News & Notices | National Futures Association

Notices to Members

2017 | 2016 | 2015 | 2014 | 2013 | Show more years

Notice I-14-38

December 30, 2014

NFA's Chairman and Executive Committee respond to recent allegations of improprieties regarding the 2014 public director nominations

Dear Member of NFA,

In January of each year, NFA's Executive Committee makes recommendations to the Board of Directors regarding the election of public representatives at the February Board meeting. NFA Board member James Koutoulas has publicly accused the Executive Committee and others of improprieties in regard to the January 2014 Executive Committee meeting and the Board's subsequent February 2014 election of public representatives. The Executive Committee has authorized me to assure you that these allegations are false and we deny each and every allegation.

NFA's Executive Committee is particularly troubled by Mr. Koutoulas's recent public allegations given the fact that prior to the election of public directors by the Board in February 2014, and at the specific request of Mr. Koutoulas, I engaged outside counsel to review Mr. Koutoulas's stated claims related to the 2014 nomination process. At the Board's February 2014 meeting, before the election of the public directors, outside counsel reported that it had concluded that the public representatives were validly nominated in accordance with NFA's Articles of Incorporation.

The facts, summarized below, refute Mr. Koutoulas's allegations:

  1. Mr. Koutoulas has stated that the nominations of the individuals elected as public representatives at the February 2014 meeting were not made prior to January 6, 2014, which Mr. Koutoulas incorrectly claims to be the deadline for making nominations. In support, Mr. Koutoulas cites the December 2013 notice to members soliciting nominations. The process for the election of public directors is set forth in NFA's Articles and Bylaws, which provide that NFA's Board must solicit nominations by the third Tuesday in January (i.e., January 21, 2014 in this case). Consistent with this process, NFA staff every year has issued a notice to members soliciting nominations from NFA's membership. The December 2013 notice directed that all nominations in response to this general solicitation be received by January 6, 2014, which was designed to provide staff with ample time to conduct due diligence on any nominees prior to the Executive Committee's mid-January 2014 meeting. The Articles do not prohibit nominations by Members from being made at the January Executive Committee meeting or at the February Board meeting.

  2. The Executive Committee met on January 16, 2014. At that meeting, Mr. Koutoulas pointed out that the incumbent public directors had been nominated by another public director and therefore alleged that their nominations were invalid because they had not been nominated by an NFA member prior to the January 6, 2014 date contained in the notice to members. In the course of the Committee's discussion, Mr. Sandner, representing NFA Member CME Group, nominated all of the incumbent public directors for election by the Board in February 2014, which he confirmed in an email to staff the following day. Mr. Koutoulas has alleged that Mr. Sandner "unequivocally" did not make any nominations for public director at the Executive Committee meeting and that Mr. Sandner and NFA's General Counsel, Tom Sexton, falsely represented to the Board that Mr. Sandner had nominated the incumbent public directors. However, to the contrary, at that meeting Mr. Sandner intended to nominate the incumbent public directors for reelection, did in fact nominate the incumbent public directors for reelection and then confirmed those nominations in an email to staff the next day. The minutes of the January 2014 Executive Committee meeting, which Mr. Koutoulas and every other member of the Executive Committee approved, directly contradict Mr. Koutoulas's claim and reflect that Mr. Sandner "stated that all the incumbent Public Directors are good and talented directors and suggests that all be reelected." Moreover, all NFA Board members, including Mr. Koutoulas, were given a copy of Mr. Sandner's January 17, 2014 email, which confirms that he nominated all of the incumbent public directors at the Executive Committee meeting held one day earlier.

  3. Mr. Koutoulas also alleges that the Executive Committee itself recommended to the Board the reelection of the incumbent public directors, which it knew had not been properly nominated. As noted above, however, at the request of Mr. Koutoulas and for purposes of a thorough independent review, I engaged outside counsel in January 2014 to examine Mr. Koutoulas's allegations that the public directors had not been properly nominated. Outside counsel completed this review and at the Board's February 2014 meeting, before the election of the public directors, outside counsel provided a complete report to NFA's Board regarding Mr. Koutoulas's claims relating to the nomination process. Outside counsel's report concluded that all of the incumbent public directors had been nominated in accordance with NFA's Articles.

The Executive Committee considers each of the allegations made by Mr. Koutoulas to be wholly without merit. We regret that Mr. Koutoulas has made these false allegations in a public forum.

Christopher K. Hehmeyer

Christopher K. Hehmeyer
Chairman of the Board

Subscribe to NFA Email Communications