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[Federal Register: January 21, 2010 (Volume 75, Number 13)]
[Rules and Regulations]               
[Page 3371-3372]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ja10-4]                         

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 12

 
Commission Guidance Concerning the Rules of Practice Relating to 
Reparations

AGENCY: Commodity Futures Trading Commission.

ACTION: Statement of policy.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is issuing this policy statement to clarify and provide 
guidance to Commission staff and affected parties that Commission Rule 
12.1(a), 17 CFR 12.1(a), requires that all rules of practice relating 
to reparation proceedings under 17 CFR part 12 ``shall be construed 
liberally so as to secure the just, speedy and inexpensive 
determination of the issues presented with full protection for the 
rights of all parties.''

DATES: Effective Date: This Statement of Policy is effective January 
21, 2010.

FOR FURTHER INFORMATION CONTACT: Edwin J. Yoshimura, Office of General 
Counsel, Commodity Futures Trading Commission, 525 West Monroe Street, 
Suite 1100, Chicago, IL 60661. Telephone: (312) 596-0562. E-mail: 
eyoshimura@cftc.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    Under Section 14(a) of the Commodity Exchange Act, as amended, 
(``Act''), 7 U.S.C. 18(a), any person complaining of a violation of the 
Act or any rule, regulation, or order thereunder, by any person 
registered or required to be registered with the Commission, may file a 
complaint with the Commission seeking an award of damages.\1\
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    \1\ Section 14 of the Act establishes the Commission's 
reparations program, which provides an ``expeditious, inexpensive, 
and easy to use dispute resolution process, available to as many 
customers as possible.'' Marianne K. Smythe, The Reparations Program 
of the Commodity Futures Trading Commission: Reducing Formality in 
Agency Adjudication, 2 Admin. L.J. 39, 40 (1988) (quoting Government 
Accounting Office Report, Reparations and Other Presently Available 
Forums for Resolution of Customer Claims, reprinted in CFTC 
Oversight: Hearings before the Subcomm. on Commerce, Consumer, and 
Monetary Affairs on the House Comm. on Government Operations, 97th 
Cong., 2d Sess. 861 app. 5 (1982)).
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    On January 22, 1976, the Commission issued its original ``Rules 
Relating to Reparation Proceedings.'' \2\ 17 CFR part 12. These rules 
originally were intended to conform to the procedural requirements of 
the Administrative Procedure Act (``APA''), as well as the guidelines 
established by section 14 of the Act.\3\
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    \2\ Kenneth M. Raisler & Edward S. Geldermann, The CFTC's New 
Reparation Rules: In Search of a Fair, Responsive, and Practical 
Forum for Resolving Commodity-Related Disputes, 40 Bus. Law 537, 540 
(1985).
    \3\ Id.
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    On January 11, 1983, Section 14(b) of the Act, 7 U.S.C. 18(b) was 
amended, effective May 11, 1983, to authorize the Commission to 
``promulgate such rules, regulations and orders as it deems necessary 
or appropriate for the efficient administration of this section.'' 
Congress conferred this broad discretion upon the Commission ``[t]o 
enable the Commission to simplify its rules of procedure regarding 
reparations and streamline the process,'' H.R. Rep. No. 565, 97th 
Cong., 2d Sess. 55 (1982). In addition, the amendments to Section 14(b) 
were intended to authorize the Commission ``to use its best judgment in 
fashioning appropriate procedures that will be both fair and 
efficient.'' Id.

II. Statement of Policy

    Currently, Rule 12.1(a), 17 CFR 12.1(a), provides that ``[t]he 
rules in [17 CFR Part 12] shall be construed liberally so as to secure 
the just, speedy and inexpensive determination of the issues presented 
with full protection for the rights of all parties.''
    The Commission generally has maintained a longstanding policy of 
liberally construing its Part 12 Reparation Rules. We have restated 
that policy in several decisions:
    As we said in Wade v. Chevalier, [2007-2009 Transfer Binder] Comm. 
Fut. L. Rep. (CCH) ] 30,781 at 61,680 (CFTC Feb. 27, 2008), ``Congress 
created the reparation forum as an informal venue and decreed that 
parties are not to be subjected to strict rules found in the courts.'' 
In Sommer v. Conticommodity Services, Inc., [1987-1990 Transfer Binder] 
Comm. Fut. L. Rep. (CCH) ] 24,244 at 35,106 (CFTC May 20, 1988), we 
also said, that ``Congress[] inten[ded] that the reparations program 
provide a more flexible and informal forum than that available in court 
* * *.'' Further, in Cook v. Monex International, Ltd., [1984-1986 
Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 22,532 at 30,295 (CFTC Mar. 
19, 1985) (citations to legislative history omitted), we held that 
``[a]s remedial legislation, the reparations procedure should be 
liberally interpreted to effectuate that congressional purpose.''
    We stated elsewhere that the complexities and formalities of 
district court litigation are not involved in the reparation program. 
Nelson v. Chilcott Commodities Corp., [1982-1984 Transfer Binder] Comm. 
Fut. L. Rep. (CCH) ] 21,934 at 28,033 (CFTC Dec. 12, 1983). 
Furthermore, ``[t]o remain inexpensive, the reparations forum must, at 
a minimum, remain hospitable to the participation of pro se parties.'' 
Hall v. Diversified Trading Systems, Inc., [1992-1994 Transfer Binder] 
Comm. Fut. L. Rep. (CCH) ] 26,131 at 41,751 (CFTC July 7, 1994). ``As a 
result, we have recognized that allowances must be made for pro se 
status in interpreting and applying procedural requirements.'' Id.
    Recently, we said in Moss-Thomas v. East Coast Commodities:


[[Page 3372]]


    [A] presiding officer's exercise of his authority under the 
reparation rules must ``be guided by his general responsibility for 
the `fair and orderly conduct of a formal decisional proceeding.' '' 
Jenne v. Paine Webber, Inc., [1987-1990 Transfer Binder] Comm. Fut. 
L. Rep. (CCH) ] 24,329 at 35,424 (CFTC Aug. 31, 1988) (quoting 
Commission Regulation 12.304(a)). * * * The principles of fairness 
and orderliness must be understood in light of Congress's intent 
that our procedures provide an ``inexpensive'' and expeditious 
alternative to the courts and arbitration. Anderson v. Beach, [2007-
2009 Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 30,763 at 61,607 
(CFTC Feb. 14, 2008).

[Current Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 31,322 at 62,685 
(CFTC Mar. 3, 2009).

    Notwithstanding this guidance, we have noticed that parties in some 
matters have been held to an unusually strict interpretation of the 
rules of practice, including nonsubstantive rules relating to document 
formatting. As a result, it is necessary and appropriate to issue this 
policy statement to clarify and provide further guidance to Commission 
staff and affected parties.
    Rule 12.1(a), 17 CFR 12.1(a), requires that rules of practice 
relating to reparation proceedings under 17 CFR part 12 ``shall be 
construed liberally so as to secure the just, speedy and inexpensive 
determination of the issues presented with full protection for the 
rights of all parties.''
    For example, the requirement in Rule 12.11, 17 CFR12.11, for 
documents filed with the Proceedings Clerk to be signed in ink should 
not be applied literally to documents filed by e-mail or facsimile. The 
formatting requirements need not be strictly enforced, as long as 
pleadings are legible. This policy statement does not affect the 
existing right of pro se parties to file handwritten pleadings. 17 CFR 
12.11(c).
    In another example, the forum does not require claimants to cite 
specific provisions of the Act, despite language in Rule 
12.13(b)(iv)(A) requiring complainants to allege ``each and every act 
or omission which it is claimed constitutes a violation of the Act.'' 
17 CFR 12.13(b)(iv)(A). The discussion of these rules is meant to be 
illustrative, not exhaustive. We expect the Commission's presiding 
officers, all of whom have extensive experience in this forum, to apply 
the Part 12 Rules generally in accordance with Rule 12.1(a).

III. Related Matters

A. No Notice Required Under 5 U.S.C. 553

    The Commission has determined that this policy statement is exempt 
from the provisions of the APA, 5 U.S.C. 553, which generally requires 
notice of proposed rulemaking and provides opportunity for public 
participation. In accord with the exemptive language of 5 U.S.C. 553, 
this policy statement gives guidance to staff members and affected 
parties pertaining to the administration of reparation proceedings 
under 17 CFR part 12. In addition, this policy statement relates solely 
to ``rules of agency * * * practice.'' Therefore, the notice 
requirements under 5 U.S.C. 553 are not applicable.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires agencies with rulemaking authority to consider the impact 
those rules will have on small businesses. With respect to persons 
involved in reparations proceedings, the interpretive rule imposes no 
additional burden, and in fact provides greater flexibility in 
complying with Part 12. Thus, the Chairman, on behalf of the 
Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that this 
policy statement will not have a significant economic impact on a 
substantial number of small businesses.

C. Paperwork Reduction Act

    This policy statement concerning Part 12 does not impose a burden 
within the meaning and intent of the Paperwork Reduction Act of 1980, 
44 U.S.C. 3501 et seq.

D. Cost-Benefit Analysis

    Section 15(a) of the Act, 7 U.S.C. 19(a), requires the Commission 
to consider the costs and benefits of its actions before issuing a new 
regulation. The Commission understands that by its terms, Section 15(a) 
does not require it to quantify the costs and benefits of a new 
regulation or to determine whether the benefits of the regulation 
outweigh its costs. Nor does it require that each rule be analyzed in 
isolation when that rule is a component of a larger package of rules or 
rule revisions. Rather, Section 15(a) simply requires the Commission to 
``consider the costs and benefits'' of its action.
    Section 15(a) further specifies that costs and benefits shall be 
evaluated in light of five broad areas of market and public concern: 
(1) Protection of market participants and the public; (2) efficiency, 
competiveness, and financial integrity of futures markets; (3) price 
discovery; (4) sound risk management practices; and (5) other public 
interest considerations. Accordingly, the Commission can, in its 
discretion, give greater weight to any one of the five enumerated areas 
of concern, and can, in its discretion determine that notwithstanding 
its costs, a particular rule is necessary or appropriate to protect the 
public interest, or to effectuate any of the provisions, or accomplish 
any of the purposes, of the Commodity Exchange Act.
    This policy statement will not create any significant change in the 
Commission's reparation proceedings. This statement will enhance the 
protection of market participants and the public by providing greater 
flexibility in complying with Part 12. This statement will make it 
easier for parties to participate in reparations proceedings, either as 
complainants or respondents. The cost-benefit factors are not 
influenced by this policy statement, which simply articulates and 
clarifies applicable law and precedent in reparation proceedings.

    Issued in Washington, DC, on January 14, 2010, by the 
Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2010-1101 Filed 1-20-10; 8:45 am]
BILLING CODE 6351-01-P
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