Dennis Troyer v. National Futures Association, 981 F.3d 612

The National Futures Association (NFA) is the CFTC-approved self-regulatory organization for futures actors and enforces membership eligibility via bylaws, including NFA Bylaw 301(a)(ii)(D) (bars persons whose conduct was the cause of suspension/expulsion/order).
Dennis Troyer invested with AP Thomas Heneghan in two periods (2008–2011 and 2013–2015); Heneghan moved among Member firms (Statewide, ATC, PMI) and was later subject to NFA disciplinary scrutiny.
In 2011 the NFA reached a settlement with Statewide that included an agreement that Statewide would never reapply for NFA membership (a voluntary withdrawal with a “never reapply” clause); Heneghan was not individually named in that disciplinary action.
The NFA later investigated PMI and in 2016 permanently barred Heneghan from NFA membership; Troyer sued various defendants and asserted (against the NFA) a §25(b) CEA claim alleging failure to enforce Bylaw 301 and vicarious liability for Heneghan’s conduct.
The district court granted summary judgment for the NFA; Troyer appealed arguing (inter alia) that the Statewide settlement was effectively an expulsion triggering Bylaw 301 and that CFTC guidance requires enforcement.
The Seventh Circuit affirmed, holding the Statewide settlement (agreement not to reapply) was not an “expulsion” that triggers Bylaw 301 and thus Troyer failed the first required element of a §25(b) claim.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Bylaw 301 applies — is a settlement agreement not to reapply an “expulsion”?	Statewide’s settlement (never reapply) was effectively an expulsion caused by Heneghan and should trigger Bylaw 301 disqualification.	A withdrawal plus agreement not to reapply is a voluntary settlement, not an expulsion; Peterson/CFTC precedent distinguish the two.	Court holds settlement is not an expulsion; Bylaw 301 not triggered; claim fails on prong one.
Effect of the CFTC’s 1996 Interpretative Statement on Peterson	Interpretative Statement makes an agreement not to reapply itself sufficient to justify disqualification under §12a subsections and thus triggers NFA enforcement.	The Interpretative Statement addresses applicants who attempt to renege on an agreement; it does not overturn Peterson or treat every non-reapply agreement as an expulsion.	Court rejects Troyer’s reading; interprets the Statement as limited to attempts to violate prior undertakings; Peterson stands.
Bad faith and causation required by §25(b)	NFA acted in bad faith and its alleged failure caused Troyer’s losses.	Because Bylaw 301 did not apply, there is no need to find bad faith or causation; summary judgment appropriate.	Court ends analysis at first prong; does not reach bad faith/causation; affirms summary judgment for NFA.

Wigod v. Chicago Mercantile Exchange, 981 F.2d 1510 (7th Cir. 1992) (standard for reviewing summary judgment)