Internet* increasingly becomes a medium for the exchange of      information and activity falling within the CFTC's jurisdiction, our      *Internet* surveillance program will become an increasingly      important part of our efforts to enforce the law and protect the      public."    

**CFTC Accepts Offer of Settlement of Steven Jay Marks**

      Marks consented to the entry of an order which finds that he has been      operating as a CTA without being registered as such, in violation of the      Commodity Exchange Act (CEA). Specifically, the CFTC order finds that      from at least May 7, 1996, through the end of June 1996, Marks posted      messages on financial-related bulletin boards on the *Internet*      geared toward individual investors. The order also finds that he offered      one-week trial memberships and paid subscriptions to "MarketPulse      Online," an electronic newsletter service containing market updates      and trading recommendations concerning eight categories of commodity      futures and options. In addition to his daily electronic newsletter      service, Marks provided subscribers with his personal telephone number to      call to receive individualized trading advice based on his systematic      trading program, according to the order.    

      Marks had been previously employed by other firms engaged in soliciting      orders for futures contracts. Two former customers obtained monetary      judgments against him, which Marks has failed to satisfy. The CFTC notes      that Marks could not register in any capacity until those judgments were      satisfied. The order also finds that Marks failed to provide his      customers, or file with the CFTC, the mandatory Disclosure Document      required by CFTC regulations.    

      The order prohibits Marks from violating the registration and Disclosure      Document requirements of the CEA and CFTC regulations, and directs him to      refund all funds he received from "MarketPulse Online"      subscribers. In addition, Marks must transmit an electronic mail message      over the *Internet* to all former subscribers notifying them that he      has been ordered to cease and desist from operating as an unregistered      CTA and to refund all subscription fees, and referring them to the      CFTC's *Internet* Homepage (**http://www.cftc.gov**) to obtain      general information concerning the trading of commodity futures and      specific information concerning the settlement order.    

      Finally, the order requires Marks to make reasonable efforts to satisfy      the outstanding monetary judgments against him, including keeping the      claimants apprised of his whereabouts until such time as the judgments      are satisfied.    

**CFTC Accepts Offer of Settlement of J. Spencer Brown d/b/a      ProTrade**

      Brown consented to the entry of an order which finds that he also has      been operating as an unregisterd CTA, thus also violating the CEA. The      CFTC's surveillance of the *Internet* brought Brown's      unregistered activities to light within a few weeks after he first      launched his venture in late July 1996.    

      Specifically, the order finds that Brown solicited the public through his      *Internet* homepage to open commodity futures trading accounts that      would be managed by him by means of a computer trading program called      "ProTrade." In his solicitation, Brown touted 13 years of      ProTrade's trading results based on hypothetical trading, according      to the order. The order prevents Brown from operating as a CTA in an      unregistered capacity and from violating the Disclosure Document and      hypothetical performance requirements of the CFTC's regulations.    

**CFTC Employing New Ways To Investigate And Regulate The Use Of      Electronic Media For Commodities-Related Activities, Including a New      Enforcement Internet Webpage**

      The CFTC's *Internet* surveillance program includes routine      monitoring of homepages on the Worldwide Web, as well as newsgroups,      bulletin boards, and chat rooms frequently visited by *Internet*      users. The CFTC's *Internet* surveillance program has already      provided dozens of initial referrals to enforcement staff, including the      matters highlighted above, involving issues relating to registration,      possible misrepresentation of the success of trading programs, and the      offer of potentially illegal off-exchange products.    

      The CFTC has recently added an additional component to its *Internet* surveillance program, consisting of a       Division of Enforcement Internet Webpage which is located on the      CFTC's Homepage. The Enforcement Webpage provides the public with a      means to contact directly the Enforcement Division's electronic      mailbox (**[email protected]**) with a      click of a mouse and thereby serves as a simple method to report      suspected commodities-related wrongdoing to the CFTC. The Enforcement      Webpage also provides direct access to the CFTC's *Proceedings      Bulletin*, which contains readily available information about CFTC      enforcement actions and sanctions against individuals and firms. (See      CFTC News Release #3930-96, August 9, 1996.)    

      # # #