For anyone unfamiliar with the financial expression "fractional reserve" go here for a full explanation.
Briefly, fractional reserve banking requires a private bank to hold a stated ratio in "reserve" for withdrawals. Currently, I believe the reserve requirement is 10%; one dollar must be held in 'reserve' for every nine dollars on loan. The 'multiplier loan' effect is that of those nine $s on loan some could likewise be deposited elsewhere, with the reserve requirement again permiting additional loaning.
What this brief video clip explains is that these 'prudent man' investigators are saying that the COMEX feels safe with only 4% or less in reserve for bullion withdrawals because "nobody ever withdraws that level." Consequently, paper futures can be leveraged 96-to-1 or more. The obvious risk before commodity investors, gold and silver particularly, is that a moderate demand to take delivery of the metals there's a sure bet there are not enough metals in physical custody to satisfy even 4% withdrawals!
Sure, cash settlement is currently called for, and can be substituted for the physical at any price. But the risk for paper claim investors - that inevitably will come - is that you may be delighted with getting $150 per ounce for your paper silver. On the other hand, then the physical won't be available to you at a price of $350, $500, and so on. The dollar's drop will leave you holding-the-bag, so to speak.