Reparations Proceedings

South Florida Commodity Futures Fraud Lawyer, Russell L. Forkey, Esq.

The Commodity Futures Trading Commission (CFTC) administers a Reparations program, which is designed to provide an inexpensive, expeditious, fair, and impartial forum to handle customer complaints and resolve disputes between futures customers and commodity futures trading professionals. This post is designed to provide a general description of the Reparation process and is not designed to be complete in all material respects. This information is being provided for educational purposes only and should not be considered or relied upon as legal advice.

For the most part, a CFTC Reparations proceeding is an alternative method to an NFA arbitration to resolve disputes between futures customers and commodity futures trading professionals. While both Reparation proceedings and NFA arbitrations are designed to provide an inexpensive and expeditious forum to resolve futures disputes, the reality of the situation is that reparation proceedings are usually more expensive and lengthy then an NFA arbitration.

If you are a futures or options customer, or a leverage contract customer, and you have a dispute with your futures trading professional that you cannot resolve, you may be able to use the Reparations program if:

•· Your complaint involves a futures trading professional registered with the CFTC at the time of the alleged wrongdoing or at the time you file the complaint.

•· You allege that the individual or firm involved-the proposed respondent or respondents-has engaged in activities that violate the Commodity Exchange Act or CFTC rules. The transactions involved can include futures contracts, options on futures contracts, or on physical commodities, and leverage contracts. You must outline facts in your complaint to show that the losses you claim as damages result from the activities you describe and that the proposed respondents you name engaged in these activities.

•· You file your complaint within two years of the date the violation occurred or within two years of the date you should have known about the violation-the statute of limitations.

•· The proposed respondents you name are not in bankruptcy or receivership and you are not pursuing the same claim in a parallel proceeding such as arbitration.

•· If you are a foreign resident, you must file a non-resident bond.

If you take a look at the rules relating to Reparation proceedings, the reader can see that a Reparations proceeding more closely resembles a law suit rather than an arbitration matter. See Part 12 of CFTC's regulations, 17 CFR 12.

For example, the regulations set forth the procedures that must be followed in the filing of a Reparations complaint. For example, the regulations generally provide that the complaint must meet the following requirements:

•· The name, residence address, and telephone number (during business hours) of the complainant;

•· The name, address, and telephone number, if known, of each person alleged in the complaint to have violated the Act or any rule, regulation or order thereunder;

•· If known, the specific provisions of the Act, rule, regulation, or order claimed to have been violated;

•· A complete description of complainant's case, including, but not limited to:

(1) A description of all relevant facts concerning each and every act or omission which it is claimed constitutes a violation of the Act; and

(2) A description of all facts which show or tend to show the manner in which it is claimed that the complainant was injured by the alleged violations;

•· The amount of damages the complainant claims to have suffered and the method by which those damages have been computed, the amount of punitive damages (no more than two times the amount of such actual damages) the complainant claims, if any, and how complainant plans to demonstrate that punitive damages are appropriate;

•· A statement indicating whether an arbitration proceeding or civil court litigation, based on the same set of facts set forth and involving any party named as a respondent in the complaint, has been instituted, and whether such a proceeding has reached a final disposition or is presently pending;

•· A statement indicating whether any of the respondents is the subject of receivership or bankruptcy proceedings that are presently pending;

•· An election of a decisional procedure pursuant to subpart C, D, or E. (A procedure pursuant to subpart D may be elected only if the total amount of damages claimed, exclusive of interest and costs, does not exceed $30,000. A procedure pursuant to subpart E may be elected only if the total amount claimed as damages, exclusive of interest and costs, exceeds $30,000); and

•· A filing fee in the amount prescribed by §12.25 of these rules shall be submitted with the complaint at the time of its filing.

•· Each complaint shall be signed personally by an individual complainant or by a duly authorized officer or agent of a complainant who is not a natural person. His signature shall be given under oath or affirmation under penalty of law attesting either that he knows the facts set forth in the complaint to be true, or that he believes the facts set forth to be true, in which event the information upon which he formed that belief shall be set forth with particularity.

If the complainant is a nonresident, there are additional requirements that the filer must comply with in order for the filing to be accepted. The complaint must be filed with:

•· A bond in double the amount of the claim either with a surety company approved by the Treasury Department of the United States or two personal sureties, each of whom shall be a citizen of the United States and shall qualify as financially responsible for the entire amount of the bond, which bond shall run to the respondent and be conditioned upon the payment of costs (including reasonable attorney's fees, for the respondent if the respondent shall prevail) and any reparation award that may be issued by the Commission against the complainant on any counterclaim asserted by respondent; or

•· A written request that the bond requirement be waived in accordance with section 14(c) of the Commodity Exchange Act, accompanied by sufficient proof that the country of which the complainant is a resident permits the filing of a complaint by a resident of the United States against a citizen of that country without the furnishing of a bond.

Contact Us

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.