Case Summary

CONCORDE TRADING GROUP INC CFTC 93-1567 NFA ID: 0210383

 Respondent/Effective Date Summary 
 NFA IDRespondentEffective Date
 0210383CONCORDE TRADING GROUP INC08/13/1993
 0114057HOLLANDER, FREDERICK NEIL02/25/1994
 0080481SCHLECHT, ARTHUR JOHN08/13/1993
 Rule Summary 
 NFA IDRespondentRule Type
 0210383CONCORDE TRADING GROUP INC• CFTC33.10 - FRAUD RE COMMODITY OPTIONS
  • CFTC166.3 - FAILURE TO SUPERVISE
  • CEA 4c(b) - ILLEGAL TRADING OF COMMODITY OPTIONS
  • CFTC33.7(f) - OPTION DISCLOSURE STATEMENT RULES
 0114057HOLLANDER, FREDERICK NEIL• CEA 4c(b) - ILLEGAL TRADING OF COMMODITY OPTIONS
  • CFTC166.3 - FAILURE TO SUPERVISE
  • CFTC33.7(f) - OPTION DISCLOSURE STATEMENT RULES
  • CFTC33.10 - FRAUD RE COMMODITY OPTIONS
 0080481SCHLECHT, ARTHUR JOHN• CFTC33.10 - FRAUD RE COMMODITY OPTIONS
  • CEA 4c(b) - ILLEGAL TRADING OF COMMODITY OPTIONS
  • CFTC166.3 - FAILURE TO SUPERVISE
  • CFTC33.7(f) - OPTION DISCLOSURE STATEMENT RULES
 Action Summary 
 NFA IDRespondentAction Types
 0210383CONCORDE TRADING GROUP INC• CFTC INJUNCTIVE ACTION
 0114057HOLLANDER, FREDERICK NEIL• CFTC INJUNCTIVE ACTION
 0080481SCHLECHT, ARTHUR JOHN• CFTC INJUNCTIVE ACTION
 Penalty/Event Summary 
 NFA IDRespondentPenalty/EventEvent Date
 0210383CONCORDE TRADING GROUP INC• RETURN FUNDS
  • OTHER (SEE NARRATIVE)
  • PERMANENT INJUNCTION
  • COMPLAINT FILED
 0114057HOLLANDER, FREDERICK NEIL• PERMANENT INJUNCTION
  • COMPLAINT FILED
 0080481SCHLECHT, ARTHUR JOHN• RETURN FUNDS
  • OTHER (SEE NARRATIVE)
  • PERMANENT INJUNCTION
  • COMPLAINT FILED
 Narrative Summary 
General Case Narrative
Release: #3689-93

For Release: August 18, 1993

CFTC FILES CIVIL COMPLAINT AGAINST CONCORDE TRADING GROUP OF AVENTURA, FLORIDA, ITS PRESIDENT, AND FORMER SALES MANAGER

CFTC Alleges Fraud in the Solicitation of Customer Commodity Option Accounts

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it has filed a two-count civil complaint against Concorde Trading Group, Inc., a registered introducing broker located in Aventura, Florida; Frederick N. Hollander of Sunrise, Florida, the former sales manager of Concorde; and Arthur J. Schlecht of Miami, Florida, the current president of Concorde, alleging violations of the anti-fraud provisions of the Commodity Exchange Act and CFTC regulations.

The CFTC complaint, filed on August 13, 1993, in the U.S. District Court for the Southern District of Florida, charges the defendants with fraud by making false, deceptive, and misleading representations of material facts in connection with the solicitation of customer commodity option accounts. The alleged material misrepresentations concern the likelihood of realizing profits and the risk of loss involved in trading options on commodity futures contacts and the experience and trading success of Concorde and its salespeople, including the firm's trading performance record and research capabilities.

The CFTC's complaint alleges that Concorde's salespeople "routinely pressure customers to enter into commodity option trades which seldom return a profit on the customer's invest- ment" and that Concorde's salespeople employ various trading practices which are engaged in only for the purpose of generating commissions.

For example, the complaint alleges that from January 1989 to June 1992, Concorde traded over 2,800 customer accounts and that over 90 percent of these customers lost all or substantially all of their money, while Concorde collected $12.8 million in commissions. The complaint also alleged that in the first five months of 1993, Concorde had 1,126 actively traded customer accounts, and at the end of May 1993, those accounts had an aggregate net loss of about $5.5 million and had paid total commissions of approximately $2.6 MILLION, WHICH ACCOUNTED FOR 48 PERCENT OF THE NET LOSSES.

THE SECOND COUNT OF THE COMPLAINT ALLEGES THAT THE DEFENDANTS FAILED TO SUPERVISE DILIGENTLY THE HANDLING OF CUSTOMERS' COMMODITY OPTION ACCOUNTS AND FAILED TO MONITOR EFFECTIVELY THE SALES SOLICITATIONS BY CONCORDE'S SALESPEOPLE.

THE COMPLAINT SEEKS PRELIMINARY AND PERMANENT INJUNCTIONS AGAINST THE DEFENDANTS, AND, IF NECESSARY, ADDITIONAL EQUITABLE RELIEF, INCLUDING AN ACCOUNTING, APPOINTMENT OF RECEIVER, AND DISGORGEMENT OF ALL ILLEGALLY OBTAINED FUNDS.

Release: #3747-94 (93-1567 Civ Marcus)

For Release: March 10, 1994

PERMANENT INJUNCTION ENTERED AGAINST FREDERICK N. HOLLANDER IN CONCORDE TRADING GROUP (FLORIDA) CFTC FRAUD CASE

Hollander Agrees to Cooperate with the CFTC in its Ongoing Prosecution of the Case

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on February 25, 1994, U.S. District Court Judge Stanley Marcus of the Southern District of Florida entered an order of permanent injunction against Frederick N. Hollander (Hollander) of Sunrise, Florida, a former sales manager of Concorde Trading Group, Inc. (Concorde), a registered introducing broker located in Aventura, Florida.

The court's action stems from a two-count CFTC complaint filed on August 13, 1993, against Hollander, Concorde, and Arthur J. Schlecht of Miami, Florida, the current president of Concorde, alleging violations of the anti-fraud and supervisory provisions of the Commodity Exchange Act (CEA) and CFTC regulations (CFTC News Release #3689-93, August 18, 1993).

The CFTC complaint charges the defendants with fraud by making false, deceptive, and misleading representations of material facts in connection with the solicitation of customer commodity option accounts. The alleged material misrepresentations concern the likelihood of realizing profits and the risk of loss involved in trading options on commodity futures contracts and the experience and trading success of Concorde and its salespeople. The complaint alleges that Concorde's salespeople routinely pressure customers to enter into commodity option trades and that Concorde's salespeople employ various trading practices which are engaged in only for the purpose of generating commissions. For example, the complaint alleges that from January 1989 to June 1992, Concorde traded more than 2,800 customer accounts and that more than 90 percent of these customers lost all or substantially all of their money, while Concorde collected $12.8 million in commissions.

To settle the CFTC's civil action, Hollander, without admitting or denying the allegations, agreed to the entry of an order of permanent injunction that prohibits him from violating the anti-fraud and supervisory provisions of the CEA and the CFTC regulations and orders him to cooperate with the CFTC in the prosecution of this and any related proceeding. Specifically, Hollander is ordered to respond truthfully to any request for information from the CFTC, provide authentication of documents, and to testify truthfully in response to any requests by the CFTC for sworn testimony. The CFTC's injunctive case is still pending against Concorde and Arthur J. Schlecht.

CFTC Files and Simultaneously Settles Administrative Action Against Hollander

In addition to the civil action, on March 1, 1994, the CFTC also filed, and simultaneously settled, a two-count administrative complaint against Hollander, charging him with the same violations as those alleged in the injunctive complaint.

To settle the CFTC administrative complaint, Hollander, without admitting or denying the allegations, consented to the entry of a CFTC order that finds that he violated the provisions of the CEA and CFTC regulations charged; orders him to cease and desist from further such violations; and permanently prohibits him from trading on or subject to the rules of any exchange.

Also, in the order, Hollander agreed never to seek registration with the CFTC in any capacity; never to act as an officer, director, principal, employee, or agent of, or perform work for, be associated with, or receive any form of compensation from any CFTC registrant; and to cooperate fully with the CFTC in this or any related proceeding.

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Release: #3927-96 (Civ. 93-1567)

For Release: July 23, 1996

FLORIDA COURT ENTERS CFTC SETTLEMENT ORDER WITH CONCORDE TRADING GROUP OF AVENTURA, FLORIDA, AND CONCORDE PRESIDENT ARTHUR J. SCHLECHT, NETTING $1.5 MILLION IN CUSTOMER RESTITUTION, AMONG OTHER SANCTIONS AGAINST THE DEFENDANTS

Florida Court's Approval of Settlement Also Prohibits Fraudulent Statements and Omissions in Marketing Commodity Options, Requires Stringent Controls on Sales Operations

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that U.S. District Judge Stanley Marcus of the U.S. District Court for the Southern District of Florida entered a consent order of permanent injunction against Concorde Trading Group, Inc., an introducing broker located in Aventura, Florida, and Concorde's president, Arthur J. Schlecht, of Miami, Florida.

The consent settlement agreement follows nearly three years of litigation against the firm and Schlecht, commencing in August 1993 when the CFTC filed a two-count civil complaint against the defendants, including a former Concorde branch manager, Frederick N. Hollander, of Sunrise, Florida, alleging violations of the anti- fraud provisions of the Commodity Exchange Act (CEA) and CFTC regulations, including that the defendants make false, deceptive, and misleading representations of material facts in connection with the solicitation of customer commodity option accounts (see CFTC release #3689-93, August 18, 1993).

The CFTC's complaint alleged that, through high-pressure telephone sales activities, the defendants committed fraud, specifically, by, in the course of soliciting customers to purchase options on commodities, routinely making false, deceptive, and misleading oral representations and omissions of material fact regarding the likelihood of profits, the risk of loss (particularly regarding seasonal factors in energy futures and options contracts), and the experience and trading record of Concorde and its salesforce. Hollander settled the CFTC's charges shortly after the filing of the complaint.

Failure to Make the Ordered $1.5 Million of Restitution Payments Would Result in Concorde and Schlecht Being Barred Permanently from the Futures Industry

Under the court's consent order, Concorde and Schlecht have agreed to pay $1.5 million in restitution to former Concorde customers who maintained a commodity futures trading account introduced by Concorde after February 1, 1992, to settle CFTC charges in connection with telemarketing options on commodities such as heating oil and unleaded gasoline.

The order also prohibits Concorde and Schlecht from specific misrepresentations and deceptive omissions in connection with their sales activities, and requires their diligent supervision of customer accounts. Concorde and Schlecht also must implement measures to monitor their sales operations. Should Concorde or Schlecht fail to make timely payment of their obligation, the order provides that they shall be permanently prohibited from acting in any capacity, including their present capacities, for which registration under the CEA is required.

In commenting on the settlement, CFTC Acting Chairman John Tull said:

"This settlement reflects the CFTC's commitment to use its

enforcement resources to put money back in the pockets of

injured customers, whenever it's possible. The customers who

will receive restitution lost substantial amounts in what

defendants touted as 'seasonal investment opportunities.'"

Order Lists Prohibited Misrepresentations and Omissions of Material Fact Related to the Solicitation of Commodity Options

In addition, the settlement order permanently enjoins and restrains Concorde and Schlecht from further violations of the CEA and CFTC regulations as charged. To that end, for the first time in a CFTC settlement, the court order specifically lists the prohibited misrepresentations and omissions of material fact related to the solicitation of customers or prospective customers to purchase commodity option investments to customers. In this regard, the consent order prohibits the following

misrepresentations and omissions:

~ Representing to customers and prospective customers

-- that they are guaranteed to make a profit as the

result of an investment in commodity options,

-- that trading commodity options is virtually risk-free,

and

-- that disclosure documents required by CFTC regulation

are insignificant or of little importance, or words to

that effect.

~ Omitting to inform customers and prospective customers

-- that a seasonal increase in demand for a specific

commodity, such as heating oil and unleaded gasoline, in

and of itself, will not necessarily result in increased

value of the option on the given commodity,

-- that past trends in futures prices on specific

commodities do not necessarily forecast current

profitability of options on futures contracts on those

commodities, -- that currently known market news does not

necessarily mean that a Concorde customer will make money

by trading through Concorde as currently known market

news is usually already factored into the underlying

futures price, as well as the option value,

-- that, except possibly for in-the-money options, a rise

in the price of the underlying futures contract does not

typically correlate on a one-to-one ratio with a rise in

the price of an option on that futures contract,

-- that stop loss orders are not always effective in

limiting risk of loss,

-- that diversification of option positions does not

necessarily limit risk of loss or increase profit

potential for each option position purchased, and

-- that, under certain market conditions, a customer may

find it difficult or impossible to liquidate a position

since market conditions on the exchange where the order

is placed may make it impossible to execute a liquidation

of the position.

CFTC Acting Chairman Tull, in emphasizing the importance of the examples of prohibited misrepresentations and omissions contained in the order, observed:

"These types of misrepresentations, and to a greater extent,

material omissions, lie at the core of the commodity options

sales practices of many introducing brokers. By setting forth

specific examples of prohibited misrepresentations and

omissions, the consent order should serve not only to deter

future unlawful conduct by Concorde, but also to put on notice

other similarly situated operations that they must address

such deceptive practices to avoid future actions by the CFTC."

Order Directs Concorde and Schlecht to Implement Internal Compliance Measures Specifically Designed to Deter Future Sales Violations

Finally the settlement order requires that Concorde and Schlecht to implement internal compliance measures specifically that are designed to deter future sales violations, including:

-- hiring a full time compliance officer, whose salary is in no way dependent on the level of Concorde's sales, to tape record and monitor regularly the sales activities of the firm and reporting the findings to Schlecht and the CFTC, upon the Commission's request, and

-- securing the services of a qualified independent consultant for a minimum of 5 years to tape record and monitor, independently and periodically, the sales activities of the firm and report the findings to Schlecht and the CFTC.

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