NFA’s announcement about FXCM faces another challenge

Maria Nikolova

Effex Capital, the company embroiled in the exit of FXCM from the US retail FX market, is displeased with the decision of Judge Andrea R. Wood of the Illinois Northern District Court.

There is no end to the pressure on the National Futures Association (NFA) over its announcements from February 6, 2017, regarding FXCM and its top executives. This is proven by the latest filings with the Illinois Northern District Court.

More than a year has passed since the NFA and the Commodity Futures Trading Commission (CFTC) announced their settlements with FXCM, in a series of events that led to the exit of the broker from the US retail FX market. In June last year, Effex Capital, the company in which FXCM allegedly had an undisclosed interest and whose ties with FXCM were crucial for the findings about the US business of the broker, took NFA to Court over the announcements concerning FXCM from February 6th.

Effex and its CEO John Dittami alleged that NFA overstepped its regulatory powers by including Effex’s name into the materials it published on its website about the settlement with FXCM. In addition, NFA was alleged to have disclosed Effex Capital’s trade secrets and to have caused the company harm.

As FinanceFeeds has reported, on March 31, 2018, Judge Andrea R. Wood of the Illinois Northern District Court issued an order granting the defendants’ motion to dismiss the case. The Judge noted that the case is dismissed for failure to exhaust administrative remedies. That is, before taking the matter to the Court, the plaintiffs should have used other formal means to solve the dispute.

In a detailed Memorandum Opinion and Order, the Judge said that it is for the Commodity Futures Trading Commission, not the Court, to determine whether NFA erred in how it handled the FXCM proceeding, and whether NFA should be required to change its rules along the lines Effex suggests. Put otherwise, Effex and Dittami should have sought the assistance of the CFTC before taking the matter to Court.

The Judge closed the case at the Illinois District Court on April 5, 2018. Effex Capital, however, is displeased with this outcome.

On April 26, 2018, Effex and Dittami submitted a Notice of Appeal against the decision made by Judge Andrea R. Wood. The document is filed with the Seventh Circuit U.S. Court of Appeals, with the appellants not disclosing any grounds for their motion.

Let’s recall that Effex had requested NFA to remove the NFA Complaint, Decision, Narrative and Press Release in question its website or, in the alternative, delete all references to Effex and Dittami in the Narrative and issue a new release. The new release, according to the plaintiffs, should have stated that:

  • NFA did not make any findings against Effex or Dittami;
  • Effex was not a de facto dealing desk of FXCM;
  • Effex was not controlled by FXCM;
  • FXCM was not ordered to make any customer restitution.

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

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