Order Also Permanently Bars Respondents from Trading on CFTC-Regulated Markets
By Commodity Futures Trading Commission ….
The U.S. Commodity Futures Trading Commission (CFTC) today filed an Order instituting proceedings and settling charges against Respondents Cypress Wealth Management, Inc. (Cypress), and its former owners and operators, Ted L. Romeo of Pompano Beach, Florida, and Richard D. Schrutt of Tampa, Florida. The CFTC Order charged Respondents with illegally offering off-exchange financed transactions in precious metals to retail customers and failing to register with the CFTC as a Futures Commission Merchant (FCM), as required.
The CFTC Order requires Respondents jointly to pay restitution of US$330,764.29 to their customers and a $100,000 civil monetary penalty. Romeo is ordered to pay an additional $100,000 civil monetary penalty.
The Order also requires Respondents to cease and desist from further violations of the Commodity Exchange Act (CEA), as charged, and prohibits them from trading on or pursuant to the rules of any registered entity.
Specifically, the CFTC Order finds that, from in or about January 2012 to at least March 2013, Respondents solicited retail customers to buy and sell physical precious metals in off-exchange, leveraged transactions. According to the Order, customers paid a percentage of the purchase price for the metals and received financing for the remainder of the purchase price, while paying commissions and fees on the transactions.
The CFTC Order states that financed, off-exchange transactions with retail customers are illegal under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. As explained in the Order, financed transactions in commodities with retail customers like those engaged in by Respondents must be executed on, or subject to, the rules of a board of trade that has been designated by the CFTC as a contract market. Since Respondents’ transactions were done off-exchange, with customers who were not eligible contract participants or eligible commercial entities, the transactions were illegal, the Order finds.
Failure to Register
The Order also states that it is unlawful for any person to act as an FCM, unless such person is registered with the CFTC as an FCM and such registration has not expired or been suspended or revoked. Cypress acted as an FCM by soliciting and accepting customers’ orders for financed precious metals transactions and, in connection with those transactions, accepting funds from those customers, including customers who were not eligible contract participants or eligible commercial entities. As such, Cypress acted as an unregistered FCM. Romeo and Schrutt are also liable for Cypress’s failure to register because they were controlling persons of the company.
The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.
CFTC Division of Enforcement staff members responsible for this matter are Laura Brookover, Michael Loconte, Alison B. Wilson, and Rick Glaser.
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CFTC’s Precious Metals Customer Fraud Advisory
The CFTC has issued several customer protection Fraud Advisories that provide the warning signs of fraud, including the Precious Metals Fraud Advisory, which alerts customers to precious metals fraud and lists simple ways to spot precious metals scams.
Customers can report suspicious activities or information, such as possible violations of commodity trading laws, to the CFTC Division of Enforcement via a Toll-Free Hotline 866-FON-CFTC (866-366-2382) or file a tip or complaint online.