Opinion ID: 779905
Heading Depth: 2
Heading Rank: 5

Heading: Controlling Person Liability under the Act

Text: 46 CFTC asserts that the District Court erred by finding Raymond Fitzgerald not liable as a controlling person under the provisions of 7 U.S.C. § 13c(b). We agree. A fundamental purpose of Section 13b is to allow the Commission to reach behind the corporate entity to the controlling individuals of the corporation and to impose liability for violations of the Act directly on such individuals as well as the corporation itself. JCC, 63 F.3d at 1567 (internal quotations and citation omitted). In order to succeed on a 13c(b) claim, CFTC must show that Defendant, as a controlling person, did not act in good faith or knowingly induced, directly or indirectly, the conduct which constitutes a violation of the Act. To satisfy the latter standard, CFTC must show that the controlling person had actual or constructive knowledge of the core activities that make up the violation at issue and allowed them to continue. Id. at 1568. Section 13c(b), therefore, is about power, and imposing liability for those who fail to exercise it to prevent illegal conduct. 47 Applying this legal standard to the record, we conclude that Raymond Fitzgerald meets the criteria for 13c(b) liability. First, we note that Raymond Fitzgerald openly concedes that he was a controlling person at RJFCO. Appellees' Brief at 62. Raymond Fitzgerald was RJFCO's principal and exercised the ultimate choice-making power within the firm regarding its business decisions. See 173 F.Supp.2d at 1297. He reviewed and approved the activities that we hold today violated the Act and its regulations-the Seminar and the Commercial. He was ultimately responsible for compliance with all applicable rules on commodities solicitations. He had the power and the authority to prevent the Seminar from being conducted, or to alter its content to comply with extant law.