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Dear Scott,
How timely your post is for me.
Yesterday, in local Superior Court I went to mandatory arbitration against
Citibank USA, of DE, regarding Kevin Kates dba Trader Services Co., of FL,
among numerous other causes of action (rescission, fraud, misrepresentation,
false advertising, breach of contract, Fair Credit Billing Act violations,
Truth in Lending Act - Regulation "Z" violations --- a veritable laundry list)
for the latter's purported violations of the Commodites Exchange Act and CFTC
and NFA regulations through their actions allegedly as a CTA absent CFTC/NFA
registration (it helped that several years ago, both the CFTC and the NFA had
brought anti-fraud actions against Kates-Traders Services, which were settled,
with Kates-Traders Services's consent, in the government's favor and with
Kates-Traders Services registration being terminated, and their being
prohibited from re-applying for registration for life or acting in any
capacity requiring such registration). The case settled after the first
hour. I believe Citibank is the world's largest bank. Apparently, sometimes
David can "win" against Goliath.
Congratulations with your effforts in creating and establishing your track
record. I wish you the best in putting yourself in a position such that you
can safely and securely go forward with your plans. Here are Westlaw
summaries of some cases that might be helpful to you.
Sincerely,
Richard
Taucher v. Born,
53 F.Supp.2d 464, 27 Media L. Rep. 2217, Comm. Fut. L. Rep. P 27,677
D.D.C.
Jun 21, 1999
Publishers of commodity trading information sought declaratory judgment that
they could publish information without having to register as commodity trading
advisors under the Commodity Exchange Act (CEA). The District Court, Urbina,
J., held that: (1) as applied to publishers, registration requirement was
regulation of speech rather than profession; (2) investment advice in question
was entitled to full First Amendment protection, rather than protection as
commercial speech; and (3) registration requirement was prohibited prior
restraint on speech, as applied to publishers.
Order accordingly.
Commodity Futures Trading Com'n v. Vartuli,
228 F.3d 94
2nd Cir.(N.Y.)
Sep 22, 2000
Commodity Futures Trading Commission (CFTC) brought civil enforcement action
based upon manufacture, sale and advertising of computer software which seller
and its sole shareholder fraudulently claimed provided profitable trading
opportunities for its purchasers and users in market for currency futures. The
United States District Court for the Southern District of New York, John F.
Keenan, J., 28 F.Supp.2d 104, granted injunctive relief and ordered
disgorgement of profits. Defendants appealed. The Court of Appeals, Sack,
Circuit Judge, held that: (1) seller's representations about the program were
made in connection with futures trading; (2) seller was commodity trading
advisor (CTA) subject to antifraud provisions of CEA; (3) seller did not place
disclaimer of hypothetical or simulated accounts "prominently" in its
promotional materials; (4) misleading statements in advertising regarding past
profitability and track record of program were not protected by First
Amendment; (5) liability for failure to register as CTA did not violate First
Amendment; (6) injunction violated First Amendment insofar as conduct enjoined
included dissemination of program as speech; and (7) disgorgement order was
within district court's discretion.
Affirmed in part, and reversed and remanded in part.
Van Graafeiland, Circuit Judge, concurred in part and concurred in result in
part, and filed opinion.
Commodity Trend Service, Inc. v. Commodity Futures Trading Com'n,
1999 WL 965962, Comm. Fut. L. Rep. P 27,777
N.D.Ill.
Sep 29, 1999
This litigation involves a First Amendment challenge to Section 4m(1) of the
Commodity Exchange Act, 7 U.S.C. § 6m(1), which requires a commodity trading
advisor to register with the Commodity Futures Trading Commission ("the CFTC")
before advising others on trading in specified commodity interests. The CFTC
has determined that this requirement applies to purveyors of personalized,
client-specific trading advice, as well as those who provide impersonal
information and advice on commodity futures trading. Commodity Trend Service,
Inc., filed this action seeking a declaration that the registration
requirement violates the First Amendment as applied to its commodity trading
advisory activities. It also claims that the registration requirement is
overbroad because it sweeps within its coverage publishers of impersonal
investment advice. Commodity Trend Service has moved for summary judgment. For
the following reasons, the motion is granted in part and denied in part.
Commodity Trend Service, Inc. v. Commodity Futures Trading Com'n,
233 F.3d 981, Comm. Fut. L. Rep. P 28,057, Comm. Fut. L. Rep. P 28,439
7th Cir.(Ill.)
Nov 28, 2000
Financial publisher, which published impersonal investment advice regarding
commodities trading, brought action against the Commodity Futures Trading
Commission (CFTC) on grounds that the Commodity Exchange Act's requirement
that publisher register with the CFTC as a "commodity trading advisor"
violated the First Amendment. The United States District Court for the
Northern District of Illinois, Milton I. Shadur, J., 1997 WL 452399, dismissed
suit as unripe for judicial review and denied motion for reconsideration.
Publisher appealed. The Court of Appeals, 149 F.3d 679, reversed. On remand,
the District Court, Wayne R. Andersen, J., found that registration
requirements amounted to unconstitutional prior restraint, but that publisher
was subject to antifraud provisions of the Act, and granted CFTC's motion to
enforce administrative subpoenas. Publisher and its principals appealed. The
Court of Appeals, Flaum, Chief Judge, held that: (1) challenges to antifraud
provisions and subpoenas were ripe for review; (2) publisher was subject to
antifraud provisions prohibiting employment of device, scheme, or artifice to
defraud any client or prospective client, and prohibiting transactions,
practices, or courses of business that operated as fraud or deceit upon client
or prospective client; (3) prohibition on fraud in connection with certain
contracts of sale of commodity for future delivery made for or on behalf of
any other person applies only to brokers or others who have agency
relationship with their clients; (4) application of antifraud provisions did
not violate the First Amendment; and (5) First Amendment challenge to
disclosure obligations was not ripe for review.
Affirmed.
Scott Hoffman wrote:
> I have accumulated a good enough real money track record that I want to
> start an advisory service. I would like to avoid all the overhead of
> becoming a CTA and since I will not have any direct control over anybody's
> money I don't think I need to. A couple of years ago I recall a big court
> case where the CFTC wanted anyone offering any kind of trading advice to
> have to register as a CTA even if they did not direct control the actual
> trading of any money. The judge sided against the CFTC. So I think I can
> establish the kind of advisory service I envision without becoming a CTA.
> There are certainly a boatload of such services on the web and most do not
> claim to be a CTA.
>
> Just to cover all my bases, I would like to consult with an attorney who
> knows the field before I launch. Can anybody recommend someone?
>
> Thanks,
> Scott Hoffman
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