The statement reads like a catalogue of horrors that would discourage all but the most ardent of speculators or takers of risk:
"You may sustain a total loss of the initial . . . funds and any additional funds that you may deposit with your broker . . .
"Under certain market conditions, you may find it difficult or impossible to liquidate a position . . .
"This brief statement cannot, of course, disclose all the risks . . ."
Effective tomorrow, the above warnings must be provided by every trader of commodities futures in the United States as part of a new package of investor protection rules ordered by the Commodity Futures Trading Commission.
The warnings are included in a "Risk Disclosure Statement" that has to be signed by every customer before a new account may be opened.
As the young regulatory agency inaugurates the first significant consumer protection program in commodities trading history, however, there remains bitter irony for Washingtonian A.S. Csaky.
You may remember the case the former American University student, known by friends and foes alike simply as "Chalkie." It was Csaky who gained national headlines back in 1976 by parlaying $25,000 of lifetime savings into a quick $56,000 loss and overnight education about risks associated with pork bellies, broilers, soybeans and other commodities.
Csaky's money, removed from a savings account and put in the hands of a broker for the former Washington office of Hornblower Weeks-Hamphill Noyes (since merged with Loeb Rhoades), was invested in commidities futures contracts - agreements to deliver or accept, at a future date, a prescribed amount of a good at a price specified.
Investors seldom expect to take actual delivery of such commodities but hope to make a profit on price changes for the contracts. It is a volatile environment about which Csaky said he had no knowledge.
He subsequently filed Complaint No. 1 with the commodity commission when the agency was only a few months old, under a reparations procedure that permits customers to seek payments from brokers if they can prove damages. In that process, he sought to overturn a traditional industrywide method of settling customer disputes by arbitration. In fact, he had signed an agreement vowing to settle any future dispute in the traditional way.
An arbitration proceeding was conducted but Csaky did not participate, claiming it would do away with his rights to seek action by the new regulatory agency. But the CFTC never acted. After two years of delays, an administrative law judge opened hearings last May.
When Csaky's lawyer said the case could take up to seven days to try, however, the CFTC judges said he had time only for one day - and that subsequent days would have to be spread out over future months, a day or two at a time. Csaky's lawyer, Leonard Goldstein of College Park, objected to such a proceeding and Csaky dropped his case before the agency.
During the summer, Csaky went into U.S. District Court here with a $1.5 million lawsuit against the brokerage company, which has been given until Oct. 13 to file a reply.
Many of the practices that existed in the summer of 1975, when Csaky invested, will be changed under the new rules. Brokers will be required to confirm all futures trades made for customers and trading firms must supervise the handling of all accounts. Customers must be sent monthly statements, too.
Finally, the agency has a consumer hot line in operation to receive consumer complaints about brokers. Persons in D.C. should call 800-227-4428.