Reparations Program

The CFTC’s Reparations program 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. Part 12 of CFTC's regulations, 17 CFR 12, contains rules relating to Reparations. Read the informational booklet about the reparations program.

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.

Be aware that the information provided here is not legal advice. If you think you need legal advice from a private attorney, review the section Do You Need an Attorney?.

Check Registration Status

Complaints must involve a commodity futures trading professional registered with the CFTC who is alleged to have engaged in activities that violate either the Commodity Exchange Act or CFTC regulations. Check registration status of futures trading professionals with the National Futures Association's BASIC or contact the CFTC's Office of Proceedings.

Allege Violations or Illegal Activities

You must allege one or more violations of illegal activities in your complaint and provide evidence to support your claim. Illegal activities include, but are not limited to:

• Fraud: cheating or attempting to cheat you through false claims concerning the likelihood of profit or loss; false or misleading statements about trading or about your salesperson, advisor, or the trading program you use; or false or misleading statements about any other material fact that you relied on in making a decision about futures or option trading.
• Breach of fiduciary duty: a failure by a broker or salesperson to act with special care in handling your account when required to do so by the Commodity Exchange Act or CFTC rules.
• Unauthorized trading: trades made by a broker without your prior specific authorization or a written grant of authority to effect trades without your specific authorization.
• Misappropriation: a broker's unauthorized use or diversion of money that you deposited for the purpose of trading futures or options.
• Churning: excessive trading of your account for the purpose of producing commissions and with disregard of your financial interests. 
• Wrongful liquidation: the unauthorized closing of your position.
• Failure to supervise: Failure by a supervisor to diligently oversee the handling of a customer account by the supervisor's partners, officers, employees, and agents.
• Nondisclosure: failure to inform you of the risks associated with futures and option trading, and the failure to disclose any other material fact you required to make a decision about futures or option trading.

Additional Criteria for Filing a Complaint
Before your claim can be considered under the CFTC’s Reparations program, you must satisfy these criteria:

• Statute of limitations: Your complaint must be mailed to the CFTC Office of Proceedings within a two-year period after your cause of action accrues—the date when you knew or should have known of the wrongdoing. The appropriate filing fee must be sent with your complaint.
• Bankruptcy or receivership: The proposed respondents are not in bankruptcy or receivership proceedings. If so, your claim will be dismissed as to that proposed respondent, and you will be referred to the bankruptcy trustee or receiver appointed by a court to administer customer claims.
• Parallel proceedings: You must not be pursuing a claim based on the same set of facts in arbitration or a civil court.
• Non-resident bond: Complaints filed by non-residents of the United States must satisfy additional criteria.  See Section 12.13(b)(4) of the reparations rules.

Select Type of Proceeding

Before filing a complaint, you must choose which of the three types of Reparations proceeding you wish to begin:

• the voluntary proceeding (available for claims of any amount),
• the summary proceeding (for claims of $30,000 and less), or
• the formal proceeding (for claims greater than $30,000).

Voluntary proceeding available for claims of any amount: This is the quickest proceeding since it does not involve a hearing or allow appeals. Cases are decided by a Judgment Officer solely on the basis of written submissions and exhibits provided by the parties.

• Filing fee. You must submit a non-refundable filing fee of $50 with the complaint.
• Consent by all parties. All complainants and respondents must consent to the voluntary proceeding since the parties waive certain rights and the decision is final and cannot be appealed. If any respondent does not consent to a voluntary proceeding, the claim will be adjudicated as either a summary proceeding or a formal proceeding, depending on the amount of the claim, and that respondent must pay any increase in the filing fee. 
• Evidence. You are responsible for collecting and submitting to the Judgment Officer all information and evidence supporting your claim of a violation and your calculation of damages. The respondents will provide evidence in support of their defense. The Judgment Officer will not investigate your case for you.
• No oral hearing. An oral hearing is not permitted in voluntary proceedings.
• Decision. A CFTC Judgment Officer will decide the case based on the documents submitted by you and by the respondents.  The Judgment Officer will issue a brief final decision as to whether a violation has been proven, and if so, the amount of the reparations award.  The final decision will not contain findings of fact or any other explanation of the Judgment Officer's conclusions.
• Award. The award cannot exceed the amount of damages claimed in the complaint. Interest and costs (except the filing fee) are not awarded.  However, post-judgment interest will be awarded, if you prevail.
• No appeal. A voluntary proceeding results in a non-appealable final decision that does not contain factual findings or a discussion of the basis of the decision.

Summary proceeding available for claims of $30,000 or less.
If you do not select the voluntary proceeding, you must select the summary proceeding if your claim is $30,000 or less. Cases are decided by a Judgment Officer on the basis of written submissions and exhibits provided by the parties and, if necessary, by an oral hearing.

• Filing fee. You must submit a non-refundable filing fee of $125 with the complaint. If you choose the voluntary proceeding and one or more of the respondents does not consent to use the voluntary proceeding, your claim will be decided under the summary proceeding if it involves $30,0000 or less, and the respondent must pay the $75 difference in the filing fee.
• Evidence. You are responsible for collecting and submitting to the Judgment Officer all information and evidence supporting your claim of a violation and your calculation of damages. The respondents will provide evidence in support of their defense. The Judgment Officer will not investigate your case for you.
• Oral hearing. An oral hearing will be held if the Judgment Officer deems it necessary. Normally, the oral hearing consists of a conference telephone call, but an in-person hearing can be held in Washington, DC, if both sides request an in-person hearing, and the Judgment Officer grants the request.
• Decision. The Judgment Officer's decision will contain findings of fact and conclusions of law explaining the decision.
• Award. Awards cannot exceed $30,000, plus prejudgment and post-judgment interest, the filing fee, and any other costs deemed recoverable by the Judgment Officer.
• Appeal. The losing party may appeal, first to the Commission and then to a U.S. Court of Appeals. There is a $50 filing fee to appeal to the Commission.

Formal proceeding for claims involving more than $30,000.
If your claim is for more than $30,000 and you did not select a voluntary proceeding, you must select a formal proceeding.  A non-refundable filing fee of $250 must be submitted when the complaint is filed.

• Filing fee. You must submit a non-refundable filing fee of $250 with the complaint. If your claim is for more than $30,000 and you choose a voluntary proceeding but one or more of the respondents does not agree, your claim will be decided under the formal proceeding. In that case, the respondent must pay the $200 difference in filing fees.
• Evidence. You are responsible for collecting and submitting to the Judgment Officer or Administrative Law Judge all information and evidence supporting your claim of a violation and your calculation of damages. The respondents will provide evidence in support of their defense. The Judgment Oficer or Administrative Law Judge will not investigate your case for you.
• Oral hearing. Normally, an in-person oral hearing will be held, scheduled by the Judgment Officer or Administrative Law Judge at a location and time that considers the convenience of the parties.
• Decision. The Judgment Officer or Administrative Law Judge's decision will contain findings of fact and conclusions of law explaining the decision.
• Award. Awards generally may not exceed the amount of the damages claimed, plus prejudgment and post-judgment interest, the filing fee, and any other costs deemed recoverable by the Judment Officer or Administrative Law Judge.
• Appeal. The losing party may appeal, first to the Commission and then to a U.S. Court of Appeals. There is a $50 filing fee to appeal to the Commission.

Compare the Three Types of Proceedings

File a Complaint

Complete CFTC Form 30: Reparations Complaint Form. The complaint and the appropriate filing fee may be filed in person or sent by certified or registered mail to the CFTC's Office of Proceedings. The Reparations Complaint Checklist is a convenient tool to use to confirm that you have included all necessary information with your complaint.

A complete complaint must include:

• Information about you: your full name, address, telephone and Fax numbers, and those of all other persons lodging the complaint (the complainants).
• Information about respondents: the names, addresses, and telephone numbers (if known) of all individuals and firms against whom you are filing the complaint (the respondents).
• Facts: a statement of facts which supports your claim that there has been an alleged violation and attaches all documents which support or explain your claim, such as account forms and trading statements.
• Liability explanation: an explanation of why each respondent you have named should be held liable (any respondent whose liability or involvement is not described may be dismissed from the case).
• Damage calculation: the amount of damages claimed and a brief explanation of how you calculated them. The amount you claim cannot be adjusted after the case is forwarded for adjudication except by permission of the presiding judge. Review how to calculate damages.
• Parallel proceedings statement: a statement that no arbitration or civil court litigation is pending based upon the same facts and including the same respondents you have named.
• Bankruptcy or receivership statement: a statement indicating whether to your knowledge any of the respondents are involved in bankruptcy or receivership proceedings.
• Verification: a statement that the facts set forth in the complaint are true to the best of your knowledge, belief, and information.  The reparations complaint does not have to be notarized if you sign the reparations complaint form or include a verification statement with the description of the complaint.  The verification statement should be written as follows:  
  "I hereby affirm (under penalty of law) that to the best of my knowledge the facts set forth in this complaint are known or believed to be true.”
• Proceeding selection and filing fee: you must select the type of proceeding and submit the appropriate filing fee at the time you submit your complaint.
• Filing Fee Payment:  The filing fee check or money order should be made payable to the Commodity Futures Trading Commission (CFTC).
• Mailing Address:  Please send your reparations complaint and filing fee to Commodity Futures Trading Commission, Office of Proceedings, 1155 21st Street, N.W., Washington, DC  20581.

How to Calculate Damages

If you are filing a complaint, please review the information below for your calculation of damages by type of claim.

• For misrepresentation, fraudulent solicitation, fraudulent omissions, and other types of claims, you are entitled to be put back into the position you would have been in if the violation had not occurred. This figure is usually your net out-of-pocket loss for the transactions affected by the false statements (i.e., the amount deposited minus any amounts returned).
• For churning, you are entitled to a full refund of commissions generated by the broker during the period in which your account was churned.
• For unauthorized trading, you are entitled to the total losses for all unauthorized transactions (this figure is not offset by profitable unauthorized trades because proceeds from profitable trades always belong to the customer).
• For lost profits it is your burden to prove that any lost profits would have been earned if the violations had not occurred. Such claims for lost profits are obviously difficult to prove. You will have to prove exactly how the trading would have occurred and this cannot be based on mere conjecture or hindsight about profits that might have been earned had the violation not occurred. If you intend to claim lost profits, you must provide a calculation of the lost profits; submit supporting documentation that provides the price of the contract and the date that you intended to sell it; and a full explanation of why those profits should be awarded. Price information is available from the Wall Street Journal at http://www.wsj.com or Investor’s Business Daily at http://www.investors.com.
• For unauthorized/wrongful liquidation, the measure of damages is determined by either (1) the value of the options positions when liquidation occurred, or (2) its highest intermediate value between notice of the conversion and a reasonable time thereafter during which the positions could have been replaced had that been desired, whichever is higher.  The CFTC decision in Ahlstedt v. Capitol Commodity Services, Inc. [1996-1998 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶27,131 at 45,291 (CFTC) 1997, and citations therein, provides further guidance.

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Interest

The Commission amended its regulations to clarify that post-judgment interest shall run on all reparations awards resulting in judgment for the complainant.  The losing party is required to pay post-judgment interest on the reparations award (as well as any prejudgment interest ordered by the presiding official). Such interest shall run according to the terms of 28 U.S.C. 1961 and pursuant to 12.4079d) of the reparations rules.  The losing party is liable for post-judgment interest even if the post-judgment interest is inadvertently omittted from the decision that imposted the reparations award.

Review of Complaint

The Office of Proceedings will review your complaint to determine if it meets the criteria for a valid claim.

• If your complaint does not meet the criteria, CFTC staff will notify you of the reasons why.
• If your complaint might meet the criteria but is deficient, CFTC staff will notify you of the deficiencies and give you an opportunity to correct them.

CFTC staff will notify you when and if your complaint has been accepted.

When your complaint is accepted, the Office of Proceedings will forward copies of the complaint to the individuals and firms you named as respondents. Respondents may reply to the complaint by either paying you the full amount of damages claimed or a lesser sum mutually agreed upon as full satisfaction of the claim; or by filing an answer denying any liability to you. Respondents are required to send a copy to you (and all complainants).

Note that in certain circumstances a respondent may file a counterclaim with the answer to your complaint.

CFTC staff will review the answer and your case will be assigned to a judge. If no answer is received from the respondents, CFTC staff will forward your complaint to a Judgment Officer who may issue a default judgment.

Withdrawing a Filed Complaint

Before your complaint is forwarded to respondents, you may withdraw it by notifying the CFTC in writing that you wish to withdraw your complaint—a Notice of Withdrawal.

Once you have sent the CFTC a Notice of Withdrawal, you may:

• refile your complaint with the CFTC (with a new filing fee) provided the two-year deadline has not expired; or
• file your claim in another forum if you wish, such as arbitration or in a Federal or state court of law.

Your filing fee will not be refunded.

After your complaint has been forwarded to respondents, you may not withdraw your complaint without the consent of the respondents. When you have obtained that consent, the CFTC will issue an Order of Voluntary Dismissal.

You may not refile your complaint with the CFTC once an Order of Voluntary Dismissal is issued.

Assignment to Presiding Official

Once CFTC staff determines that a reparations proceeding has met the specified requirements, which may take from two to six months depending on the number of deficiencies that you and the respondents must correct, the case is forwarded to the CFTC Proceedings Clerk for assignment to a presiding official.

Voluntary and summary proceedings normally are assigned to a Judgment Officer; formal proceedings may be assigned to either a Judgment Officer or an Administrative Law Judge.

You will receive a notice of the assignment to a judge, which will also authorize you to begin gathering evidence in support of your claim.

Ex Parte Communications

After you are notified that your case has been assigned to a presiding official, you may not discuss the facts of your case with the presiding official or any member of his staff without the other parties being present or, in the case of a written communication, without simultaneously sending a copy of your letter to the other parties. This prohibition against ex parte communications applies to all parties to the case. If you violate the rule against ex parte communications, your case may be decided against you.

Evidence: the Discovery Process

You may provide evidence in support of the allegations of your complaint in many forms, including:

• affidavits (i.e., sworn statements) of the parties themselves and of other witnesses;
• solicitation mailings;
• telephone records, including memos of telephone conversations;
• correspondence;
• account forms, including account opening documents, trading statements, order tickets, and confirmations; and
• other records such as tape recordings.

Parties are responsible for gathering their own evidence.

To obtain evidence that is in the hands of the other side or held by third parties, each side may make a formal request during discovery.

• Requests to parties: all parties are required to respond to relevant discovery requests.
• Requests to non-parties: the judge can issue a subpoena to obtain information from non-parties.

Discovery requests can be in any or all of three forms:

• Interrogatories: questions posed to other parties concerning factual matters (such as names of witnesses, the reasons for a trade recommendation, or the dates of a respondent's employment);
• Requests for production of documents: documents held by the other side (for example, a request could be filed to produce copies of order tickets or monthly statements); and/or
• Requests for admissions: factual matters that are important but not likely to be disputed (for example, a party could request the other side to admit that the account was first opened on a particular day or that a deposit or trade occurred on that day).

No party may request personal tax returns or personal bank records during discovery unless the judge grants permission.

Abuse of the discovery rules can lead to sanctions, including assessment of costs against the abusing party.

Decision Process

After your complaint is assigned to a presiding official, he will review your evidence and, depending on the type of proceeding you selected, will take the necessary steps before issuing a decision. The time until you receive a decision on your complaint varies widely and depends on factors such as the complexity of the issues and the facts; whether you and the respondents provide requested information quickly; whether there are disputes about procedural issues; and whether an oral hearing is required and when can be scheduled easily. Sometimes, a presiding official approves a “stay” in a case, putting the procedure on hold due to the health of a party or for other reasons requested by a party and approved by the presiding official.

Typical voluntary proceedings are decided in about six months after the Judgment Officer receives the case, while summary and formal proceedings typically require anywhere from two months to eighteen months. All cases are different and times may vary significantly. The length of time required for the Commission to decide an appeal varies from case to case depending on a combination of factors, including the complexity of legal and factual issues in a particular case.

Case Status Inquiries

Appeal or Review of Initial Decision

Voluntary proceeding. If you and the respondents named in your complaint all agree to use the voluntary proceeding, neither you nor the respondents may appeal the decision to any higher level. The decision reached is final.

Summary or formal proceeding. If your claim was considered in a summary or formal proceeding, the losing party may appeal an adverse decision (or an adverse part of a decision) to the Commission. There is a $50 filing fee for an appeal to the Commission. The Commission may reverse, modify, or affirm the initial decision.

Appeal to U.S. Court of Appeals. A losing party may appeal a decision by the Commission to a U.S. Court of Appeals. Appellate rules are strictly enforced at both the Commission and U.S. Court of Appeals levels, and any failure to observe those rules may result in losing the appeal.

Monetary Awards

Payment in 45 days. Under the law, the respondents must pay you any award within 45 days unless one of the respondents appeals the decision.

Failure to pay. If none of the respondents appeals the decision and the respondents do not pay your award, the Commission will automatically revoke the license and trading privileges of any respondent who fails to pay and fails to report to the Commission that payment has been made. The industry and the public is notified of the revocation and suspension through publication of the CFTC's Reparations Sanctions in Effect.

Collection of an award. The Commission cannot help you collect your award. You may obtain a certified copy of your decision from the CFTC's Proceedings Clerk. If the respondent does not pay the award, you can attempt to enforce the award by filing a certified copy of the reparations decision in the U.S. District Court that is in the district where the respondent lives or has a principal place of business. If the District Court enforces the award, the court normally will require the respondent to pay all court costs and any legal fees incurred in enforcing the award.

Interest.  The Commission amended its regulations to clarify that post-judgment interest shall run on all reparations awards resulting in judgment for the complainant.  The losing party is required to pay post-judgment interest on the reparations award (as well as any prejudgment interest ordered by the presiding official).  Such interest shall run according to the terms of 28 U.S.C. 1961 and pursuant to 12.407(d) of the reparations rules. The losing party is liable for post-judgment interest even if the post-judgment interest is inadvertently omitted from the decision that imposted the reparations award.

Counterclaims

Filed by respondent. A respondent can file a counterclaim against you if it stems from the same set of facts that are the subject of your claim. Counterclaims usually seek to recover a debit balance in an account you held with the respondent. If a counterclaim is filed against you, you will be sent a copy and you must file a reply within 30 days.

Decision against you. If a respondent wins a counterclaim against you, you must pay the counterclaim within 45 days after the decision unless you appeal to the Commission.

If you fail to pay the counterclaim and you do not appeal, the respondent can enforce the award in the U.S. District Court in your district. If you win your claim and a respondent wins a counterclaim against you, your award will be reduced by the amount of the counterclaim award or vice versa.

Additional Resources

Federal court decisions involving commodity law and CFTC decisions in both reparations and enforcement cases are available on Lexis-Nexis and Westlaw and are published in the Commodity Futures Law Reporter (published by Commerce Clearing House). These resources are available in many libraries and most law libraries.

If you are representing yourself, you are not required to cite legal cases, but if you can provide the judge with references to similar cases, you may strengthen your claim.

Registration Information and Disciplinary History
Information about CFTC enforcement or reparations actions is available from CFTC staff in the Office of Proceedings.
Information about both registration status and disciplinary history for registrants is available from the National Futures Association.

Bankruptcy or Receivership
If the respondents are in bankruptcy or receivership, you should contact the respondents or their lawyers for the names of the bankruptcy trustee or receiver to determine if you may file a claim.

Arbitration and Alternate Dispute Resolution
Information about arbitration to resolve commodity futures disputes is available from

National Futures Association
American Arbitration Association

Futures exchanges offer arbitration programs for disputes involving one or more exchange members.

Filing Civil Cases in U.S. District Court
Information is available from the Clerk of any U.S. District Court. Court information is available from libraries or on the Internet.

Do You Need an Attorney?

Many parties represent themselves; in other words, act pro se. You may not need an attorney if:

• the facts and issues are simple and you can present your case satisfactorily without the assistance of an attorney; or
• the amount of money at stake is so small that hiring an attorney would not be cost-effective.

Remember that when you act pro se, you must gather evidence, comply with all rules and deadlines, and make your own legal arguments. Neither the judge nor CFTC staff will litigate or investigate the case on behalf of any party, whether or not that party is acting pro se.

If you have a complex case or anticipate difficulty in following the reparations rules, you may wish to hire an attorney to represent you. You can ask a local bar association for a referral to an attorney.