CFTC asks for more time to determine stance in lawsuit about FXCM publications

Maria Nikolova

The CFTC asks for more time to decide on its position in a lawsuit targeting NFA’s publications about FXCM from February 2017.

The lawsuit launched by Effex Capital, the entity embroiled in FXCM’s exit from the US retail FX market, targeting the National Futures Association (NFA) keeps getting protracted. As FinanceFeeds has reported, the Seventh Circuit U.S. Court of Appeals has invited the Commodity Futures Trading Commission (CFTC) to have its say on the matter by filing the so-called amicus brief. The CFTC has already been granted a reprieve to determine its stance – until March 25, 2019. However, the US regulator has now asked for another extension of time to decide on whether to file such a brief.

On Tuesday, March 19, 2019, the CFTC submitted a Motion with the Court, requesting a second extension of time to file possible amicus brief. The regulator wants an additional two-week extension of time to determine whether to file an amicus brief, and, if so, to file one. The deadline would thereby move from March 25, 2019 (pursuant to the Court’s grant of the CFTC’s previous motion to extend time) to April 8, 2019.

The CFTC notes that a decision to file an amicus brief in this case must be approved by the Commission (i.e., the five CFTC commissioners appointed by the President and confirmed by the Senate). The CFTC Office of the General Counsel has made a recommendation to the Commission with regard to an amicus brief. However, in light of the issues raised by this case as well as other pressing issues currently before the agency, the Commission will not be able to complete its deliberations with regard to an amicus brief by March 25. The CFTC therefore requests an additional extension.

Let’s recall that the case is about NFA’s publications from February 2017 related to FXCM.

Effex Capital, LLC brought this action in the United States District Court for the Northern District of Illinois. It alleged that NFA committed a raft of state law torts, violated the Illinois Trade Secret Act, and violated the Fifth Amendment’s Due Process Clause through its actions regarding a settlement between the NFA and its member Forex Capital Markets, LLC (FXCM). In particular, Effex claims that the NFA made false and misleading statements about it in four NFA documents relating to the FXCM settlement: a Complaint, a Decision, a Narrative of the Decision, and a Press Release.

According to Effex, these statements are defamatory, interfere with its business relations, and include confidential and proprietary information. Furthermore, Effex argues that it was deprived of procedural due process because, as a non-party to the settlement and non-member of the NFA, it was unable to participate in the settlement between the NFA and FXCM and did not have the opportunity to contest references to it in the related settlement documents. Effex seeks injunctive relief as well as money damages.

Effex asked for a preliminary injunction; the NFA moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss the action. The district court determined that Effex had failed to exhaust its administrative remedies under the Commodity Exchange Act and dismissed without prejudice. The District Court advised Effex to pursue administrative remedies and then seek review of properly exhausted claims. Effex appealed.

On December 4, 2018, the Seventh Circuit U.S. Court of Appeals filed an Order inviting the CFTC to file a brief as “amicus curiae” in this case within ninety days from the date of the order. An amicus curiae is someone who is not a party to a case and is not solicited by a party, but who assists a court by offering information that bears on the case.

When inviting the CFTC’s opinion, the Appeals Court noted that the District Court premised its dismissal on a variety of possible avenues that Effex could have taken to seek review of the NFA’s actions by the CFTC.

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