COMMENT 

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SOO'l'T E. RATNER • 

SIDNEY SEGAL (1931:1-1988) 

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TOGUT, SEGAL& SEGAL LLP 

ONE PENN PLAZA 

NEW YORX, NEW YORK 10119 

(212) 1:194-15000 

l"AOSIM'ILB 

(912)9674268 

INTE:B.NET 

eMail@TeamTogut.com 

Received CFTC 

Records Section 

jJ(/d-tJ/0 

Via-Email: secretazy@dtc.gov 

Via Fax: 202-418-5521 

Mr. David A. Stawick 

Secretary of the Commission 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 zrt Street, N.S. 

Washington, DC 20581 

Ladies and Gentlemen: 

Re: RIN 3038-AC90 

17 CFR Part 190 

DANIEL P.X, GEOGHAN • 

JA.MESJ.LEE' 

JEFFRKY M. TRAUIDG" 

BRI.A.N 1", MOORR' 

ERJO OH.A.l"ETZ• 

DAVID M. SMITH 

~HANIBA. SKELLY: o 

STEVENS. FLORES 

MIOHAEL D. HAMERSB.Y 

KATlmlUN:& J, WnALI. 

:&L Y:SE I!, NOVIXOI!I! 

NAOMI 0, MOSS 

JASONP,RUBIN 

'MEMBER NV AND NJ DAR 

DMI!:MI!ItR NV AND ¢T BAR 

~ MEMB&R NY AND MA BAR 

• M£MBE:R Ml BAR 

January 14, 2010 

I am currently serving as the Trustee for Refco, LLC ("Refco") in its Chapter 7 

bankruptcy case pending before the Honorable Robert D. Drain in the United States 

Bankruptcy Court for the Southern District of New York, Case No. 05-60134 (RDD). Refco has 

the distinction of being the first futures commission merchant ("FCM") to have been sold as a 

going concern in bankruptcy. 

The Commodity Futures Trading Commission (the "Commission") has proposed 

amending its regulations (17 CFR Chapter 1, the "Regulations") regarding a commodity broker 

in bankruptcy to permit the bankruptcy trustee to operate, with the written permission of the 

Commission, the business of such broker in the ordinary course, including the purchase or sale 

of new commodity contracts on behalf of its customers under appropriate circumstances as 
TOGUT1 SEGAL & SEGAL LLP 

Mr. David A. Stawick 

Secretary of the Commission 

Commodity Futures Trading Commission 

January 14, 2010 

Page2 

determined by the Commission (the "Proposed Amendment''). For the reasons detailed 

below, I support the Proposed Amendment. 

Based upon my firsthand experience, I believe that the Proposed Amendment, if 

enacted, will better serve the Commission's regulatory purpose (i.e., "to provide an 

understandable and workable method for operating the estate pending liquidation") than does 

the current regulatory scheme which prohibits the bankruptcy trustee, immediately upon the 

commencement of the commodity broker's bankruptcy case, from processing any new trades 

on behalf of customers. 

As noted by the Commission in the commentary accompanying the Proposed 

Amendment, Refco was the unique situation where the business of the commodity broker was 

able to be sold to a third party following a bankruptcy filing without any disruption to 

customer trades or prejudice to customer accounts.1 As the Commission correctly observed, 

however, this was able to take place (among other reasons) because the Refco bankruptcy 

filing, the third-party sale, and the related transfer of customer accounts all occurred after the 

close of the domestic commodity markets on a shortened (and very light) trading Friday, 

November 25,2005, and prior to the re-opening of domestic markets on the next business day. 

The sale had to be closed on the same day the case was commenced because once 

the Chapter 7 petition was filed, there was no room for any delay; customers would likely 

have pulled their accounts from Refco, trades would not have been able to be processed and 

the marketplace would have suffered from severe disruptions and chaos- given the fact that a 

bankruptcy trustee could not operate Refco, trades could not be processed and customer 

positions would have been required to be transferred to a third party commodity broker under 

the current regulatory scheme. 

The timing of the commencement of the Refco case was carefully considered. 

Under the Regulations then in effect, I was constrained to sell the business to the buyer 

immediately upon the bankruptcy petition filing because (except for certain limited 

exceptions) Regulation 190.04(d)(2) expressly prohibited me from purchasing or selling new 

commodity contracts for customers. Although the Bankruptcy Court could, and did, authorize 

my limited operation of the Refco business, it could not authorize continued trading because 

of the Regulations then in effect. This significantly limited what I could do. So, to minimize 

the loss of customer accounts due to customer fear that the Refco bankruptcy would freeze 

their account activity, the bankruptcy filing was timed to occur after the markets closed on a 

holiday weekend (Thanksgiving), on the Friday when there would be little trading. To effect a 

transfer of all customer accounts before the markets could reopen and to be able to have a 

It is my understanding that all other FCMs that preceded Refco in bankruptcy proceedings could only be 

liquidated in their Chapter 7 cases because, unlike Refco, their businesses could not be sold intact. 
TOGUT, SEGAL & SEGAL LLP 

Mr. David A. Stawick 

Secretary of the Commission 

Commodity Futures Trading Commission 

January 14, 2010 

Page3 

hearing in open court, on a weekday, the hearing to approve the sale of the Refco business to 

its buyer had to occur on the Friday after Thanksgiving, a day when there would be little court 

activity. The Refco Chapter 7 petition was filed at 4:31 p.m. that post-Thanksgiving Friday, 

and Judge Drain stayed late until the sale was approved. 

This timing was critical to the overall success of the transaction, the protection of 

customers, and the stability of the market. However, the Commission's commentary fails to 

note that such timing was only possible due to an extraordinary measure taken by the United 

States Trustee, with the concurrence of other parties in interest. Had the United States Trustee 

strictly followed the Bankruptcy Code as written (i.e, the Trustee does nothing until appointed 

and is not notified of an appointment until after the petition is filed), the Refco case would 

have been a disaster because no trustee could ever have been able to adequately prepare to 

understand the sale, draft the necessary pleadings to get the sale before the Court, obtain 

Court approval, and then on the same day attend a complex closing and close the sale. 

The Trustee in Refco was afforded that needed time by the United States Trustee. 

Since, as explained above, the time could not be available after the Chapter 7 petition was 

filed, it was created before the case began. The United States Trustee afforded me the time I 

needed to prepare for, seek and obtain Court authorization to enter into and consummate the 

Refco sale transaction on day one of the bankruptcy filing by telling me several weeks prior to 

the bankruptcy filing that I would be appointed the Trustee. As a result, I was able to obtain 

informal authority to begin extensive due diligence and work as a "trustee-in-waiting," and 

was able to spend the several weeks before the Chapter 7 filing to be prepared to immediately 

move on the Chapter 7 filing date. 2 Without this extraordinary flexibility afforded to me by 

the United States Trustee, the Court and other parties in interest, neither I nor any other 

person appointed as the Refco trustee would have been in a position to obtain Court approval 

of, and consummate, a sale of the complex commodity brokerage business on day one of the 

case. 

By allowing a bankruptcy trustee to operate the commodity broker's business, 

including placing and processing trades pending an orderly sale to a third party, the Proposed 

Amendment would eliminate the very real possibility of disaster faced in the Refco case and 

2 As noted by Bankruptcy Judge Drain at the hearing to approve the Refco sale (on the first day of the case): 

"As is clear from the statute and regulations, the only way to perform such meaningful due diligence was to 

do it in advance of the filing and by giving Mr. Togut as 'trustee-in-waiting' such an opportunity, the U.S. 

Trustee was truly fulfilling her obligations to make sure that the bankruptcy system runs properly and 

particularly in the area where Congress has recognized that if possible and consistent with the desires of the 

applicable regulatory bodies, customer accounts should be transferred as expeditiously as possible ... , That 

obviously is what is happening here. The result, I believe, is the best that could be hoped for the customers." 

(Ch. 7 Sale Hrg. Tr. 41). 
TOGUT, SEGAL & SEGAL LLP 

Mr. David A. Stawick 

Secretary of the Commission 

Commodity Futures Trading Commission 

January 14, 2010 

Page4 

rationalize, going forward, the orderly sale process for a solvent commodity broker able to 

conduct business in bankruptcy. The trustee will be given essential time to do the things I was 

only able to do prior to Refco's filing that must be done for any trustee to perform intelligently. 

The current structure constrains the trustee's ability to act as a fiduciary as he is required to do 

under the Bankruptcy Code; any trustee needs time to perform due diligence and to confirm 

that a complex sale is in the best interests of the estate. 

An unintended consequence of the Proposed Amendment is that, currently, a 

trustee in bankruptcy may be sued by third parties for acts or omissions in connection with the 

operation of a debtor's business. See 28 U.S.C. § 959 (a).3 Chapter 7 trustees do not normally 

operate businesses in a Chapter 7 case. Operating a Chapter 7 debtor's business is very much 

the exception, not the rule, and is extremely rare. 

Recognizing such potential liability to a trustee, the Proposed Amendment 

should be expanded beyond what is currently proposed. If an individual is to serve as a 

bankruptcy trustee authorized to operate the business of a commodity broker, including the 

executing and processing of customer trades, then that person should receive protection in the 

form of some degree of quasi-judicial immunity -- or else the trustee could face substantia] 

personal liability. That will deter qualified individuals from being willing to serve as trustee, 

an undesirable result. 

As the Chapter 7 Trustee in the Refco case, I sought and obtained a provision 

granting me such quasi-judicial immunity in the Court order pursuant to which I was afforded 

limited authority to operate the debtor's business for the purpose of consummating the sale, 

and winding down and liquidating the remainder of the debtor's business. That provision 

provided: 

In acting pursuant to this Court's orders and otherwise 

performing his statutory and other duties, the Trustee is 

granted the fullest measure of quasi-judicial immunity 

permitted by law. The Trustee shall be free from any 

personal liability, and immune from any suit for personal 

The statute provides as follows: 

Trustees, receivers or managers of any property, including debtors in possession, may be sued, without 

leave of the court appointing them, with respect to any of their acts or transactions in carrying on 

business connected with such property. Such actions shall be subject to the general equity power of 

such court so far as the same may be necessary to the ends of justice, but this shall not deprive a litigant 

of his right to trial by jury. 

28 U.S.C. § 959(a). 
TOGUT• SEG-AL & SEGAL LLP 

Mr. David A. Stawick 

Secretary of the Commission 

Commodity Futures Trading Commission 

January 14, 2010 

PageS 

liability, on account of any actions or inactions taken by 

the Trustee in good faith pursuant to orders of this Court, 

in compliance with any order, rule, law, judgment, 

regulation or decree, and/ or in exercising his objectively 

reasonable business judgment, in connection with his 

operation of the debtor's business and the discharge of 

his duties in this chapter 7 case. 

See In re Refco, LLC, No. 05-60134 (RDD), Docket No. 11 (Bankr. S.D.N.Y. Nov. 25, 2005). 

A copy of the Order is attached. 

Accordingly, as part of my comments to the Proposed Amendment, I strongly 

urge the Commission to afford a bankruptcy trustee, who is to operate the business of a 

commodity broker, a level of quasi-judicial immunity in the limited operation of the business, 

and suggest that the language employed by the Court and acceptable to the parties in Refco be 

utilized. 

The foregoing constitutes my comments to the Proposed Amendment, which I 

respectfully submit for consideration by the Commission and other parties. I stand ready and 

able to appear voluntarily, and at my own expense, to further discuss my views concerning the 

foregoing. 

Thank you for your consideration. 

Respectfully yours, 

(_ d ~--:;; 

Albert Togut 

AT/cj 

cc: Ananda Radhakrishnan 

Director, Division of Clearing and Intermediary Oversight (Fax (202) 418-5547) 

Robert B. Wasserman 

Associate Director, Division of Clearing and Intermediary Oversight 

(Fax (202) 418-5547) 
UNnEDSTATESBANKRUPTCYCOURT 

SOUTHERN DISTRICT OF NEW YORK 

In re: 

RefcoLLC, 

Debtor. 

----------------------------------x 

Chapter 7 

Case No. 05-60134 (RDD) 

ORDER AUTHORIZING CHAPTER 7 TRUSTEE TO OPERATE BUSINESS OF REFCO 

LLC FOR A LIMITED PERIOD AND GRANTING RELATED RELIEF 

Upon the motion (the "Motion") 1 of Albert Togut, interim chapter 7 trustee (the 

"Trustee") for the above-captioned debtor (the "Debtor" or "Refco LLC"), for entry of an order 

authorizing the Trustee to operate the business of the Debtor for a limited period and for related 

relief; the Court having considered the Motion, the Chapter 7 Sale Motion filed 

contemporaneously therewith, the statements of the Trustee and counsel in support of the Motion 

and the record made at the November 25,2005 hearing on the Motion; it appearing that the relief 

requested in the Motion is in the best interests of the Debtor's bankruptcy estate, its creditors and 

other parties-in-interest; and after due deliberation and sufficient cause appearing therefor; 

IT IS HEREBY ORDERED TIIAT: 

1. The Motion is GRANTED as provided herein. 

2. The Trustee is authorized to continue to operate the business of the Debtor 

in order to effectuate the Sale and the terms of the Chapter 7 Sale Order, and to fulfill his 

Unless otherwise defined, capitalized terms herein shall have the meanings assigned to such terms in the 

Motion. 
obligations under Subchapter IV, the Part 190 Regulations, and the Bankruptcy Code, as set forth 

more fully in the Motion. 

3. In acting pursuant to this Court's orders and otherwise performing his 

statutory and other duties, the Trustee is granted the fullest measure of quasi-judicial immunity 

pennitted by law. The Trustee shall be free from any personal liability, and immune from any 

suit for personal liability, on account of any actions or inactions taken by the Trustee in good 

faith pursuant to orders of this Court, in compliance with any order, rule, Jaw, judgment, 

regulation or decree, and/or in exercising his objectively reasonable business judgment, in 

connection with his operation of the debtor's business and the discharge of his duties in this 

chapter 7 case. 

Dated: November 25,2005 

New York, New York 

2 

Is! ROBERT D. DRAIN 

UNITED STATES BANKRUPTCY JUDGE