Kegs, Crude and Commodities Law: On Why It Is Time to Re-Examine the Suitability Doctrine Under U.S. Commodities Law

47 Pages Posted: 2 Oct 2015

See all articles by Andrew Pardieck

Andrew Pardieck

Southern Illinois University School of Law

Date Written: January 1, 2007

Abstract

It is a clear sign the world has changed when thieves steal beer kegs not for the beer but for the stainless steel, and duffers hit the links not to play golf but to steal the aluminum cups from the golf course. Commodities have come of age. The media now follows oil and gold prices with all the breathless enthusiasm formerly reserved for high tech stocks. The debate over “peak oil” has entered the mainstream, and the debate over the impact of China and India’s increasing consumption of oil, steel, copper, and other commodities continues. Commodities are no longer passing assumptions. Neither are the commodities futures markets. They have grown enormously, as have the means for investing in commodities futures. With this increased focus on and participation in the commodities futures markets has come increased fraud. Yet, while the growing futures markets and fraud have received growing attention, commodities law, by and large, has not. Congress has debated expanding the authority of the Commodities Futures Trading Commission (CFTC) to “clamp down on fraud in the natural-gas markets,” but the focus has been on institutional investors, and there has been little debate about the anti-fraud provisions within or promulgated pursuant to the Commodities Exchange Act (CEA). The same is true of the suitability doctrine and its role in U.S. commodities law. While the scope of the suitability requirements under U.S. securities law remains a perennial source of debate within academia and the securities industry, that debate has been all but silent as it relates to the futures market. In 1986, the CFTC and federal courts rejected arguments that the recommendation of unsuitable futures transactions violated the anti-fraud provisions of the CEA. Since then, an unspoken, growing divide has arisen separating the black letter law that there is no suitability requirement under federal commodities law and the reality that futures transactions continue to be recommended to unsuitable investors. The increased focus on commodities futures markets, increased participation in those markets, and increased levels of fraud all suggest the time is ripe to reexamine the suitability doctrine and its role in U.S. commodities law. This Article urges consideration of the imposition of a uniform suitability standard for individual or retail investors in futures markets similar to that covering the securities futures products now jointly regulated by the CFTC and the Securities Exchange Commission.

Keywords: commodities law, suitability doctrine

Suggested Citation

Pardieck, Andrew, Kegs, Crude and Commodities Law: On Why It Is Time to Re-Examine the Suitability Doctrine Under U.S. Commodities Law (January 1, 2007). 7 Nevada Law Journal 301 (2006-2007), Available at SSRN: https://ssrn.com/abstract=2214063

Andrew Pardieck (Contact Author)

Southern Illinois University School of Law ( email )

1150 Douglas Drive
Carbondale, IL 62901-6804
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
59
Abstract Views
405
Rank
648,767
PlumX Metrics