CFTC set to have its say in case concerning NFA’s publications about FXCM

Maria Nikolova

The CFTC is invited to file a brief as “amicus curiae” in a case launched by Effex Capital, which accuses the NFA of making false statements in documents relating to the FXCM settlement.

fxcm

There has been another twist in the case launched by Effex Capital, the company involved in FXCM’s exit from the United States retail FX market, against the National Futures Association.

On December 4, 2018, the Seventh Circuit U.S. Court of Appeals filed an Order which may lead to the involvement of the Commodity Futures Trading Commission (CFTC) in the proceedings.

Let’s recall that Effex Capital, LLC brought this action in the United States District Court for the Northern District of Illinois. It alleged that the National Futures Association (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 .

The Appeals Court notes 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 Commodity Futures Trade Commission (CFTC).

“Having studied the briefs and the record and having heard oral argument, the court has determined that, in deciding this appeal, it would benefit greatly from the view of the CFTC as to whether a non-party such as Effex can seek review of an NFA disciplinary procedure or otherwise seek redress before the Commission.”

Accordingly, the Court invites 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.

It may be the CFTC whose opinion will be crucial in these proceedings.

The case is captioned Effex Capital, LLC, et al v. National Futures Association, et al (0:18-cv-01914).

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