§ 25. — Private rights of action.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC25]
TITLE 7--AGRICULTURE
CHAPTER 1--COMMODITY EXCHANGES
Sec. 25. Private rights of action
(a) Actual damages; actionable transactions; exclusive remedy
(1) Any person (other than a registered entity or registered futures
association) who violates this chapter or who willfully aids, abets,
counsels, induces, or procures the commission of a violation of this
chapter shall be liable for actual damages resulting from one or more of
the transactions referred to in subparagraphs (A) through (D) of this
paragraph and caused by such violation to any other person--
(A) who received trading advice from such person for a fee;
(B) who made through such person any contract of sale of any
commodity for future delivery (or option on such contract or any
commodity); or who deposited with or paid to such person money,
securities, or property (or incurred debt in lieu thereof) in
connection with any order to make such contract;
(C) who purchased from or sold to such person or placed through
such person an order for the purchase or sale of--
(i) an option subject to section 6c of this title (other
than an option purchased or sold on a registered entity or other
board of trade);
(ii) a contract subject to section 23 of this title; or
(iii) an interest or participation in a commodity pool; or
(D) who purchased or sold a contract referred to in subparagraph
(B) hereof if the violation constitutes a manipulation of the price
of any such contract or the price of the commodity underlying such
contract.
(2) Except as provided in subsection (b) of this section, the rights
of action authorized by this subsection and by sections 7(d)(13), 7a-
1(b)(1)(E), and 21(b)(10) of this title shall be the exclusive remedies
under this chapter available to any person who sustains loss as a result
of any alleged violation of this chapter. Nothing in this subsection
shall limit or abridge the rights of the parties to agree in advance of
a dispute upon any forum for resolving claims under this section,
including arbitration.
(3) In any action arising from a violation in the execution of an
order on the floor of a registered entity, the person referred to in
paragraph (1) shall be liable for--
(A) actual damages proximately caused by such violation. If an
award of actual damages is made against a floor broker in connection
with the execution of a customer order, and the futures commission
merchant which selected the floor broker for the execution of the
customer order is held to be responsible under section 2(a)(1) of
this title for the floor broker's violation, such futures commission
merchant may be required to satisfy such award; and
(B) where the violation is willful and intentional, punitive or
exemplary damages equal to no more than two times the amount of such
actual damages. If an award of punitive or exemplary damages is made
against a floor broker in connection with the execution of a
customer order, and the futures commission merchant which selected
the floor broker for the execution of the customer order is held to
be responsible under section 2(a)(1) of this title for the floor
broker's violation, such futures commission merchant may be required
to satisfy such award if the floor broker fails to do so, except
that such requirement shall apply to the futures commission merchant
only if it willfully and intentionally selected the floor broker
with the intent to assist or facilitate the floor broker's
violation.
(4) Contract enforcement between eligible counterparties.--No
agreement, contract, or transaction between eligible contract
participants or persons reasonably believed to be eligible contract
participants, and no hybrid instrument sold to any investor, shall be
void, voidable, or unenforceable, and no such party shall be entitled to
rescind, or recover any payment made with respect to, such an agreement,
contract, transaction, or instrument under this section or any other
provision of Federal or State law, based solely on the failure of the
agreement, contract, transaction, or instrument to comply with the terms
or conditions of an exemption or exclusion from any provision of this
chapter or regulations of the Commission.
(b) Liabilities of organizations and individuals; bad faith requirement;
exclusive remedy
(1)(A) A registered entity that fails to enforce any bylaw, rule,
regulation, or resolution that it is required to enforce by sections 7
through 7a-2 of this title, (B) a licensed board of trade that fails to
enforce any bylaw, rule, regulation, or resolution that it is required
to enforce by the Commission, or (C) any registered entity that in
enforcing any such bylaw, rule, regulation, or resolution violates this
chapter or any Commission rule, regulation, or order, shall be liable
for actual damages sustained by a person who engaged in any transaction
on or subject to the rules of such registered entity to the extent of
such person's actual losses that resulted from such transaction and were
caused by such failure to enforce or enforcement of such bylaws, rules,
regulations, or resolutions.
(2) A registered futures association that fails to enforce any bylaw
or rule that is required under section 21 of this title or in enforcing
any such bylaw or rule violates this chapter or any Commission rule,
regulation, or order shall be liable for actual damages sustained by a
person that engaged in any transaction specified in subsection (a) of
this section to the extent of such person's actual losses that resulted
from such transaction and were caused by such failure to enforce or
enforcement of such bylaw or rule.
(3) Any individual who, in the capacity as an officer, director,
governor, committee member, or employee of registered \1\ entity or a
registered futures association willfully aids, abets, counsels, induces,
or procures any failure by any such entity to enforce (or any violation
of the chapter in enforcing) any bylaw, rule, regulation, or resolution
referred to in paragraph (1) or (2) of this subsection, shall be liable
for actual damages sustained by a person who engaged in any transaction
specified in subsection (a) of this section on, or subject to the rules
of, such registered entity or, in the case of an officer, director,
governor, committee member, or employee of a registered futures
association, any transaction specified in subsection (a) of this
section, in either case to the extent of such person's actual losses
that resulted from such transaction and were caused by such failure or
violation.
---------------------------------------------------------------------------
\1\ So in original. Probably should be preceded by ``a''.
---------------------------------------------------------------------------
(4) A person seeking to enforce liability under this section must
establish that the registered entity \2\ registered futures association,
officer, director, governor, committee member, or employee acted in bad
faith in failing to take action or in taking such action as was taken,
and that such failure or action caused the loss.
---------------------------------------------------------------------------
\2\ So in original. Probably should be followed by a comma.
---------------------------------------------------------------------------
(5) The rights of action authorized by this subsection shall be the
exclusive remedy under this chapter available to any person who sustains
a loss as a result of (A) the alleged failure by a registered entity or
registered futures association or by any officer, director, governor,
committee member, or employee to enforce any bylaw, rule, regulation, or
resolution referred to in paragraph (1) or (2) of this subsection, or
(B) the taking of action in enforcing any bylaw, rule, regulation, or
resolution referred to in this subsection that is alleged to have
violated this chapter, or any Commission rule, regulation, or order.
(c) Jurisdiction; statute of limitations; venue; process
The United States district courts shall have exclusive jurisdiction
of actions brought under this section. Any such action shall be brought
not later than two years after the date the cause of action arises. Any
action brought under subsection (a) of this section may be brought in
any judicial district wherein the defendant is found, resides, or
transacts business, or in the judicial district wherein any act or
transaction constituting the violation occurs. Process in such action
may be served in any judicial district of which the defendant is an
inhabitant or wherever the defendant may be found.
(d) Dates of application to actions
The provisions of this section shall become effective with respect
to causes of action accruing on or after the date of enactment of the
Futures Trading Act of 1982 [January 11, 1983]: Provided, That the
enactment of the Futures Trading Act of 1982 shall not affect any right
of any parties which may exist with respect to causes of action accruing
prior to such date.
(Sept. 21, 1922, ch. 369, Sec. 22, as added Pub. L. 97-444, title II,
Sec. 235, Jan. 11, 1983, 96 Stat. 2322; amended Pub. L. 102-546, title
II, Secs. 211, 222(d), title IV, Sec. 402(14), Oct. 28, 1992, 106 Stat.
3607, 3616, 3625; Pub. L. 106-554, Sec. 1(a)(5) [title I, Secs. 120,
123(a)(25)], Dec. 21, 2000, 114 Stat. 2763, 2763A-404, 2763A-410.)
References in Text
The Futures Trading Act of 1982, referred to in subsec. (d), is Pub.
L. 97-444, Jan. 11, 1983, 96 Stat. 2294, which is classified generally
to this chapter. For complete classification of this Act to the Code,
see Short Title of 1983 Amendment note set out under section 1 of this
title and Tables.
Amendments
2000--Subsec. (a)(1). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(A)(i)(I)], substituted ``registered entity'' for
``contract market, clearing organization of a contract market, licensed
board of trade,'' in introductory provisions.
Subsec. (a)(1)(C)(i). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(A)(i)(II)], substituted ``registered entity'' for
``contract market''.
Subsec. (a)(2). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(A)(ii)], substituted ``sections 7(d)(13), 7a-
1(b)(1)(E),'' for ``sections 7a(11),''.
Subsec. (a)(3). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(A)(iii)], substituted ``registered entity'' for
``contract market'' in introductory provisions.
Subsec. (a)(4). Pub. L. 106-554, Sec. 1(a)(5) [title I, Sec. 120],
added par. (4).
Subsec. (b)(1). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(B)(i)], substituted ``registered entity that fails'' for
``contract market or clearing organization of a contract market that
fails'', ``sections 7 through 7a-2 of this title'' for ``section 7a(8)
and section 7a(9) of this title'', ``registered entity that in'' for
``contract market, clearing organization of a contract market, or
licensed board of trade that in'', and ``registered entity to the'' for
``contract market or licensed board of trade to the''.
Subsec. (b)(3). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(B)(ii)], substituted ``employee of registered entity''
for ``employee of a contract market, clearing organization, licensed
board of trade,'' and ``such registered entity'' for ``such contract
market, licensed board of trade''.
Subsec. (b)(4). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(B)(iii)], substituted ``registered entity'' for
``contract market, licensed board of trade, clearing organization,''.
Subsec. (b)(5). Pub. L. 106-554, Sec. 1(a)(5) [title I,
Sec. 123(a)(25)(B)(iv)], substituted ``registered entity'' for
``contract market, licensed board of trade, clearing organization,''.
1992--Subsec. (a)(1). Pub. L. 102-546, Sec. 402(14)(A), substituted
``subparagraphs'' for ``clauses'' in introductory provisions and
``subparagraph'' for ``clause'' in subpar. (D).
Subsec. (a)(2). Pub. L. 102-546, Sec. 402(14)(B), made technical
amendment to reference to section 21(b)(10) of this title to correct
reference to corresponding section of original act.
Subsec. (a)(3). Pub. L. 102-546, Sec. 222(d), added par. (3).
Subsec. (c). Pub. L. 102-546, Sec. 211, amended subsec. (c)
generally. Prior to amendment, subsec. (c) read as follows: ``The United
States district courts shall have exclusive jurisdiction of actions
brought under this section. Any such action must be brought within two
years after the date the cause of action accrued.''
Effective Date
Section effective Jan. 11, 1983, see section 239 of Pub. L. 97-444,
set out as an Effective Date of 1983 Amendment note under section 2 of
this title.
