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Appellate court upholds dismissal of class action suit against NFA

A U.S. Court of Appeals recently upheld the decision of a federal district court to dismiss a class action lawsuit filed against NFA, two NFA Committee members and 11 FCMs. The suit was filed three years ago by a group of investors defrauded in a ponzi scheme run by unregistered individuals. The investors claimed the FCMs had violated NFA Bylaw 1101 by doing business with unregistered pool operators and that NFA had failed to enforce Bylaw 1101 against the FCMs. They also claimed that the NFA Committee members were partially responsible for NFA's failure.

This case is significant for NFA because most ponzi schemes tend to involve activity by non-Members. The district court and appellate court rulings provide a solid legal rationale to support NFA's position that it should not be held responsible for failing to discover fraud committed by non-Members.

NFA presents futures trading seminar at SEC Investors Town Hall Meeting

NFA unveiled its "Introduction to Futures Trading" seminar at the SEC's Investors Town Hall Meeting in Cleveland, Ohio, on July 25. The 45-minute program explains the basics of futures hedging and speculating for individual investors. The Town Hall Meetings have been held at various locations throughout the United States in an effort to educate investors about the financial services industry.

As a member of the Steering Committee for this project lead by SEC Chairman Arthur Levitt, NFA has participated at meetings held throughout the year by distributing the organization's educational materials and giving demonstrations of NFA's Background Affiliation Status Information Center web-based program for participants. However, as noted above, NFA added an educational seminar to the program in July.

NFA will continue to offer this program at upcoming Town Hall Meetings scheduled for October 11 in Fort Lauderdale and November 1 in Atlanta. For more information on the SEC's Investor Town Hall Meetings, visit their web site at www.sec.gov.

NFA participates in B2B conference in Boston

NFA Senior Vice President Yvonne Downs chaired a panel discussion on self-regulation and best practices at the B2B Markets Forum conference held in Boston on September 11-13. Sponsored by the Futures Industry Association, the conference addressed concerns of the next generation of business-to-business exchanges. These marketplaces have evolved to the point where they are addressing price discovery, transparency, liquidity, forward pricing and counterparty risk issues. The panel discussion chaired by Downs covered topics such as moving from cash to futures in the B2B marketplace, the regulatory concerns an exchange may face in becoming a contract market and how to best meet those concerns.

In Memoriam

NFA mourned the loss of one its Board Members in July. New York Mercantile Exchange President R. Patrick Thompson died of a heart attack on July 19 at age 51.

Mr. Thompson was president of the New York Mercantile Exchange since 1989. From March 1988 to October 1989, he served as executive vice president. He also held positions with the Exchange as senior vice president of compliance, and senior vice president and general counsel. Mr. Thompson served as an Exchange Representative on NFA's Board since 1994.

He is survived by his wife, Debbie, and four children.

NFA publishes revised brochure on options trading

NFA recently revised its popular brochure title "Buying Options on Futures Contracts: A Guide to Uses and Risks." The 24-page brochure defines commonly used terms in options trading, details the "arithmetic of option premiums" and leads the reader though the "mechanics of buying and writing options."

NFA has distributed more than 300,000 copies of "Buying Options on Futures Contracts" since its original publication in 1988. Several NFA Member firms purchase large quantities of the brochure to distribute to their existing as well as potential customers.

Individual copies of the brochure are free and can be ordered from NFA by telephone (800.621.3570) or through NFA's web site (www.nfa.futures.org). Visitors to the web site can also choose to download the publication.

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
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