No futures commission merchant, retail foreign exchange dealer, introducing broker or any of their associated persons may directly or indirectly effect a transaction in a commodity interest for the account of any customer unless before the transaction the customer, or person designated by the customer to control the account:
(a) With respect to a commodity interest as defined in any paragraph of the commodity interest definition in § 1.3 of this chapter, specifically authorized the futures commission merchant, retail foreign exchange dealer, introducing broker or any of their associated persons to effect the transaction (a transaction is “specifically authorized” if the customer or person designated by the customer to control the account specifies—
(1) The precise commodity interest to be purchased or sold; and
(2) The exact amount of the commodity interest to be purchased or sold); or
(b) With respect to a commodity interest as defined in paragraph (1) or (2) of the commodity interest definition in § 1.3 of this chapter, authorized in writing the futures commission merchant, introducing broker or any of their associated persons to effect transactions in commodity interests for the account without the customer's specific authorization; Provided, however, That if any such futures commission merchant, introducing broker or any of their associated persons is also authorized to effect transactions in foreign futures or foreign options without the customer's specific authorization, such authorization must be expressly documented.
[75 FR 55451, Sept. 10, 2010, as amended at 77 FR 66349, Nov. 2, 2012; 83 FR 7997, Feb. 23, 2018]
Notes of Decisions
Nanlawala v. Jack Carl Assocs., Inc., 669 F. Supp. 204 (N.D. Ill. 1987).
· cites it 6× “§ 6b 4 and (2) violated 17 C.F.R. § 166.2 by entering liquidating orders for the Discount Account without the express approval of Nanlawala.”
Chu v. U.S. Commodity Futures Trading Comm'n, 823 F.3d 1245 (9th Cir. 2016).
· cites it 2× “Review of CFTC Proceedings The essence of Chu’s claim rests on a theory of unauthorized trading, namely that she never gave permission for Huang to conduct trades in the account and that Kelly, in following Huang’s directives, violated 17 C.F.R. § 166.2 . The regulation…”
Ellwood v. Mid States Commodities, Inc., 404 N.W.2d 174 (Iowa 1987).
· cites it 2× “Commodity Futures Trade Commission rule 166.2 requires specific authorization of each trade in a nondiscretionary account by the customer on whose account the trade is executed.”
Joseph P. Cange v. Stotler & Co., Inc., 826 F.2d 581 (7th Cir. 1987).
“The unauthorized trades were made through plaintiff’s account with defendant by defendant’s agent in charge of that account and presumably were acts within the scope of Wilson’s agency with Stotler and Company. The fact that the agent’s actions were illegal and fraudulent does…”
Witter v. Commodity Futures Trading Comm'n, 832 F.3d 745 (7th Cir. 2016).
· cites it 2× “TransAct, he says, had a duty under both federal regulation, see 17 C.F.R. § 166.2 , and its customer agreement to record the call.”
Cauble v. Mabon Nugent & Co., 594 F. Supp. 985 (S.D.N.Y. 1984).
“See 17 CFR § 166.2 . A broker’s closing out of open positions in a commodity account without a margin call for additional funds constitutes unauthorized trading in violation of § 4b.”
Smith v. M & M Commodities, Inc. (In Re Smith), 72 B.R. 61 (N.D. Iowa 1987).
“Section 6d(2) of the Act required Smith as a registered merchant to treat all money of his customers *63 as belonging to the customer, without commingling it, and prohibited Smith from using customer funds as his own. Regulations promulgated by the Commodity Futures Trading…”
Bartels v. Clayton Brokerage Co. of St. Louis, Inc., 631 F. Supp. 442 (S.D.N.Y. 1986).
“t, introducing broker or any of their associated persons to effect the transaction (a transaction is "specifically authorized" if the customer or person designated by the customer to control the account specifies (1) the precise commodity interest to be purchased or sold and (2)…”
O & G Carriers, Inc. v. Rosenthal & Co., 685 F. Supp. 66 (S.D.N.Y. 1988).
“Therefore, although plaintiff has not enumerated the rule or rules violated in this instance, it may be inferred that plaintiff’s allegations implicate 17 C.F.R. § 166.2 (1985) (involving unauthorized transactions by broker), and that the plaintiff’s claims thus constitute…”
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