CFTC seeks more time to determine its stance in case concerning NFA’s publications about FXCM

About two months have passed since the Seventh Circuit U.S. Court of Appeals issued an Order which may lead to the involvement of the Commodity Futures Trading Commission (CFTC) in a lawsuit targeting the National Futures Association (NFA). The Court has invited the CFTC to file a brief as “amicus curiae”, that is, as 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.

This lawsuit was brought by Effex Capital, which was implicated in FXCM’s exit from the US retail FX market. 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 .

In asking for the CFTC’s stance on the matter, the Appeals Court has 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.

On February 14, 2019, the CFTC filed a motion with the Appeals Court asking for a three-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 4, 2019 to March 25, 2019.

The CFTC explains that its request is due to the lapse in appropriation for the agency from December 22, 2018 to January 25, 2019. According to the regulator, the US Government shutdown prevented the CFTC Office of the General Counsel from working on this case for approximately a month and put the office behind schedule on other time-sensitive matters, delaying work on this case once the lapse was over.

The CFTC Office of the General Counsel has been reviewing the issues the Court invited the CFTC to address and will be making a recommendation to the Commission (i.e., the CFTC commissioners appointed by the President and confirmed by the Senate). A decision to file an amicus brief would require the approval of the Commission.