**Release: #4269-99 (CFTC Docket No. 99-12)**

**For Release: May 24, 1999**

**CFTC FILES AND SETTLES ACTION AGAINST REFCO, INC. FOR
    ORDER-TAKING AND RECORDKEEPING VIOLATIONS AND FOR FAILING TO
    SUPERVISE**

**Company Ordered to Pay $7 Million, Including $1
    Million To Fund An Industry Study, And to Cease And Desist From Further
    Violations, and to Conduct an Internal Review Concerning Refco's Compliance
    Policies and Procedures**

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) today announced that it issued
    an order, simultaneously instituting and settling an administrative
    proceeding, finding that Refco, Inc. (Refco), a registered futures
    commission merchant, violated provisions of the Commodity Exchange Act
    (CEA) and CFTC regulations. The CFTC order finds that Refco failed to
    comply with CFTC regulations regarding order-taking and recordkeeping in
    handling customer orders, in violation of section 4g of the CEA and
    regulation 1.35(a-1)(2). The order also finds that Refco failed to
    administer a proper supervisory system and failed to investigate
    indications of improper handling of trades, in violation of CFTC regulation
    166.3. Refco consented to issuance of the order without admitting or
    denying the findings contained in it.

The CFTC ordered the company to cease and desist from further violations
    of those provisions of the CEA and to pay a total of $7 million, of which
    $6 million will be paid immediately as a civil monetary penalty. The
    remaining $1 million will be used to fund a study of issues associated with
    order transmission and entry procedures for exchange-traded futures and
    options and the diligent supervision of the order transmission and entry
    process by commodity professionals. The study will be overseen by
    representatives of the National Futures Association and the Futures
    Industry Institute, among others. This is the first CFTC order ever to
    contain such a provision.

The order also requires Refco to conduct an internal study by its new
    General Counsel to review and make recommendations concerning its
    compliance policies and procedures related to its handling of trades by its
    trading floor and back office personnel as may be necessary to conform such
    procedures to the requirements of the CEA, the CFTC regulations and
    exchange rules, and to prevent recurrence of the type of conduct discussed
    in the order.

According to the order, the matter arose out of trade allocations by a
    registered introducing broker (IB). The order states that, from at least
    January 1995 through December 1995, the IB typically placed orders for
    thousands of treasury bond futures and options contracts per day for his
    customers through Refco, and the IB placed a substantial number of such
    orders without providing account identification to Refco. After the orders
    were executed, according to the order, the IB assigned those trades to
    customer accounts, directing positions as the IB chose, and sometimes moved
    trades between accounts after trades had been assigned and cleared. In
    connection with the IB's trading, the order finds that Refco failed to
    comply with CFTC regulations regarding order taking and recordkeeping in
    handling customer orders, in violation of section 4g of the CEA and CFTC
    regulation 1.35(a-1)(2).

The order also finds that Refco violated CFTC regulation 166.3 by
    failing to administer a proper supervisory system to oversee the process of
    order taking and the receipt and changing of customer identification on
    orders. In addition, the order finds that Refco had indications of the
    improper handling of trades which it failed to investigate properly, in
    violation of CFTC regulation 166.3.

Geoffrey Aronow, the Director of the Division of Enforcement, commented
    on the order and settlement:

*"This settlement culminates a critical aspect of this matter. It
    demonstrates the Commission's commitment to impose substantial
    sanctions when confronted with serious recordkeeping and supervision
    failures. It also provides for an innovative effort to further the
    development and promotion of good practices and conduct in the industry
    through the funding of a study conductd by industry experts. We hope that
    this study will promote industry practices that provide a higher level of
    customer protection and market integrity. If so, this settlement will have
    an impact felt well beyond the parties involved in the years ahead. I am
    very proud of the work of the staff of the Division in bringing this aspect
    of this investigation to such a successful conclusion."*

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