United States Commodity Futures Exch. Comm’n v. Vision Fin. Partners, LLC, No. 16-60297 (S.D. Fla. 2016), addresses the international practice question of whether federal courts have subject matter jurisdiction to hear lawsuits brought by the Commodity Futures Exchange Commission (the Commission) on behalf of non-U.S. investors trading through non-U.S. electronic platforms.

In this case, the Commission sued Vision Financial Partners and its principal for violating the Commodity Exchange Act. Defendants allegedly misappropriated funds deposited by non-U.S. investors who invested in “binary options” through trading platforms located in Israel, Cyprus, and the United Kingdom.

In moving to dismiss based on Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), Defendants argued that the Commission lacked authority to bring the suit, mainly because “the Commodity Exchange Act does not apply to the binary options purchased by foreign investors and exchanged on foreign trading platforms.” Defendants’ argument was based on Morrison v. National Australia Bank Ltd., No. 08-1191 (June 24, 2010), in which non-U.S. plaintiffs relied on the Securities Exchange Act of 1934 to sue a non-U.S. issuer based on securities transactions outside of the United States. In Morrison, the Supreme Court held that a private plaintiff can bring a securities lawsuit only if “the purchase or sale [of the subject security] is made in the United States, or involves a security listed on a domestic exchange.” (For a fuller discussion of Morrison v. National Australia Bank Ltd., see the discussion of subject matter jurisdiction in our e-book, International Practice: Topics and Trends.) Courts have applied Morrison to suits brought by private parties under the Commodity Exchange Act. However, in this case, the Court did not apply Morrison, because the Court believed that “the extra-territorial reach of a private right of action under the Commodity Exchange Act is a ‘different, and somewhat more complicated question’ than that of a suit brought by the Commission.” The Commodity Exchange Act affirmatively indicates that “it applies to extraterritorial transactions, at least concerning suits brought by the Commission itself.”

The district court denied the motion to dismiss, holding that “the Commission may sue Defendants for violation of the Commodity Exchange Act, even if the violations concerned transactions between non-U.S. residents and non-U.S. electronic platforms.” The Court found that since Defendants committed their misconduct in Florida, the Commodity Exchange Act permitted the Commission to bring this lawsuit. The Court stated:

7 U.S.C. § 6(b)(2) permits the Commission to “adopt rules and regulations proscribing fraud,” and other rules, even if they concern instruments or transactions “made on or to be made subject to the rules of a board of trade, exchange or market located outside the United States,” so long as that fraud or other regulated behavior is committed by “any person located in the United States.” And, of course, 7 U.S.C. § 13a-1 permits the Commission to sue over “any practice constituting a violation of any provision of [the Commodity Exchange Act] or any rule, regulation, or order thereunder.

In short, the Court was not willing to extend the narrowing teaching of Morrison to this lawsuit brought by the Commission.


Special thanks to Yujia Feng* for her assistance in creating this blog post and in re-establishing this blog.

*Not admitted to the practice of law