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No. 51-99 December 10, 1999 |
Weekly Advisory
Commodity Futures Trading Commission Three Lafayette Centre
1155 21st Street, NW Washington, DC 20581 Telephone: (202) 418-5080
Facsimile: (202) 418-5525 |
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On December 3, 1999, the Commission
held a closed meeting to discuss surveillance matters.
On December 7, 1999, the Commission
held an open roundtable meeting to discuss technology issues
pertaining to the financial services and commodities markets.
On December 8, 1999, the Commission's Agricultural
Advisory Committee held an open meeting.
On December 10, 1999, the Commission will
hold a closed meeting to discuss surveillance matters.
Release:
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#4346-99
For Release:
���������� December 3,
1999
CFTC PROPOSES TO EXEMPT CERTAIN COMMODITY TRADING ADVISORS FROM
REGISTRATION
Proposed New Rule Would Eliminate Registration Requirement For
Distributors of Commodity Trading Advice Through Periodicals, The
Internet, and Similar Media
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced
today that it will issue for public comment a proposed rule that would
exempt from mandatory registration under the Commodity Exchange Act (CEA)
those persons who engage in the business of distributing commodity
interest trading advice through media such as periodicals, books,
Internet web sites, electronic mail, telephone voice recordings,
facsimile services, and non-customized computer software. Under current
law, persons advising others about trading commodity futures and options
contracts, ordinarily must register with the Commission as commodity
trading advisors (CTAs). Although such CTAs would be relieved of the
burdens associated with registration, they would continue to be subject
to other provisions of the CEA and Commission rules that apply to CTAs,
including prohibitions against fraud and deceptive advertising,
prohibition against the handling of clients' funds by a CTA, and
prescribed disclosures concerning the limitations of hypothetical or
simulated commodity trading.
The proposed exemption is designed to eliminate the legal uncertainty
that has arisen from recent federal court decisions involving plaintiffs
who published standardized commodity trading advice through impersonal
media. In these cases, the plaintiffs claimed that the First Amendment
protected their right to publish without registration because they did
not possess discretionary control over their clients' commodity
trading accounts; they did not provide advice tailored to their
clients' particular situations; and they had no personal contact with
their clients. The proposed rule, which adds a new subdivision (9) to 17
C.F.R. � 4.14(a), reflects these considerations.
To qualify for the registration exemption, the CTA may not engage in any
of the following activities: (i) directing client accounts; (ii)
providing commodity interest trading advice that is tailored to a
particular client's circumstances; or (iii) providing such advice
through interactive communications with individual clients, such as
face-to-face or telephonic conversations.
The CFTC has invited interested persons to submit comments within 60
days. A copy of the Commission's proposed rule can be obtained by
contacting the Commission's Office of Secretariat, Three Lafayette
Centre, 1155 21st Street, N.W., Washington, D.C., 20581, (202)
418-5100. The Commission also intends to make the proposed rule available
in the near future on its website at
www.cftc.gov.
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No Opinions Updates were issued during this period.
On December 2, 1999, the Commission authorized for
publication in the Federal Register a proposed rulemaking
concerning an exemption from registration as a commodity trading
advisor.
The Commodity Futures Trading Commission is proposing to amend its rules
to create an exemption from registration requirements for commodity
trading advisors that provide advice by means of media such as
newsletters, Internet web sits, and non-customized computer software.
Vol. 64, No. 234, 12/07/99, p. 68304.
NOTE:
All Comment Letters must be received by the Commission no later than the closing date specified in the applicable Federal Register release. Any requests for an extension of the comment period must be made in writing - - before the expiration of the comment period - - to the Commission's Office of the Secretariat.
Comment period concerning the Commission's proposal to eliminate fees
for futures and option contract market applications ends,
December 27, 1999.
Comment period concerning the Commission's proposal to revise its
procedures for the review of contract market rules and rule amendments
ends, January 25, 2000.
Comment period concerning the Commission's proposed to amend its
rules to create an exemption from registration requirements for commodity
trading advisors that provide advice by means of media such as
newsletters, Internet web sits, and non-customized computer software
ends, February 7, 2000.
Daren J. and Mary D. Flitcroft v. LFG, LLC and Universal
Financial Bancorp, Inc., d/b/a Potomac Futures. Filed December
2, 1999. The parties' stipulated to the dismissal of this proceeding.
Accordingly, this proceeding was terminated in its entirety.
Administrative Law Judge, Bruce C. Levine. CFTC Docket No. 99-R116.
In the Matter of Wellington Financial Group, Inc. Filed
December 3, 1999. All issues were resolved. Accordingly, this matter was
dismissed. Administrative Law Judge, George H. Painter. CFTC Docket No.
99-10.
Sohn Diary, Inc. v. Cargill, Inc. Filed December 6,
1999. The Commission determined that the complainant was seeking purely
declaratory relief, not authorized by section 14 of the CEAct.
Accordingly, this proceeding was dismissed with prejudice. Administrative
Law Judge, George H. Painter. CFTC Docket No. 99-R037.
Norman Kohlmeyer v. Cargill, Inc. Filed December 6,
1999. The Commission determined that the complainant was seeking purely
declaratory relief, not authorized by section 14 of the CEAct.
Accordingly, this proceeding was dismissed with prejudice. Administrative
Law Judge, George H. Painter. CFTC Docket No. 99-R032.
Elizabeth Coscia, as Trustee for the Coscia Family Trust v.
Refco, Inc. Filed December 7, 1999. Pursuant to the parties'
settlement, the reparations complaint filed by Elizabeth Coscia as
Trustee for the Coscia Family Trust against respondent Refco, Inc., was
dismissed with prejudice, including with prejudice the complainant's
right to re-file any claim either in reparations or in any other forum
arising out of the facts alleged in this proceeding. Administrative Law
Judge, George H. Painter. CFTC Docket No. 99-R047.
Paul J. Weber, M.D., v. Refco, Inc. Filed December 7,
1999. Pursuant to the parties' settlement, the reparations complaint
filed by Paul J. Weber against respondent Refco, Inc., was dismissed with
prejudice, including with prejudice the complainant's right to
re-file any claim either in reparations or in any other forum arising out
of the facts alleged in this proceeding. Administrative Law Judge, George
H. Painter. CFTC Docket No. 99-R046.
Vivian Mahl v. Linnco Futures Group d/b/a LFG, LLC., M.G. Globe
Trading Company, Albert Gray, and Joseph Pierre Valencia, Jr.
Filed December 7, 1999. The complaint was filed on May 12, 1999. The
complaint satisfied the core requirements for a reparations complaint by
naming registrants Linnco, Gray and Valencia as respondents, by alleging
various fraudulent acts, by claiming $29,700 in actual damages, and by
including a filing fee. In response to a series of letters seeking
clarification of damages and of parties to be named as respondents, Mahl
subsequently filed three addenda to the complaint and added M.G. Globe as
a respondent. The joint answer filed by LFG, M.G. Globe, and Gray was
deficient and did not include a precise and detailed statement of the
facts which constitute each registrant's ground for defense.
Accordingly, pursuant to the Commission regulations, Gray, and any other
employee, agent or principal of LFG and M.G. Globe with first-hand
knowledge of the matters described or mentioned in the complaint and in
the joint answer, must file, by January 10, 2000, a precise and detailed
sworn statement of the facts which constitute each registrant's
ground for defense. In addition, LFG, M.G. Globe, and Gray must produce,
by January 20, 2000: 1) a copy of the guarantee agreement between LFG and
M.G. Globe in effect between March 1 and December 1, 1997; 2) a copy of
any contact or lead sheet, telephone log, or other written record
memorializing communications with Mahl; 3) a tape-cassette copy of all
recorded conversations with Mahl; and 4) a copy of the itemized phone
bill showing each incoming and outgoing call between Mahl and M.G.
Global, from March 1 to August 30, 1997. Philip V. McGuire, Judgment
Officer. CFTC Docket No. 99-R113.
Stuart A. Briscoe, III v. Ca-Ni Industries, Ltd., Nicholas James
Nicholaou, and Audrey Marie Lombardi Nicholaou. Filed December
7, 1999. It was determined that respondents had misrepresented the
likelihood of success of their software trading systems, as well as the
likelihood of success in soliciting complainant to open a discretionary
account traded by respondents. These acts violated the CEAct and
proximately caused damages to complainant of $38,299.40. Accordingly,
violations having been shown, respondents were ordered to pay reparations
to complainant in the amount of $38,229.40, plus costs of $50.00. Since
complainant filed the case as a voluntary proceeding, interest was not
awarded. Joel R. Maillie, Judgment Officer. CFTC Docket No.
00-R004.
Thomas W. Starks v. American Financial Trading Corp., Susan Mead
Lee and Ted Lamar Romeo. Filed December 8, 1999. The
parties' stipulated to a dismissal of this proceeding. Accordingly,
the complaint was dismissed with prejudice and the matter was terminated
in its entirety. Administrative Law Judge, Bruce C. Levine. CFTC Docket
No. 99-R053.
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Norman Kohlmeyer v. Cargill, Inc. Filed December 6,
1999. The Commission's review of the record indicated that resolution
of the certified question was unnecessary in light of the
Commission's recent decision in Murray v. Cargill, Inc.,
CFTC Docket No. 99-R040 (CFTC November 29, 1999). There, the Commission
held that section 14 of the CEAct does not authorize it to grant purely
declaratory relief in a reparations proceeding. Murray, slipped
op. at 4. Because the record in this case established that complainant
Kohlmeyer was seeking purely declaratory relief, the Commission remanded
this case to the ALJ for dismissal without prejudice, in light of the
Commission's holding in Murray. CFTC Docket No.
99-R032.
99-49; Exemption; November 30, 1999; CPO permitted to
treat a trust as a QEP where, among other things, the grantor of the
trust: (1) was the chief financial officer of a company owned by one of
the four founding limited partners of the Rule 4.7 exempt pool; (2) had
been responsible for evaluating and structuring that limited
partner's investment in the pool; and (3) continued to oversee the
performance of that investment. [Rule 4.7] (T&M).
99-50; Exemption; November 30, 1999; CPO permitted to
treat an employee as a QEP where the employee: (1) is employed by the CPO
as a senior analyst "with responsibility to review all portfolios
purchases" for the Rule 4.7 exempt pool; and (2) has been employed
by the CPO for the preceding seven years. [Rule 4.7] (T&M).