Silverman v. CFTC

Jeffrey Silverman (defendant) was an account executive for a commodity futures commission merchant. From 1970 to 1972, Silverman defrauded five of his customers by placing trades without their prior authorization. In response, on March 13, 1973, the Commodity Futures Trading Commission (CFTC) (plaintiff) filed a disciplinary petition against Silverman and issued a two-year suspension of his trading privileges, which Silverman appealed. On March 31, 1975, while Silverman’s appeal was still pending, Silverman applied for registration as an associated person, a category of persons engaged in commodities trading on behalf of a futures commission merchant. Silverman properly disclosed the pending disciplinary proceedings against him. The CFTC granted his application. Subsequently, on May 5, 1976, the CFTC issued a final order in Silverman’s disciplinary proceedings, affirming the two-year suspension. Thereafter, on May 27, the CFTC filed an administrative complaint against Silverman, ordering that he show cause as to why his registration as an associated person should not be revoked. As grounds for revocation, the CFTC cited his earlier fraudulent conduct from 1970 to 1972 as well as the more recent final order. The matter was referred to an administrative-law judge (ALJ). At the administrative hearing, Silverman presented 15 witnesses to attest to his mitigation and rehabilitation. On August 24, 1976, the ALJ entered a finding that the evidence did not warrant revocation of Silverman’s registration as an associated person. The five-member commission of the CFTC unanimously reversed the ALJ’s ruling, ordering Silverman’s registration revoked. In doing so, the CFTC stated that the evidence was insufficient to demonstrate rehabilitation, and in light of the serious nature of Silverman’s violations and the need to protect the public, his registration should be revoked. Silverman appealed to the federal court of appeals.