Publishers sue to enjoin CFTC registration requirements

WASHINGTON, D.C.–A group of small newsletter publishers, software developers and Internet users sued the Commodity Futures Trading Commission in late July, saying its news licensing requirements restrict their free press rights under the First Amendment.

The suit, filed in federal District Court in Washington, D.C., alleges that provisions of the 1995 Commodity Exchange Act, which allow the commission to impose criminal penalties for publishing commodity information if a publication is not registered with the CFTC and to evaluate the qualifications of journalists as a condition of registration, are unconstitutional prior restraints on speech.

In 1995 the CFTC began requiring “commodity trading advisors” to register, a process that requires finger printing, fees, and an FBI background check. The CFTC defined an advisor to include anyone who provides information, analysis or advice about commodity trading either directly or through publications, writings or electronic media.

Under the law, the CFTC can restrict or grant registration based on the “training, experience and such other qualifications as the Commission finds necessary of desirable to ensure the fitness of persons required to be registered.” Registration can also be revoked if it is “in the public’s interest.”

Upon registration, publishers must maintain copies of their publications, lists of past and current subscribers and financial records to be available on demand for CFTC audits. The publishers are also required to file reports “as prescribed by the Commission.”

Larger publications, such as The Wall Street Journal and Investors Business Daily, are excluded from the registration requirement because their publications do not exclusively report on commodities. But if smaller publications, including those involved in the suit — the Bullish Review, Commodity Traders Consumer Report, Dynamic Trader Analysis and Club 3000 — do not register, they face fines up to $500,000 and five years in jail for a felony offense.

Scott Bullock, an attorney for the Institute of Justice, which represents the group of ten publishers and subscribers, said he hopes the suit will bring about an amendment to the definition of advisor to exclude small publishers who neither invest customer funds nor give person-to-person trading advice.

In 1985, the U.S. Supreme Court ruled that individuals who publish impersonal advice about stock trading cannot be forced to register with the Securities and Exchange Commission. The CFTC said the ruling does not apply because it focused on securities instead of commodities.

Bullock said the suit also seeks to enjoin a current CFTC proposal that would require registration of anyone who writes about commodities on the Internet. (Taucher v. CFTC; Media Attorney: Scott Bullock, Washington, D.C.)