UNITED STATES OF AMERICA
COMMODITY FUTURES TRADING COMMISSION
AMERICAN FUTURES GROUP, INC.
CFTC DOCKET NO. 96-R133
Complainant Lorenz Hoff ("Hoff"), a German resident, appeals from the initial decision of the Administrative Law Judge which concluded that he had failed to prove that respondent American Futures Group ("AFG") had violated the Commodity Exchange Act ("CEA") or Commission rules. We do not reach the substantive issues that Hoff raises on appeal, because we find that a threshold jurisdictional issue concerning the required filing of a bond by nonresident reparations complainants, pursuant to Commission Rule 12.13(b)(4), was not properly resolved.
Hoff filed a complaint on July 18, 1996 and a supplement to his complaint on August 5, 1996. The Commission’s Office of Proceedings, by letter dated July 25, 1996, informed Huff that, as a reparations complainant who is not a resident of the United States, he was required to file a bond or, alternatively, to request that the bond be waived and to submit evidence that he was entitled to a such a waiver. The letter also advised Hoff that the Office of Proceedings had "received a legal opinion that residents of Germany are eligible to request that the bond be waived" and that the bond request must be in writing. Hoff’s attorney submitted a written bond waiver request by letter dated August 2, 1996, but did not present supporting evidence.
The record does not contain a copy of the "legal opinion" to which the Office of Proceedings referred. In similar recent cases involving German resident complainants, however, the Office of Proceedings has referred to a legal opinion which relies on Section 110 of the German Code of Civil Procedure to establish a right to a waiver. In these circumstances, it appears reasonable to infer that the "legal opinion" referenced by the Office of Proceedings was that same opinion citing Section 110 of the German Code of Civil Procedure. As will be discussed, however, the Commission has recently held that Section 110 of the German Civil Code is insufficient to establish a right to a waiver of the bond requirement.
There is no evidence that Hoff’s waiver request was ever formally granted. A hearing was held on March 24, 1997, but the bond issue was not raised. The initial decision contained no reference to the bond issue and the parties have not raised this issue on appeal.
We address this issue sua sponte as a jurisdictional matter. The Commission has recently addressed the statutory bond requirement in general and as it pertains to German residents in particular. In Rendita Global Investment, A.G. v. Mercafe Clearing, Inc., [Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,958 (CFTC Feb. 20, 1997), the Commission required strict compliance with Commission Rule 12.13(b)(4), which mandates that a nonresident reparations complainant post a bond or establish a right to have the bond waived. Moreover, in a subsequent opinion, the Commission has held that a bond waiver request based solely on Section 110 of the German Civil Code is an insufficient basis to satisfy the bond waiver reciprocity requirement in Rule 12.13(b)(4). See Haekal v. Refco, Inc. [Current Transfer Binder] (CCH) ¶ 27,162 (CFTC Sept. 26, 1997). Most recently, in Gemeinder v. Gartmann, CFTC Docket No. 95-R3 (CFTC Feb. 17, 1998), we addressed the nonresident bond requirement and reaffirmed our previous holding as to the insufficiency of Section 110 of the German Civil Code.
For the reasons set forth above, we are providing Hoff with an opportunity, within 60 days of the date of this order, to post a bond in double the amount claimed or to submit a sufficiently supported waiver request addressing the bond law applicable in Germany to complainants who are residents of the United States. Respondent shall have 30 days to reply to any response by Hoff.
If no such showing is made or no bond is posted by Hoff within the time allowed, the initial decision shall be vacated, and this proceeding shall be dismissed for Hoff’s failure to comply with Section 14(c) of the CEA and Commission Rule 12.13(b)(4). If Hoff makes an appropriate showing or posts the bond within the time allowed, this matter will be the subject of a further order of the Commission addressing the issues on appeal from the initial decision.
IT IS SO ORDERED.
By the Commission (Chairperson BORN and Commissioners TULL, HOLUM and SPEARS).
Jean A. Webb
Secretary of the Commission
Commodity Futures Trading Commission
Dated: April 20, 1998