SECOND DIVISION

								August 281, 2001

No. 1-00-1585

FIRST AMERICAN DISCOUNT      		)	Appeal from the

CORPORATION, 	    				)	Circuit Court of 

							)	Cook County.   

		Plaintiff-Appellant,	)

							)

	v.							)	Case No. 97M1002750

							)

							)

GEORGE JACOBS and DEENA JACOBS,	)	The Honorable

						  	)	Glynn J. Elliott, Jr.,

          		Defendants-Appellees. 	)	Judge Presiding. 

	JUSTICE GORDON delivered the opinion of the court:

	The central incident in this appeal is plaintiff-appellant

First American Discount Corporation's (FADC) liquidation of

defendants George and Deena Jacobs' trading account, allegedly

without notice, on October 27, 1997.  Defendants claimed that

this liquidation constituted unauthorized trading, and the Cook

County Circuit Court agreed, finding that FADC carried out

unauthorized trading and thereby breached its fiduciary duty to

defendants.  Following a bench trial, the court entered judgment

in the amount of $106,511.74 (essentially the amount of

defendants' equity balance plus securities on deposit prior to

the liquidation) against FADC and in favor of defendants.  

	FADC is a registered futures commission merchant (FCM)

located in Chicago, with customers whose trades are cleared at

the Chicago Mercantile Exchange (CME).  Among FADC's customers

were defendants, whose account was introduced to FADC by Kristian 

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Capital Management, Inc. (KCM), of Naples, Florida, a registered

introducing broker (IB).  Defendants, also of Naples, Florida,

opened a trading account with FADC in January 1997 and executed a

Customer Agreement with FADC.  One of the agreement's provisions

authorized FADC to liquidate the positions in defendants'

accounts "without prior demand or notice."  

	On the morning of October 27, 1997, defendants held what are

called strangle option positions in the December Standard &

Poor's (S&P) 500 futures contract traded on the CME.  They had

sold 10 November 1025 calls and 10 November 890 puts.  These

options gave the purchasers the right, but not the obligation, to

buy or sell the underlying S&P contract at a fixed price within a

specified time.  Specifically, a put option is an option sold to

a buyer giving him the right to sell the contract at the fixed,

strike price even if the market declines below that price, while

a call option is an option sold to a buyer giving him the right

to buy at the strike price even if the market rises above that

level.  In this case, the 10 November 1025 call options sold by

defendants gave the purchasers the right to purchase the contract

at the strike price of 1025, even if the price rose above that

level, and the 10 November 890 put options gave the purchasers

the right to sell the contract at the strike price of 890, even

if the price fell below that level.  Thus a "ceiling" of 1025 and

a "floor" of 890 were created.  

	In engaging in this strategy, defendants were betting that 

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the underlying S&P contract price would stay within the range

between this ceiling and floor until the options expired, which

would mean they would expire worthless.  So long as the

underlying contract price remained below 1025, the purchaser of

the call option had no incentive to exercise it and purchase the

contract at the higher strike price of 1025.  Similarly, if the

contract price remained above 890, the purchaser of the put

option had no incentive to exercise it and sell at the lower, 890

strike price.  If the options expired worthless, defendants would

be able to keep the entire amount (premium) which they had

collected when they sold the options.  However, defendants'

positions were vulnerable to unlimited risk should the underlying

market move through either the ceiling or the floor.  

	Trading customers such as defendants are required to keep on

deposit with their FCM, in this case FACD, a certain amount of

what is called margin, which is a good faith deposit that

generally represents from 3 to 7 percent of the underlying

contract value. When this margin dwindles and the customer's

account goes "under margin," the FCM generally issues a "margin

call" requiring the customer to deposit additional money to bring

the margin back up to the required level.  According to documents

introduced into evidence at trial, at the close of trading on

Friday, October 24, 1997 (the last day of trading before Monday,

October 27, 1997), defendants had total equity of $57,164.98 in

their trading account, plus T-bills with a market value of 

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$48,846.76, for a sum of $106,011.74.  The initial margin

requirement for the positions held by defendants was $94,776,

which meant that they had on hand an excess margin of $11,235.74.

So long as the positions in their account did not lose more than 

$11,235.74 in value, the account had sufficient equity to

maintain the positions.  

	It is undisputed that the stock market fell precipitously on

October 27, 1997, which the testimony disclosed was the date of

the worst single-day point drop in the history of the U.S. stock

market.  See Great Northern Ry. Co. v. Weeks, 297 U.S. 135, 149 (1936) (taking judicial notice of the stock market collapse of

1929).  As a result of this decline, defendants' account became

under-margined.  Plaintiff asserts, without contradiction, that

at the time it liquidated defendants' positions, the account had

a deficit balance of $27,631, i.e., all of the margin had been depleted, and the account balance had dropped an additional

$27,631, an amount which plaintiff FACD paid to the CME at the

close of business on October 27.  It is also undisputed that

earlier in the day, before defendants' account became under-

margined, defendant George Jacobs instructed KCM, his introducing

broker, to execute a series of roll-down orders which would

result in a lowering of both the "ceiling" and the "floor" of his

positions.  According to this "roll-down" strategy, which was

only partially completed prior to the liquidation, defendants

would gradually buy back the 890 puts and 1025 calls, and replace 

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them by selling the same number of 885 puts and 985 calls.  Thus

the "floor" would be lowered from 890 to 885, and the "ceiling"

would be lowered from 1025 to 985.  

	In November 1997 FADC filed suit against defendants George

and Deena Jacobs, seeking a judgment against them in the amount

of $27,631.38.  FADC alleged that under the terms of the Customer

Agreement entered into between defendants and FADC, defendants

agreed to pay any and all debit balances incurred in their

trading account.  According to the complaint, defendants' account

incurred a debit balance of $27,631.38 "[a]s a result of

unprofitable trades initiated by Defendants," and defendants had

failed and refused to pay this amount to FADC.  Thus FADC alleged

that defendants breached the agreement.  

	Defendants counterclaimed that plaintiff's liquidation of

their positions constituted unauthorized trading, and that this

liquidation was a breach of plaintiff's fiduciary duty to

defendants.  Plaintiff moved for summary judgment, contending

that it had both a legal and a contractual right to liquidate

defendants' under-margined positions with or without notice. 

Attached to defendants' response to this motion was an affidavit

of defendant George Jacobs.  In this affidavit, Jacobs stated

that prior to opening his account with FADC, he had spoken with

Ken Kristian of KCM, the Florida broker which introduced

defendants' account to FADC.  According to Jacobs, Ken Kristian

told him at that time that FADC would never liquidate positions 

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in Jacobs' account unless he failed to meet a margin call.  

	The trial court denied plaintiff's motion for summary

judgment.  A bench trial began on June 4, 1999, and it was

reconvened on October 14, 1999.  The following relevant evidence

was presented at trial.  

	Carl Gilmore, the director of compliance for FADC, was

called by both FADC and defendants.  Gilmore stated that on

October 27, 1997, he noticed a dramatic downward move in the S&P

500 futures market.  When the market declined to about 930,

Gilmore became concerned about defendants' account, whose

positions, as noted, had a "floor" of 890.  Gilmore called his

firm's trading desk and asked them to contact KCM and express

Gilmore's concerns about defendants' positions if the market

continued to decline.  He told the trading desk to ask KCM what

defendants' intentions were if the market continued to drop. 

Gilmore was told by the trading desk that defendants were unable

to wire funds on that day because they were traveling.  The

trading desk informed Gilmore that defendants wanted to initiate

a "roll-down" strategy which would lower the floor and ceiling of

their positions, thereby reducing the potential margin

consequences to the account. It was Gilmore's understanding that

the roll-down strategy was to be initiated when the underlying

futures contract price hit 910.   

	Gilmore further stated that he told the trading desk the

roll-down strategy was acceptable for the time being, but that if 

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the market continued to decline, the positions would have to be

liquidated, since additional funds apparently were not

forthcoming from defendants.  Gilmore told the trading desk to

inform KCM about the possible liquidation.  

	Gilmore testified that they began to implement the roll-down

strategy but were unable to complete it.  The market declined

rapidly, moving through the new floor, and FADC was forced to

liquidate defendants' positions in an effort to reduce the risk

and protect itself.  At the time of liquidation, defendants'

account showed a deficit balance of $27,631, which FADC was

required to pay to the CME at the close of business on October

27.  According to Gilmore, this deficit amount would have been

much greater had FADC not acted when it did.  If FADC had simply

continued the roll-down, the deficit in defendants' account would

have grown by another $54,850 prior to settlement, leaving a

deficit in excess of $80,000 at the end of the day.  At the

opening the next day, this deficit would have increased not by

$55,000 but instead by $177,050.  Thus the actual deficit of

$27,631 would have grown to a total of some $204,000.  In that

event, defendants' margin call at the opening on October 28,

1997, would have exceeded $255,000.

	During his testimony, Gilmore referred to an individual

information form which was included in the Customer Agreement

between defendants and FADC.  According to this form, which as

part of the agreement was admitted into evidence, George Jacobs 

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listed his residence as Naples, Florida.  The residence telephone

number listed on the form had a Florida area code.  On October

27, 1997, based on conversations between FADC and KCM, FADC knew

that Jacobs was "on the road."  Gilmore stated that since he

could not have reached Jacobs at the Florida telephone number on

October 27th, he did not call Jacobs at that number and give him a margin call. According to Gilmore, Jacobs never gave him a

number where he could be reached on that day.

	Defendant George Jacobs, who also was called by FADC and

defendants, testified that on October 27, 1997, he was traveling

somewhere in Maryland (apparently en route from his home in

Connecticut to his home in Florida) when he heard on the car

radio that the market had moved down ("toward [his] put positions

from the start of the day").  He went to the nearest telephone

and called KCM.  Jacobs talked to Kirk Kristian (Ken Kristian's

brother), a KCM broker, about the market.  Kirk Kristian told

Jacobs that FADC was concerned about the market, and Jacobs asked

Kirk if he, Jacobs, needed to send any additional money.  Kirk

said he would find out.  Also at this time, Jacobs instructed

Kirk Kristian to begin a roll-down strategy if the market fell to

910.  Jacobs testified that he did not have a cell phone, and he

could not be sure that he would come to another pay telephone

before 15 or 20 miles had passed. He wanted to prepare himself in

case the market dropped, which is why he told Kirk to institute

the roll-down strategy.  According to Jacobs, there was no 

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discussion at this time about a margin call.

	Jacobs stated further that he called Kirk Kristian a short

while later, and Kirk told him that FADC would not tell him

(Kirk) that Jacobs "need[ed to send] any money."  Jacobs called

Kirk a third time and asked him if there was a problem with the

margin, and Kirk told him that FADC would not tell him.  When

Jacobs called Kirk a fourth time,1 Kirk told him that FADC had liquidated his positions.   

	Jacobs maintained throughout his testimony that he never

received a margin call from FADC.  He also insisted that he never

told Kirk Kristian on October 27, 1997, that he would not meet a

margin call, or that he would not wire money.  Jacobs testified

that he had $103,000 in his bank account which he could have

wired.  There were 32 branches of this bank in Maryland, and

Jacobs stated that he was prepared to go to the closest one and

"see what arrangements [he] could make."  He never did that

because, according to Jacobs, he was never asked to put up any

additional money.  Jacobs also stated that the market

subsequently recovered and that by the end of the next day

(October 28), the November 890 and 885 S&P options "were very

close to the *** positions that we had [previously]." 

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	Jacobs conceded that, since his account was liquidated at a

deficit on October 27th, at some point on that day it was under- margined.  He also conceded that at the point when his account

became under-margined, FADC could not have reached him at his

residence in Florida.  Jacobs did not have a cell phone, and he

did not give Kirk Kristian a number where he could be reached. 

He also acknowledged that he signed the Customer Agreement with

FADC, and that by signing it he represented to FADC that he had

read and understood its terms, and agreed to be bound by them. 

Jacobs said he believed that Ken Kristian of KCM had orally

amended the agreement.  Jacobs attempted to testify, as indicated

in his earlier affidavit attached to his response to FADC's

summary judgment motion, that he had been assured by Ken Kristian

that he would always receive a margin call prior to any

liquidation.  However, the trial court sustained FADC's objection

that this testimony was barred by the parol evidence rule. 

Jacobs conceded that no one from FADC ever told him that Ken

Kristian worked for FADC or that he had the authority to amend

the agreement, which was between FADC and defendants.  

	Kirk Kristian, a commodities broker with KCM, testified on

behalf of FADC.  He said Jacobs was a client of his brother, Ken

Kristian, but that Ken was out of the office on October 27.  Kirk

Kristian stated that his first conversation with Jacobs on that

day was at 1:17 p.m. eastern time.  Jacobs told Kirk that he was

traveling south to Naples, Florida, for the winter and that he 

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had heard on the radio that the market was falling and he was

very concerned.  Kirk explained to Jacobs what FADC's concerns

were.  He told Jacobs that FADC wanted to know if he had money

available should the market continue to move downward.  Kirk and

Jacobs discussed implementing a roll-down strategy if the market

continued to decline, and Kirk told Jacobs that he would present

that option to FADC.  However, he asked Jacobs if money was

available in case the roll-down strategy proved insufficient. 

According to Kirk Kristian, Jacobs was confident that the market

would not move much further downward, and he (Jacobs) was not in

a position to wire money. Jacobs told Kirk that his bank was in

Connecticut and that he was not going to send money.  

	Kirk Kristian testified further that FADC called him on

October 27, 1997, and expressed concern about defendants'

positions.  FADC was concerned that if the market continued to

fall, Jacobs might be on margin call or he could possibly "go

debit."  FADC asked Kirk Kristian what funds Jacobs had available

in case they were needed.  After talking to Jacobs, Kirk told

FADC about the roll-down strategy and that it was unlikely that

Jacobs would be sending money.  FADC told Kirk that they could do

the roll-down but that if the market continued lower, that might

not be enough.  FADC told Kirk to tell Jacobs that if he was

unable to wire funds or if the roll-down position became under-

margined, his positions could be liquidated.  Kirk relayed this

information to Jacobs the next time Jacobs called him, which was 

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at about 1:47 p.m. eastern time. 

	Kirk Kristian also testified that the market continued to

decline, and when it reached 910, the roll-down sequence was

initiated.  However, the market continued downward and traded

through the new "floor" of 885.  FADC then called Kirk to say

that they were liquidating Jacobs' "put" positions (the "floor"

positions) because Jacobs was in deficit at that point.  Kirk was

not able to call Jacobs and give him this information because

Jacobs was on the road, traveling from town to town, and was not

at a telephone booth.  He did not have a cell phone.  Jacobs'

"call" positions (the "ceiling" positions) subsequently were

liquidated as well.  

	Linda Frazier testified as an expert witness on behalf of

defendants.  She stated that, according to custom and practice in

the industry, as well as under CME and Commodity Futures Trading

Commission (CFTC) rules, a customer is entitled to notice that

his account positions are at risk of being liquidated, and is

entitled to an opportunity to meet the margin call in order to

prevent liquidation.  Frazier averred that failure to issue a

margin call prior to liquidating an account is a violation of CME

rules pertaining to liquidation of accounts.  According to

Frazier, even if the broker knew that the customer was not at his

residence in Florida but was instead traveling by car from

Connecticut to Florida, the broker still must attempt to call the

customer at his Florida residence.  	

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	On April 17, 2000, the trial court entered a judgment order

finding that FADC "did unauthorized trading and did break [sic]

its fiduciary duty to George & Deena Jacobs."  The court awarded

defendants $106,511.74 in damages.  The court also rejected

defendants' contention that KCM was an agent of FADC.  The

instant appeal followed.  

			DISCUSSION

	FADC urges on appeal that it had a legal and contractual

right to liquidate defendants' under-margined positions even

without prior notice.  Thus FADC contends that the trial court

erred in finding for defendants on their counterclaim that this

liquidation constituted unauthorized trading and a breach of

fiduciary duty.  FADC also asserts that it was entitled to

judgment in its favor on its affirmative complaint for breach of

contract against defendants. 

	The question which must be determined in this decision is

whether plaintiff FADC, the brokerage firm, was entitled to

liquidate defendants' positions without a prior margin call at a

time when defendants were inaccessible.  Our conclusion is that

the brokerage firm was so entitled as a matter of law.  While

there are no cases specifically on point from our jurisdiction,

there is a decision from the Supreme Court of North Carolina (see

Moss v. J.C. Bradford & Co., [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶26,146 (1994)), as well as an administrative

law decision from the CFTC (see Mohammed v. Jack Carl/312 

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Futures, Index Futures Group, Inc., [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶25,229 (1992)), which clearly uphold

the right of a brokerage house to effect a liquidation of an

under-margined account without prior notice.  

	In Moss v. J.C. Bradford & Co., [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶26,146 (1994), which is nearly exactly

on point, the plaintiffs, who were trading customers of the

defendant brokerage firm, alleged that the defendant wrongfully

liquidated their accounts on the CME and thereby breached the

agreement they had entered into with the defendant.  This

liquidation followed a precipitous drop in the S&P 500 index on

Monday, October 19, 1987, which resulted in a loss to the

plaintiffs of $282,625.  The defendant broker issued a margin

call, and the plaintiffs' representative attempted to meet it

with "over the counter" stock which, under CME rules, could not

be used to satisfy a margin call.  Accordingly, the stock was

used as security for a loan from the brokerage firm to the

plaintiffs, and it was this loan rather than the stock which was

used to meet the margin call.  

	The market continued to spiral downward, and by the next

morning, an additional margin call of $105,000 was issued.  The

plaintiffs were able to come up with only $65,000, so the

defendant sold $40,000 worth of the plaintiffs' over-the-counter

stock to satisfy the remainder of the margin call.  Meanwhile,

the market continued to plummet, and the defendant determined 

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that another margin call would be necessary when the index fell

to 191.5.  The defendant therefore decided to enter a "stop loss

order" for the plaintiffs' contracts at an index of 190, which

meant that if the index fell to 190, the plaintiffs' accounts

would be liquidated.  The defendant attempted to contact the

plaintiffs' representative to inform him of the decision, but was

unable to reach him.  Shortly thereafter the index reached 190,

and the plaintiffs' accounts were liquidated. 

	The customer agreement at issue in Moss was similar to the agreement in the instant case.  Under its terms, if the

plaintiffs' accounts became under-margined, the defendant was

authorized to liquidate them without notice. The defendant thus

argued that the agreement gave it the right to liquidate the

plaintiffs' accounts "whenever it deemed itself at risk and

without issuing a margin call or providing the plaintiffs with

notice of its intent to liquidate their positions."  Moss, [1992- 1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,802.  The

court in Moss did not reach this question, however, concluding instead that the federal regulatory scheme governing margin calls

and account liquidation permitted the liquidation of a customer's

account without prior demand or notice.  According to the court,

"any [contract] terms contrary to the federal regulatory scheme

in the area of futures trading would be unenforceable."  Moss, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,805.  

Thus if the contract in Moss were construed to require such 

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notice, it would be in violation of the federal scheme.  "Since

the federal regulatory scheme is designed to afford merchants and

commodities exchanges with maximum protection, any terms of the

customer agreement which exposed [the defendant brokerage firm]

(and thereby the CME) to a risk greater than that allowed by

federal law would be unenforceable."  Moss, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,805.  

	In discussing this regulatory scheme, the court pointed in

particular to CFTC regulation 1.55 (17 C.F.R. §1.55 (1999)),

which prescribes the "Risk Disclosure Statement" that futures

merchants must provide to their customers, and to CME Rule 827

(since replaced by portions of CME Rule 930).  Both Rules 1.55

and 827 (and CME Rule 930) deal with margin and liquidation.  The

court concluded that "the pervasive federal regulatory paradigm

in the area of futures trading, including CME Rule 827, is

designed to afford maximum protection to the commodities

merchants and the commodities exchanges themselves and therefore

permits the liquidation of a customer's under-margined account without prior demand or notice."  (Emphasis added.)  Moss, [1992- 1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,804-05.  The

court explained that "it is imperative that futures merchants be

able to act quickly and decisively to liquidate a customer's

account when, as in the present case, a precipitously declining

market demands such action."  Moss, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,804. Therefore "the federal 

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scheme, including Rule 827, contemplates and permits but does not require a demand, i.e., margin call, or notice prior to liquidating a customer's account."  (Emphasis in original.) 

Moss, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,804. 

	This same conclusion was reached in an administrative

decision of the CFTC, which is the federal agency charged with

regulation of commodity futures trading.  In Mohammed v. Jack Carl/312 Futures, Index Futures Group, Inc., [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶25,229 (1992), the complainants alleged that the respondent FCM had liquidated positions on their

account without giving them an opportunity to meet a margin call,

and that this constituted unauthorized trading. As in Moss and the instant case, the complainants had signed customer agreements

acknowledging that the FCM could liquidate positions without

notice or demand if the account was under-margined.  The evidence

presented at trial showed that the complainants' account was

under-margined for a week and that during this time the

respondent tried repeatedly to contact them but to no avail.  The

CFTC Administrative Law Judge (ALJ) dismissed the complaint,

concluding that "[n]othing in the [Commodity Exchange] Act or

regulations requires a futures commission merchant to obtain the

consent of a customer to liquidate positions on an undermargined

account."  Mohammed, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 38,665.  The ALJ explained that when an account 

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becomes under-margined, it exposes the FCM to risk, and "[i]t is

not a violation of the [Commodity Exchange] Act for a futures

merchant to liquidate positions on an account to avoid such

risk."  Mohammed, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 38,665.  If the situation were otherwise, this would

mean the FCM was obligated to take risks on behalf of a customer. 

"That is not the case," the ALJ said. 

	Thus both Moss and Mohammed enunciate the principle that under the federal regulatory scheme, a broker is permitted to

liquidate an under-margined account without prior notice.  This

would be the case even if the contract with the customer required

a prior margin call.  See Moss, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,805 ("[A]ny terms contrary to the

federal regulatory scheme in the area of futures trading would be

unenforceable").  

	In our case, we have a contract which provides for

liquidation "without prior demand or notice," in full

implementation of the federal policy addressed in Moss and Mohammed.  This Customer Agreement between FADC and defendants provides in pertinent part that:

		"In the event I [Jacobs] fail to deposit

sufficient funds to pay for any commodities and/or to

satisfy any demands for original and/or variation

margin, or whenever in your [FADC's] sole and absolute

discretion you consider it necessary, you may, without prior demand or notice, when and if you deem appropriate, notwithstanding any rule of any exchange,

liquidate the positions in my account(s) ***."  (Emphasis added.)  

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This language clearly authorizes FADC to liquidate defendants'

under-margined account without prior demand or notice. 

	Defendants contend that the federal regulatory scheme does

require notice prior to liquidation.  They point to CFTC Rule

1.55 (17 C.F.R. §1.55 (1999)) and CME Rule 827, both of which are

part of the federal scheme addressed in Moss and Mohammed.   Rule 827, which as noted has been replaced by portions of CME Rule

930, provides in pertinent part that:

		"D. The [merchant] may call for additional margins

at his discretion, but whenever a customer's margins

are depleted below the minimum amount required, the

[merchant] must call for such additional margins as will bring the account up to initial margin

requirements, and if within a reasonable time the

customer fails to comply with such demand (the

[merchant] may deem one hour to be a reasonable time),

the [merchant] may close out the customer's trades or

sufficient contracts thereof to restore the customer's

account to required margin status."  (Emphasis added.) 

Moss, [1992-1994 Transfer Binder], Comm. Fut. L. Rep. (CCH) at 41,803.  

According to defendants, the use of the word "must" here means

that under Rule 827, a broker is required to issue a margin call

before liquidating a customer's account. 

	This argument was explicitly rejected by the court in Moss, which emphasized that "[r]ules of this sort governing margin

calls and account liquidation are for the protection of the

merchant and, ultimately, for the protection of the commodities

exchange itself."  Moss, [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 41,803.  The court stated that: 

	"The essential thrust of Rule 827 therefore is that if 

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	the merchant chooses not to liquidate an under-margined

customer, the merchant at least must issue a margin call.  Thus, while the merchant may either liquidate the under-

margined customer's accounts without notice to the customer

or provide the customer an opportunity to restore his

account to the initial margin, the exchange rules prohibit a

merchant from continuing to 'carry' an under-margined

customer to the detriment of the merchant, the CME and,

ultimately, the national economy."  (Emphasis in original.) 

Moss, [1992-1994 Transfer Binder], Comm. Fut. L. Rep. (CCH) at 41,804.

	Under this analysis, with which we agree, Rule 827 is not

intended to extend the rights of the customer, but rather to

protect the right of the brokerage house to be free from

liability if it issues a margin call instead of instantly

liquidating the customer's positions.  Thus, as articulated in

Moss, the broker may issue a margin call, but Rule 827 does not prohibit him from going a step further and liquidating the

customer's under-margined account without notice.

	As noted in the instant case, if FADC had failed to

liquidate defendants' account when it did, defendants' losses

would have been even greater by the end of the day, and far

greater at the opening on the following day.  Rule 827 protects

brokers such as FADC against accusations that they did not sell

out soon enough.  If a broker fails to liquidate, he is protected

so long as he issued a margin call.  Under the analysis in Moss, Rule 827 is not designed to give the customer the right to notice

before liquidation.2 

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	CFTC Rule 1.55, which prescribes a "Risk Disclosure

Statement" that futures merchants must provide to their

customers, is somewhat more troublesome.  This statement, which

was included in the Customer Agreement executed by FADC and

defendants, provides in pertinent part that:

		"You may sustain a total loss of the funds that

you deposit with your broker to establish or maintain a

position in the commodity futures market, and you may

incur losses beyond these amounts.  If the market moves

against your position, you may be called upon by your broker to deposit a substantial amount of additional

margin funds, on short notice, in order to maintain your position.  If you do not provide the required funds within the time required by your broker, your

position may be liquidated at a loss, and you will be liable for any resulting deficit in your account." 

(Emphasis added.)  17 C.F.R. §1.55(b) (1999). 

Insofar as this statement is a warning, it appears to be

indicative of a contemplation under CFTC regulations that there

will be notice prior to liquidation.  However, it does not

prohibit liquidation without notice.  It deals only with warning

about the risks of the investment.  The first sentence, as set

forth above, cautions the customer that he may lose all of the

funds he has invested, and may incur "losses beyond these

amounts." 

	As noted, under Moss a contract prohibiting immediate liquidation without notice would be unenforceable as being 

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contrary to federal regulatory policy which mandates that such

latitude be given to the broker.  However, even if we would

interpret Rule 1.55 as diluting the strength of the federal

regulatory policy articulated in Moss, it would clearly not be sufficient to establish a contrary federal policy so as to

vitiate an agreement which expressly authorizes liquidation

without notice.  See Olmos v. Golding, [1990-1992 Transfer Binder], Comm. Fut. L. Rep. (CCH) ¶24,893 (N.D. Ill. 1989). 

There, the U.S. District Court held enforceable an agreement

whose relevant terms were nearly identical to the instant

Customer Agreement.  

	In Olmos, the plaintiff executed an agreement with the defendant broker which provided, in relevant part, that:

	"If at any time Customer's account does not contain the

amount of margin required, Broker may, but is not

obligated to at any time without notice, close out

Customer's positions in whole or in part ***." Olmos, [1990-1992 Transfer Binder], Comm. Fut. L. Rep. (CCH)

at 37,237.   

The plaintiff, a customer of the defendant commodity broker, had

purchased silver futures contracts.  At the close of the silver

market on March 31, 1986, the plaintiff's account was on margin

call for $43,941.14.  Earlier that day, the defendant had advised

the plaintiff that his account was under-margined and that unless

he wire-transferred sufficient funds to meet the margin call that

day, in time to be confirmed prior to the open of the silver

market the next day, stop loss orders would be placed to protect 

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the account from going deficit. The plaintiff never transferred

the funds.  The next day, April 1, 1986, the defendant broker

placed stop loss orders on the plaintiff's account, and his

contracts ultimately were sold.  

	The plaintiff brought suit against the broker, alleging,

inter alia, unauthorized trading.  The defendant moved for summary judgment, and the court granted the motion.  In reaching

this conclusion, the court noted that, under the terms of the

agreement, "[i]n the event [the plaintiff's] account was to

become underfunded for any reason, such as failure to meet a

margin call, [the broker] had the authority under the Agreement,

in its sole discretion, for its own protection and without notice to [the plaintiff], to close out [the plaintiff's] position by

placing stop loss orders."  (Emphasis added.)  Olmos, [1990-1992 Transfer Binder], Comm. Fut. L. Rep. (CCH) at 37,239.

	Defendants attempt to distinguish Olmos on the ground that under the specific facts in Olmos, the defendant broker did as a matter of fact notify the plaintiff that his account was under-

margined and that it could be liquidated if he did not wire funds

to meet the margin call.  In the instant case, by contrast,

defendants allege that FADC never attempted to give them a margin

call.  This distinction does not alter the fact that the

agreement in Olmos, as the court itself noted, authorized the broker "in its sole discretion, for its own protection and

without notice to [the plaintiff], to close out [the plaintiff's] 

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position by placing stop loss orders."  (Emphasis added.)  Olmos, [1990-1992 Transfer Binder], Comm. Fut. L. Rep. (CCH) at 37,239. 

It is this agreement which was held enforceable in Olmos.  Accord 

Geldermann & Co. v. Lane Processing, Inc., 527 F.2d 571, 577 (8th Cir. 1975) ("Imposing requirements of demand and notification,

particularly where it may be extremely difficult or time-

consuming to contact an investor, would violate the manifest

purpose of the [contract's] liquidation provision"). 

	Defendants make essentially the same argument 

with respect to Geldermann as they do with regard to Moss, Mohammed and Olmos, contending that since the facts in Geldermann, as in Moss, Mohammed and Olmos, include either an actual margin call or at least an attempt to notify the customer,

these cases therefore do not stand for the proposition that a

broker may liquidate without prior notice.  We disagree.  While

under the facts of these cases a margin call was received or

notice was attempted, the holdings clearly adhere to the

proposition that no demand or notice is required prior to

liquidation.  Accordingly, we conclude that the liquidation

provision in the Customer Agreement between defendants and FADC

is enforceable, in that no demand or notice is required on the

part of a brokerage house prior to liquidating an under-margined

account.  

	However, we note that even if notice were ordinarily required prior to liquidation, which it is not, no such prior 

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notice would be required in this case, where defendant George

Jacobs, by his own admission, was inaccessible on the day in

question.  Testimony given at trial showed that on October 27,

1997, Jacobs was in Maryland, traveling by car from Connecticut

to his home in Florida, and that he was periodically contacting

KCM from pay telephones.  Jacobs conceded that he did not have a

cell phone and that he did not give Kirk Kristian of KCM a number

where he could be reached.  Thus Kirk Kristian was able to speak

to Jacobs only when Jacobs called him from a pay telephone. 

Jacobs also conceded that at the point when his account became

under-margined, FADC could not have reached him at his residence

in Florida.  

	Testimony also showed that FADC knew on October 27 that

Jacobs was "on the road" and could not be reached at his Florida

telephone number.  It was for this reason that FADC did not call

Jacobs at that number to give him a margin call.  Nevertheless,

Linda Frazier, who testified as an expert on behalf of

defendants, asserted that such a call still should have been made

and in fact that it was required.  We disagree.  In the instant case, where the evidence is undisputed that the market was

falling precipitously and where defendants were (by their own

admission) inaccessible, there is no requirement that a broker

make what would have amounted to a futile attempt to give notice

prior to liquidation.  

	The law should not require the performance of a useless act. 

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See Liberty National Bank of Chicago v. Newberry, 6 Ill. App. 2d 252, 257, 127 N.E.2d 269, 272 (1955) ("Courts will not permit the

doing of a useless act"); see also Leitch v. Sanitary District of Chicago, 386 Ill. 433, 440, 54 N.E.2d 458, 461 (1944); Daven v. Downey, 378 Ill. 543, 555, 39 N.E.2d 45, 50 (1941) (equity will not require the doing of a useless act).  In this case, where the

market was undisputably in steep decline, we decline to require a

broker to make an attempt to issue a margin call which would have

been unquestionably futile, particularly at a time when even a

minor delay could increase the risk for the broker as well as the

exchange.  A broker is not obliged to take risks on behalf of a

customer.  See Mohammed, [1990-1992 Transfer Binder] Comm. Fut. L. Rep. (CCH) at 38,665.  	

	FADC also urges that the trial court erred in finding that

FADC breached a fiduciary duty to defendants George and Deena

Jacobs.  We agree. 

	This court has held that "[t]he duty of care owed by a

broker carrying a nondiscretionary account is an exceedingly

narrow one, consisting at most of a duty to properly carry out

transactions ordered by the customer."  Index Futures Group, Inc. v. Ross, 199 Ill. App. 3d 468, 475, 557 N.E.2d 344, 348 (1990); see also Commodity Futures Trading Comm'n v. Heritage Capital Advisory Services, Ltd., 823 F.2d 171, 173 (7th Cir. 1987) ("Only a broker operating a discretionary account–in which the broker determines which investments to make–is viewed as a fiduciary").  

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In the instant case, it is undisputed that FADC did not have

general discretionary authority over defendants' account.  Thus

FADC's fiduciary duties were "exceedingly narrow," essentially reaching no further than taking orders, executing trades, and

dealing with customer funds.  See Ross, 199 Ill. App. 3d at 476, 557 N.E.2d at 348.  These duties were not breached by FADC's

liquidation of defendants' account, which we have already

concluded was authorized by the Customer Agreement and permitted

by the federal regulatory scheme governing futures trading.  

	Notwithstanding the foregoing, defendants argue that FADC

breached its fiduciary duty by misleading defendants as to its

margin and liquidation policies.  Defendants assert that, prior

to opening their account with FADC, Ken Kristian of KCM informed

George Jacobs that Jacobs would always receive a margin call

prior to any liquidation of his positions.  As noted, this

assertion was made by Jacobs in an affidavit which was attached

to defendants' response to FADC's motion for summary judgment. 

This affidavit was never accepted into evidence by the trial

court.  In addition, when defendants attempted to proffer

testimony to this effect at trial, the trial court sustained

FADC's objection that the testimony was barred by the parol

evidence rule.3  The trial court also rejected defendants' 

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contention that KCM was an agent of FADC.  Jacobs conceded at

trial that no one from FADC told him that Ken Kristian either

worked for FADC or that he had authority to modify the Customer

Agreement between defendants and FADC.  There is nothing in the

record indicating that Ken Kristian was a principal of FADC, or

that his alleged statement to Jacobs would have constituted an

amendment to the Customer Agreement.  There is thus insufficient

basis in this record to support the conclusion that Ken

Kristian's alleged statement to Jacobs regarding margin calls and

liquidation could be attributed to FADC.  

	Accordingly, we conclude that FADC's liquidation of

defendants' account on October 27, 1997, did not constitute a

breach of fiduciary duty, particularly since the upholding of any

such duty would necessarily be contrary to the federal regulatory

scheme, as well as to the liquidation provision of the Customer

Agreement.  It would expose FADC to a risk greater than that

allowed by federal law, and thus would be unenforceable.  See

Moss, [1992-1994 Transfer Binder], Comm. Fut. L. Rep. (CCH) at 41,805.      

	We therefore reverse the trial court's finding that FADC's 

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liquidation of defendants' account constituted unauthorized

trading, as well as the finding that the liquidation was a breach

of fiduciary duty.  We also reverse the court's award of

$106,511.74 in damages to defendants.  In addition, we remand

this cause to the trial court for a determination as to whether

defendants' refusal to pay the debit balance of $27,631.38 to

FADC constituted a breach of the Customer Agreement between

defendants and FADC.

	Reversed and remanded with directions.  

	CAHILL, P.J., and COUSINS, J., concur.