Snake oil salesman, don't let this happen to you

Discussion in 'Educational Resources' started by ivanbaj, Jul 8, 2009.


    On July 30, 1997, the Commodity Futures Trading Commission ("Commission") filed a Complaint and Notice of Hearing against Curtis McNair Arnold ("Arnold") and London Financial, Inc. ("LFI") (collectively, "Respondents"). The Complaint charges that Respondents violated Sections 4b(a)(i) and 4o(1) of the Commodity Exchange Act, as amended ("Act"), 7 U.S.C. §§ 6b(a)(i) and 6o(1), (1994), and Commission Regulation 4.41(a) and (b), 17 C.F.R. §§ 4.41(a) and (b) (1999).



    The Commission finds the following:


    Since at least 1992, Arnold and LFI have acted as commodity trading advisors ("CTAs") by offering and selling to the public the Pattern Probability Strategy ("PPS") trading system, a video, a book and a training manual teaching PPS, and various advisory services offering the trading signals generated by PPS, including facsimile services. Respondents also acted as CTAs by providing PPS trading signals to two commodity pools, one from 1990-1994 and one from 1993-1994. Since at least 1996, Respondents also have offered and sold to the public a publication entitled Systems USA, distributed by mail and over the Internet. Systems USA purports to "track" the performance of various trading systems authored by Arnold and other vendors, and offers and sells these systems and services related to these systems.

    Respondents distributed direct-mail promotional literature through two publishers in 1994 and 1995 and directly in 1995. The Promotions misrepresented the profits and rates of return generated by Arnold's trading pursuant to PPS and failed to disclose that many of the representations concerning the performance of PPS were based on hypothetical trading of PPS rather than actual trading . Respondents' direct Promotion and the Systems USA publication also failed to disclose that many of the representations concerning the performance of PPS were based on hypothetical trading and further failed to provide the warning regarding the limitations of hypothetical trading required by Section 4.41(b) of the Regulations .



    A. Arnold and LFI shall cease and desist from violating Sections 4b(a)(i) and 4o(1) of the Act and Section 4.41(a) and (b) of the Regulations;

    B. Arnold and LFI shall be prohibited from trading on or subject to the rules of any contract market, and all contract markets are directed to refuse Arnold and LFI trading privileges, beginning on the third Monday after the date of this Order and continuing for a period of three (3) years;

    C. Arnold shall pay a civil monetary penalty in the amount of one hundred thousand dollars ($100,000) within ten (10) days of the date of this Order. Arnold shall make such payment by U.S. postal money order, certified check, bank cashier's check, or bank money order, made payable to the Commodity Futures Trading Commission, and addressed to Dennese Posey, Division of Trading and Markets, Commodity Futures Trading Commission, 1155 21st Street, NW, Washington D.C. 20581 under cover of a letter that identifies Arnold and the name and docket number of the proceeding. A copy of the cover letter and the form of payment shall be simultaneously transmitted to Director, Division of Enforcement, Commodity Futures Trading Commission, at the following address: 1155 21st Street, NW, Washington D.C. 20581; and

    D. Respondents shall comply with the following undertakings:

    1. never to apply for registration with the Commission in any capacity or to seek exemption from registration;

    2. never to engage in any activity that requires registration with the Commission, including, but not limited to, directing any current or prospective client's commodity interest account; soliciting, accepting or receiving any funds, revenue, or other property from any person, or soliciting prospective customers, related to the purchase or sale of any commodity futures or options on commodity futures contracts;

    3. never to act as a principal, agent, or officer of any person registered, exempted from registration or required to be registered with the Commission; and

    4. neither of the Respondents, nor any of their agents or employees under their authority or control, shall take any action or make any public statements denying, directly or indirectly, any finding in this Order, or creating, or tending to create, the impression that this Order is without a factual basis; provided, however, that nothing in this provision shall affect each Respondent's (i) testimonial obligations; or (ii) right to take legal positions in other proceedings to which the Commission is not a party.

    The provisions of this Order shall be effective on this date.

    By the Commission.
    Dated: August 14, 2000 ______________________
    Jean A. Webb
    Secretary to the Commission
    Commodity Futures Trading Commission