In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1957

MBH Commodity Advisors, Inc. and
Jacob Bernstein,

Petitioners,

v.

Commodity Futures Trading Commission,

Respondent.

Appeal from an Order of the
Commodity Futures Trading Commission.
CFTC Docket No. CRAA 99-3.

Argued January 18, 2001--Decided May 7, 2001



  Before Cudahy, Kanne, and Rovner, Circuit
Judges.

  Cudahy, Circuit Judge. The National
Futures Association (NFA) imposed
sanctions on Jacob Bernstein and MBH
Commodity Advisors, Inc. (MBH) in
connection with an infomercial and web
site on which both appeared. Following an
unsuccessful appeal to the NFA Appeals
Committee, Bernstein and MBH brought
their case to the Commodity Futures
Trading Commission (CFTC or Commission),
which summarily affirmed the NFA Appeals
Committee. Bernstein and MBH now appeal
to this court, arguing that the CFTC
applied a too-lenient standard of review
in evaluating the NFA Appeals Committee
decision; failed to make and declare
required findings; and applied expansive
readings of NFA rules in violation of
their due process rights. We affirm.

I.   BACKGROUND

  Bernstein has been active in the
commodities industry since 1972 and has
developed a "seasonal trading method."
This method is based on Bernstein’s study
of the historical behavior of futures
markets--a study that allegedly revealed
that trades of certain futures products
will almost certainly produce a profit
when executed on specified dates. The
method is described in Bernstein’s book,
Key Date Seasonals--The Best of the Best
in Seasonal Trades, as well as a series
of newsletters, videotape lectures and
other such materials, all of which he
markets to the public.

A.   Facts

  In the spring of 1995, Ramy El-Batrawi
of Genesis/Positive Response Television
(Genesis) approached Bernstein at a
seminar in Burbank, California about the
possibility of marketing Bernstein’s
futures trading products through the
creation of an infomercial. On October
27, 1995, Bernstein, acting for himself
and on behalf of MBH,/1 entered into a
marketing and distribution agreement with
Genesis. Bernstein testified before the
NFA panel that, during the negotiations
leading up to the final marketing
agreement, he stressed the need for
assurances that the infomercial would
comply with NFA and CFTC regulations.
Bernstein also stated that he insisted on
the right to review the infomercial
before it aired. However, the final
agreement between Bernstein and Genesis
granted Genesis the unrestricted and
exclusive right to advertise and market
Bernstein’s commodity trading products.
(Thus, Bernstein retained no right to
pull the infomercial from the air, even
if the infomercial raised regulatory
concerns.) In exchange, Bernstein
received four percent of Genesis’ gross
receipts from the sales of his products
through the infomercial.

  Prior to the infomercial’s production,
Genesis provided Bernstein with the
infomercial script, which he reviewed. As
part of his review, Bernstein
independently verified the testimonials
of three customers who were to appear in
the infomercial as having successfully
traded using his method. According to
Bernstein, he satisfied himself that they
had indeed profited from the use of his
method although he did not continue to
monitor their accounts to ensure that
they remained profitable for the time
during which the infomercial aired. For
additional scrutiny, Bernstein sent an
unspecified excerpt from the script to
his attorney for review. Bernstein also
requested that Genesis and Jeffrey Fox of
Fox Investments, a broker to whom
Bernstein referred customers for their
trades, send the infomercial’s script to
their attorneys. All three attorneys
suggested changes to the infomercial,
which Genesis made. Following these
preliminaries, Bernstein approved the
script. Genesis produced the infomercial,
entitled Success and You, in the spring
of 1996.

1.

  The infomercial was ultimately aired by
390 television stations throughout the
United States in 1996. The infomercial
opens with a shot of two men who appear
to represent contrasting degrees of
wealth and poverty. A narrator states:

Both of these men have had the same
opportunities throughout their lives. One
struggles paycheck to paycheck trapped in
a dead-end job, while the other has
financial independence and the freedom to
enjoy it. Why are some people stuck
living a dull and meager existence while
others succeed and lead the good life?

One of the host figures in the
infomercial then appears on-screen and
exclaims, "Today we’ll reveal how you can
change your humdrum existence into a life
of financial independence on Success and
You." Following some preliminary
profiles, the infomercial focuses on
Bernstein, who tells the audience, "I
think trading futures is one of the best
possible ways to achieve wealth in
America today." Bernstein then recounts
his own "rags to riches" story,
concluding with a description of the
seasonal trading methodology he developed
along the way.
  Bernstein next tells the viewer that his
seasonal trades are "no-brainers," which
require no guesswork because the trader
is instructed when to enter and exit from
the futures market. Bernstein notes that
he has done all of the hard work for his
customers, and emphasizes that his trades
have been historically correct 70 percent
of the time. (In fact, Bernstein claims
that he doesn’t even "fool around with
anything that’s been correct less than 70
percent of the time.") However, Bernstein
also gives examples during the course of
the infomercial of his more successful
trades, naming, for example, a heating
oil trade that he claims has an 87
percent probability of producing a
profit.
  Following the spotlight on Bernstein,
the infomercial turns to three traders
who testify to their success using
Bernstein’s seasonal method. Ken
Whisenhunt, a truck driver, is shown
telling his wife, "We’re going to get
that Lincoln now." Whisenhunt also tells
the audience that "[i]t’s fantastic when
you make a trade and come up with several
thousand dollars in your favor." Next,
the audience is introduced to a Texas
farmer named Harold Hinkle, who tells
them, "I’m trading for one reason and one
reason only, to make money. I’m trading
Jake’s methodology, because I believe in
it, and it’s working for me." Lastly, a
housewife named Pam Smith is introduced.
Near the end of the infomercial she
declares, "Jake is so easy to follow in
what he teaches you. . . . So, by keeping
it simple, I’ve doubled my account and
made a lot of money, and I feel like I’m
on my way to making a lot more money."
Following other segments, the infomercial
concludes with a casino dealer who tells
the viewer that "[m]ost people lose in a
casino because their odds of winning are
less than 50 percent. Imagine if your
odds of winning were over 80 percent. If
you were able to win on this table eight
out of ten times, would you walk out a
winner?"

  The infomercial superimposes cautionary
statements on six scattered occasions
throughout its run. These statements are:
(1) "There is a risk of loss in futures
trading. Past results are not necessarily
indicative of future results;" (2)
"Statistical probabilities do not assure
that any particular trade will be
profitable;" and (3) "Persons who wish to
commit money to the futures market should
understand the risks before they do so."

2.

  In addition to the infomercial, Genesis
created an internet web site, entitled
Amazing Discoveries, to promote
Bernstein’s materials. The web site’s
address is provided in the infomercial,
and the site includes content similar to
the infomercial. For example, the site
states that "Jake Bernstein’s Trade Your
Way to Riches will give you the exact
skills it takes to make money as a
disciplined, successful commodities
trader," and states that Bernstein’s
trades are "no-brainer" trades with
"unbelievable accuracy rates of 70, 80,
even 90%." The web site only contains one
small-print statement at the bottom of
the web page warning of the risk inherent
in futures trading: "There is a risk of
loss in futures trading." The record does
not indicate how many visitors viewed the
web site.

3.

  The infomercial and web site came to the
attention of the NFA, which is charged
with creating and implementing a
comprehensive program for self-regulation
of the commodity futures industry./2 To
further this goal, the NFA is required to
adopt rules governing the conduct of its
membership. These rules are subject to
Commission approval and must provide
standards governing the sales practices
of NFA members. See 7 U.S.C. sec.
21(p)(3); 17 C.F.R. sec. 170.5. In
addition, these rules must be "designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, in
general, to protect the public interest,
and to remove impediments to and perfect
the mechanism of free and open futures
trading." 7 U.S.C. sec. 21(b)(7).

  Pursuant to its statutory mandate, the
NFA has adopted numerous rules governing
member conduct. See generally National
Futures Association, NFA Manual (updated
on an on-going basis). Because Bernstein
and MBH were both members of the NFA at
the time of the conduct relevant to this
case, they were both subject to these
rules, the most relevant of which is NFA
Compliance Rule 2-29, entitled
"Communications With the Public and
Promotional Material." The following
provisions of this rule are especially
relevant:

(a) General Prohibition. No Member or
    Associate shall make any
    communication with the public which:

(1) operates as a fraud or deceit;

* * *

(3) makes any statement that futures
trading is appropriate for all persons.

(b) Content of Promotional Material.   No
    Member or Associate shall use any
    promotional material which:

(1) is likely to deceive the public;

(2) contains any material misstatement of
fact or which the Member or Associate
knows omits a fact if the omission makes
the promotional material misleading;

(3) mentions the possibility of profit
unless accompanied by an equally
prominent statement of the risk of loss;

* * *

(c) Hypothetical Results.

(1) Any Member or Associate who uses
promotional material which includes a
measurement or description of or makes
any reference to hypothetical performance
results which could have been achieved
had a particular trading system of the
Member or Associate been employed in the
past must include in the promotional
material the following disclaimer
prescribed by the NFA’s Board of
Directors:

[lengthy disclaimer omitted]

NFA Compliance Rule 2-29.

  After reviewing the infomercial and web
site, the NFA determined that they misled
viewers and violated NFA Compliance Rule
2-29 for several reasons. The NFA
believed that the infomercial and web
site falsely implied that customers would
profit on the trades recommended by Bern
stein without adequately disclosing the
risk of loss. This violated Compliance
Rule 2-29(b)(3), which prohibits the use
of promotional material that mentions the
possibility of profit without featuring
an equally prominent warning of the risk
of loss. The NFA also concluded that the
infomercial falsely represented that
anyone could trade futures, in violation
of Compliance Rule 2-29(a)(3), which
prohibits any communication with the
public that contains any statement that
futures trading is appropriate for all
persons. In addition, the NFA charged
that the infomercial and web site
advertised hypothetical results without a
required disclaimer, in violation of
Compliance Rule 2-29(c)(1), which
requires promotional materials that make
use of hypothetical results to include a
disclaimer stating the limitations of
reliance on hypothetical results.

  Following its review of the accounts of
the three customers shown in the
infomercial (Whisenhunt, Hinkle, and
Smith), the NFA concluded that the
infomercial falsely implied that these
customers made money using Bernstein’s
recommended trades. In fact, these
customers all lost money on their trades
or failed to realize the returns they
claimed in the infomercial during the
time the infomercial aired. In addition,
these customers for the most part did not
even trade using Bernstein’s seasonal
methodology. Accordingly, the NFA
believed that the infomercial’s claim of
the traders’ successes violated
Compliance Rules 2-29(a)(1) (prohibiting
communications with the public that
operate as a fraud or deceit), (b)(1)
(prohibiting use of promotional material
that is likely to deceive the public) and
(b)(2) (generally prohibiting use of
promotional material that contains
material misstatements of fact).

  Lastly, the NFA believed that the
infomercial and web site falsely stated
that Bernstein was a successful trader.
Bernstein provided the NFA with monthly
statements from November 1992 through
November 1996 for MBH’s proprietary
account, through which he made his own
trades. The NFA’s analysis of this
account showed that the account had lost
$3,286.33 during 1992, $8,499.13 during
1993, $1,793.82 during 1994, $14,300.26
during 1995, and $8,374.34 during the
first 11 months of 1996. Accordingly, the
NFA believed that Bernstein’s claim that
he was a successful trader violated
Compliance Rules 2-29(a)(1) and (b)(1).

4.

  As a result of its investigation, the
NFA requested that Bernstein stop airing
the infomercial. In turn, Bernstein
relayed this request to El-Batrawi.
(Remember, Bernstein had contracted away
his ability to control airing of
theinfomercial, so, presumably, his only
recourse was to ask that El-Batrawi honor
the NFA’s request.) After initial
resistance, El-Batrawi agreed to stop
airing the infomercial, and Genesis
pulled it off the air sometime in July
1996. While the infomercial was off the
air, Bernstein attempted to revise its
script to address the NFA’s concerns.
Ultimately, the NFA did not accept the
revised script because the script did not
include disclaimers about hypothetical
results. When Bernstein informed El-
Batrawi of this, El-Batrawi lost patience
and began re-airing the infomercial in
October or November 1996, notwithstanding
its alleged non-compliance with NFA
rules.

B.   Proceedings Below

  Following its review of the infomercial
and web site, the NFA filed a four-count
complaint against Bernstein and MBH,
alleging various violations of the NFA’s
Compliance Rules. Specifically, count one
of the complaint charged Bernstein and
MBH with violating Compliance Rules 2-
29(a)(1), (b)(1) and (b)(2) by presenting
misleading information in the infomercial
and web site. Count two alleged that
Bernstein and MBH violated Compliance
Rule 2-29(b)(3) because the infomercial
and web site promised profit without
giving equal prominence to the risk of
loss. Count three alleged that Bernstein
and MBH violated Compliance Rule 2-
29(a)(3) because the infomercial
represented that futures trading was
appropriate for all persons. Lastly,
count four alleged that the infomercial
and web site failed to disclose the
limitations of using hypothetical
performance results, as required by
Compliance Rule 2-29(c)(1). Bernstein and
MBH denied the allegations and requested
a hearing before an NFA panel in
accordance with Part Three of the NFA
Compliance Rules. See also 7 U.S.C. sec.
21(b)(9); 17 C.F.R. sec. 170.9.

  After briefing by both parties, the
assigned NFA panel issued a decision
finding Bernstein and MBH liable on all
counts. As a sanction, the panel barred
both Bernstein and MBH from the NFA for a
period of 18 months, after which both
could reapply for membership. In
addition, the panel imposed a $200,000
fine on Bernstein and MBH, for which they
incurred joint and several liability. The
parties appealed to the NFA’s three-
person Appeals Committee, and the
Committee affirmed the panel decision in
all respects. The parties then appealed
to the CFTC. The CFTC summarily affirmed
the NFA decision, adopting the
NFA’sfindings and conclusions after
applying a weight of the evidence
standard of review as dictated by 17
C.F.R. sec. 171.34. Bernstein and MBH now
appeal to this court.

II.    DISCUSSION

  Bernstein raises three arguments on
appeal: (1) that the CFTC erred by
summarily affirming the NFA
decisionwithout making its own,
independent findings of fact; (2) that
the CFTC erred by failing to make the
findings required by 7 U.S.C. sec. 21(i);
and (3) that the NFA violated his due
process rights by applying novel
constructions of Compliance Rule 2-29 to
him.

A.    The CFTC’s Standard of Review

  Bernstein first argues that 7 U.S.C.
sec. 21(i) requires de novo fact finding,
rather than the weight of the
evidencereview that the CFTC chose. As an
initial matter, we note that Bernstein
does not precisely define what he
believes de novo fact finding to entail.
However, we infer from his briefs that he
understands de novo fact finding to
require not that the CFTC draw its own
inferences from the facts found by the
NFA, but that the CFTC set aside the
facts found by the NFA in favor of making
its own determination, possibly through
the admission of additional evidence that
was not presented to the NFA.

  Bernstein’s argument in favor of his
version of de novo review rests upon sec.
21(i), which states:

(1) In a proceeding to review a final
disciplinary action taken by a registered
futures association against a member
thereof or a person associated with a
member, after appropriate notice and
opportunity for a hearing (which hearing
may consist solely of consideration of
the record before the association and
opportunity for the presentation of
supporting reasons to affirm, modify, or
set aside the sanction imposed by the
association)--

(A) if the Commission finds that--

(i) the member . . . has engaged in the
acts or practices . . . that the
association has found the member . . . to
have engaged in . . .;

(ii) the acts or practices . . . are in
violation of the rules of the association
. . .; and

(iii)   such rules are, and were applied
        in a manner, consistent with the
        purposes of this chapter,

the Commission, by order, shall so
declare and, as appropriate, affirm the
sanction imposed by the association . . .
.

* * *

(3) In a proceeding to review the denial
of membership in a registered futures
association or the barring of any person
from being associated with a member,
after appropriate notice and opportunity
for a hearing (which hearing may consist
solely of consideration of the record
before the association and opportunity
for the presentation of supporting
reasons to affirm, modify, or set aside
the action of the association)--

(A) if the Commission finds that--

(i) the specific grounds on which the
denial or bar is based exist in fact;

(ii) the denial or bar is in
accordance with the rules of
the association; and

(iii) such rules are, and were applied in
a manner, consistent with the purposes of
this chapter,

the Commission, by order shall so declare
and, as appropriate, affirm or modify the
action of the association, or remand the
case to the Commission for further
proceedings . . . .

7 U.S.C. sec. 21(i). Believing the
statute to be ambiguous with regard to
the standard of review, the CFTC chose a
standard of review to govern its
evaluation of NFA disciplinary decisions
by proposing in 1990, and eventually
adopting, a weight of the evidence
standard. See 17 C.F.R. sec. 171.34;
Commission Review of National Futures
Association Decisions in Disciplinary,
Membership Denial, Registration and
Membership Responsibility Actions, 55
Fed. Reg. 24,254 (June 15, 1990)
(codified at 17 C.F.R. sec. 171.34).
Under the weight of the evidence
standard, the Commission:

does not mechanically reweigh the
evidence to ascertain in which direction
it preponderates. The Commission focuses
its inquiry on whether the fact finder
acted reasonably in reaching material
findings in light of the evidence . . .
the reasonable inferences drawn
therefrom, and other pertinent
circumstances.

55 Fed. Reg. at 24,256. "Several courts
have equated the ’weight of the evidence’
standard with the ’preponderance of the
evidence’ standard used in other
contexts." Monieson v. CFTC, 

, 858 (7th Cir. 1993) (and cases cited
therein). Bernstein disagrees with the
CFTC’s interpretation of sec. 21(i),
arguing that it mandates de novo fact
finding./3

  In light of the Commission’s use of
notice-and-comment procedures in adopting
the weight of the evidence standard, the
Commission points us to "the well
established canon [frequently referred to
as the Chevron doctrine] ’that
considerable weight should be accorded to
an executive department’s construction of
a statutory scheme it is entrusted to
administer.’" Geldermann, Inc. v. CFTC,

, 315 (7th Cir. 1987)
(quoting Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 

, 844 (1984)). While Chevron deference
"is not abject deference," United Transp.
Union-Ill. Legislative Bd. v. Surface
Transp. Bd., 

, 476 (7th Cir.
1999), "courts must defer to the agency’s
interpretation [of a statute] so long as
it is ’a permissible construction of the
statute.’" Stinson v. United States, 

, 44 (1993) (quoting Chevron, 467
U.S. at 842-43).

  The Chevron analysis is accomplished in
two steps: first we examine the text of
the relevant statute to determine whether
its plain meaning controls the agency
interpretation. If, on the other hand,
the statute is ambiguous, the agency’s
interpretation governs if it is
reasonable.
1.

  Here, the first step of the Chevron
analysis is easily disposed of. Bernstein
argues that the statute plainly mandates
de novo fact finding because it requires
the CFTC to make certain findings in
connection with its decision. See 7
U.S.C. sec. 21(i)(1)(A)(i) & (3)(A)(i).
Bernstein supports his argument by noting
that "find" is defined as "[t]o come upon
by seeking or effort . . . [t]o discover;
to determine; to locate; to ascertain and
declare." Black’s Law Dictionary 631 (6th
ed. 1990). From this definition,
Bernstein concludes that "the plain
meaning of a command to find a fact is to
make an actual determination as to the
fact’s existence (or non-existence)."
Appellant’s Reply Br. at 7. This is
nonsense. An appellate body may make a
"finding" based on its own investigation
or, more commonly, based on a record made
below. Therefore, while sec. 21(i)
requires that the CFTC make certain
findings of fact, it does not dictate
whether the CFTC’s factual findings must
result from a de novo or a weight of the
evidence review.

  Bernstein also cites to the
parenthetical language of sec. 21(i)(1) &
(3), which states that the CFTC’s hearing
"may consist solely of consideration of
the record before the association and
opportunity for the presentation of
supporting reasons to affirm, modify, or
set aside the sanction imposed by the
association." But this language obviously
cuts against Bernstein, for it does not
prescribe a standard of review--it merely
describes the record upon which the CFTC
may base its decision. That the record
may be closed on appeal does nothing to
dictate a de novo standard of review.
Indeed, this court applies the clearly
erroneous standard--rather than the de
novo standard--to a closed-record review
of factual determinations by lower
courts. See, e.g., Fed. R. App. P. 10(a);
Eli Lilly & Co. v. Natural Answers, Inc.,

, 462 (7th Cir. 2000)
(factual findings will not be disturbed
unless they are clearly erroneous)./4

2.

  Having found the language of sec. 21(i)
to be silent as to the appropriate
standard of review, we can proceed to the
second step of Chevron, a determination
of the reasonableness of the CFTC’s
interpretation. In this step, we take
into account extrinsic sources that
include not only legislative history, but
also "the consistency of the agency’s
interpretation, the contemporaneousness
of the interpretation, and the robustness
of the regulation following congressional
re-enactment of the underlying statute."
Bankers Life & Casualty Co. v. United
States, 

, 983 (7th Cir.
1998). Bernstein relies on these factors
to make arguments in favor of de novo
review based on: (1) the SEC’s use of de
novo review in appeals of National
Association of Securities Dealers, Inc.
(NASD) disciplinary proceedings; (2) the
structure of the CEA; and (3) the
legislative history of the CEA.

i.

  The SEC--which, under 15 U.S.C. sec.
78s, is subject to statutory requirements
for reviewing securities association
disciplinary decisions that are virtually
identical to the CFTC’s--apparently
reviews NASD disciplinary actions de
novo. See, e.g., Shultz v. Securities &
Exchange Comm’n, 

, 568 (7th
Cir. 1980). Even though this might be
Bernstein’s most telling point, he has
merely pointed out this inter-agency
discrepancy without making the obvious
point that two agencies should not draw
conflicting conclusions from similar
language. See Rapaport v. United States
Dept. of the Treasury, Office of Thrift
Supervision, 

, 216-17 (D.C.
Cir. 1995) (one agency’s interpretation
of a statute is not entitled to deference
when several other agencies share
administration of the statute). But here
there appears to be a sound basis for the
SEC and CFTC’s conflicting
interpretations of similar
statutorylanguage.

  Perhaps most obviously, the statute
guiding the SEC (the Securities Exchange
Act, of which 15 U.S.C. sec. 78s is
relevant here) and the statute guiding
the CFTC (the CEA) are different
statutes, which have a different history,
even though they now contain similar
language applicable to disciplinary
proceedings./5 More importantly, if any
interpretation needs to be declared
unreasonable, the SEC’s use of a de novo
standard of review appears the better
candidate, for in amending the SEA
Congress stated that "[t]he scope of the
hearings [to review disciplinary
sanctions] would be within the discretion
of the appropriate regulatory agency,
thus permitting the agency to consider
the matter de novo if it deems this
appropriate or simply on the record
before the self-regulatory agency as
would be the normal situation." S. Rep.
No. 94-75, at 132 (1975) (emphasis
added). Thus, sec. 78s appears at best to
grant the SEC discretion to choose a
standard of review, and certainly does
not dictate a de novo standard of review.
Likewise, sec. 21(i) grants discretion to
the CFTC, even if this means that the
CFTC and SEC may reach different
conclusions in exercising their
discretion.

ii.

  Bernstein also argues that the structure
of the CEA supports the inference that
sec. 21(i) requires de novo fact finding.
Bernstein begins his argument by noting
that "[w]here Congress includes
particular language in one section of a
statute but omits it in another section
of the same Act, it is generally presumed
that Congress acts intentionally and
purposely in the disparate inclusion or
exclusion." Russello v. United States,

, 23 (1983) (quoting United
States v. Wong Kim Bo, 

, 722
(5th Cir. 1972)). Thus, because sec.
21(i) does not explicitly mandate a
weight of the evidence review for
disciplinary actions--whereas sec. 21(o)
specifically prescribes this standard for
the review of registration actions--
Bernstein argues that Congress must have
intended for the CFTC’s review of
disciplinary actions to be de novo.

  However, given the similar reputational
and financial consequences that attach to
parties under both sec. 21(i) membership
actions and sec. 21(o) registration
actions, it would make little sense to
apply differing standards of review to
each. Further, sec. 21(i) explicitly
states that the CFTC is only required to
"review" final disciplinary decisions of
the NFA, and that the CFTC may limit its
review to the record below. In
"reviewing" NFA decisions, the CFTC is
acting in an appellate capacity, and
appellate tribunals generally do not make
de novo factual determinations. See
Lawson Products, Inc. v. Avnet, Inc., 

, 1439 (7th Cir. 1986). Lastly,
de novo review would require the CFTC to
ignore the NFA’s own "expertise in
evaluating factual issues in the context
of day-to-day industry practice."
Commission Review of National Futures
Association Decisions in Disciplinary,
Membership Denial, Registration and
Membership Responsibility Actions, 55
Fed. Reg. 24,254, 24,256 (June 15, 1990).
For all of these reasons, we cannot
conclude that the CFTC has adopted an
unreasonable reading of sec. 21(i), even
if sec. 21(o) explicitly mandates a
weight of the evidence review while sec.
21(i) does not.

iii.

  We lastly address Bernstein’s argument
that the pre-amendment version of sec.
21(i) required de novo review and that
Congress’ 1986 amendment of sec. 21(i)
was not intended to alter this
requirement. This argument requires two
steps. First, Bernstein argues that sec.
21(i), as originally written, clearly
mandated a de novo standard of review.
Second, Bernstein points to a report of
the House Committee on Agriculture that
he believes indicates Congress’ intent to
preserve in the amended version of sec.
21(i) the de novo standard of review
allegedly called for by the original
version of sec. 21(i). Both steps of
Bernstein’s argument are questionable.

  As originally written, sec. 21(i)
allowed the Commission to consider not
only the record before the NFA, but also
"such other evidence as it may deem
relevant." Commodity Futures Trading
Commission Act of 1974, Pub.L. 93-463,
Title III, sec. 301, 88 Stat. 1406
(emphasis added). Accordingly, the
Commission was not originally required to
consider every piece of evidence offered
by parties on appeal, but only the
evidence that it deemed relevant. Thus,
even if de novoreview was required
whenever the Commission considered new
evidence, the Commission was never
required to consider new evidence by the
original version of sec. 21(i).
Accordingly, the original version of sec.
21(i) left the appropriate standard of
review to the CFTC’s discretion--it did
not mandate de novo review.

  In addition, we are not convinced that
Congress intended to perpetuate a de novo
standard with the 1986 amendment to sec.
21(i). Bernstein believes otherwise,
citing only the House Committee on
Agriculture report in support. However,
the only statement in the report coming
even close to a discussion of the
standard of review merely notes that "ac
tual standards for commission review of
any association decision, however, would
remain essentially unchanged." H.R. Rep.
No. 99-624, at 11 (1986) (emphasis
added). The report’s use of the modifier
"essentially" deprives this statement of
whatever force it might otherwise have in
advancing Bernstein’s argument./6

  Further, the report cited by Bernstein
is not the only congressional report to
address the meaning of the language
employed in sec. 21(i). In describing the
1975 amendment of sec. 15A of the
Securities Exchange Act of 1933 (codified
at 15 U.S.C. sec. 78s), which contains
language virtually identical to the
current text of sec. 21(i), the Senate
Committee on Banking, Housing and Urban
Affairs stated that the scope of the
hearings reviewing self-regulatory
association disciplinary proceedings
"would be within the discretion of the
appropriate regulatory agency, thus
permitting the agency to consider the
matter de novo if it deems this
appropriate or simply on the record
before the self-regulatory agency as
would be the normal situation." S.Rep.
No. 94-75, at 132 (1975) (emphasis
added). Accordingly, regardless of what
Congress thought of the earlier version
of sec. 21(i), Congress apparently
believed that the new language would
leave the standard of review entirely to
the discretion of the agency, which would
normally limit itself to the record
before the self-regulatory agency and not
apply de novo review.

3.

  We lastly note that under the
Administrative Procedure Act, we will not
reverse an agency determination unless an
error is prejudicial. See 5 U.S.C. sec.
706; see also Braniff Airways, Inc. v.
Civil Aeronautics Bd., 

, 466
(D.C. Cir. 1967). While Bernstein argues
in favor of de novo review, he offers
almost no facts that the CFTC would have
found in his favor had the NFA’s factual
determinations been subject to this more
stringent standard. Bernstein’s briefs
state only that "the CFTC’s review left
open the possibility that, had it
conducted de novo review, it might have
reached different conclusions than did
the NFA." Appellant’s Br. at 24 n.29. And
when specifically asked at oral argument
what facts would change under de novo
review, Bernstein’s counsel only said
that:

[I]f the Commission had conducted a de
novo review of the facts . . . the
Commission would have discovered that
[the] National Futures Association had
interpretations of its rules,
specifically Rule 2-29. Rule 2-29(a)
required, pursuant to the interpretation,
a scienter requirement. . . . [The NFA]
did not find that.

However, the NFA’s alleged failure to
make a required finding goes more to the
question whether the NFA complied with
its own, as well as the CFTC and CEA’s
rules, which is a question of law, not of
fact. Indeed, the only fact challenged by
Bernstein upon sustained questioning at
oral argument was the NFA’s finding that
the infomercial and web site were
misleading. But Bernstein cited to no
evidence that suggested the success of a
challenge to that seemingly unassailable
finding. Regardless, because we do not
consider arguments raised for the first
time during oral argument, see United
States v. Rodriguez, 

, 524
(7th Cir. 1989), we need not consider
this point. Accordingly, even if we had
determined that de novo review was
warranted in this case, we would have
seen no good reason to reverse.

B. Findings Required by sec. 21(i)(1) &
(3)

  Bernstein next argues that, in its
summary opinion, the CFTC failed to make
the findings and declarations required by
7 U.S.C. sec. 21(i)(1) & (3). The
required declarations include a finding
that the member engaged in the acts that
the NFA found the member to have engaged
in, sec. 21(i) (1)(A)(i) & (3)(A)(i);
that the member’s acts are in violation
of NFA rules, sec. 21(i)(1)(A)(ii) &
(3)(A)(ii); and that the rules have been
applied in a manner that is consistent
with the CEA, sec. 21(i)(1)(A)(iii) &
(3)(A)(iii).

  Here, the CFTC determined that the
findings and conclusions of the NFA were
supported by the weight of the evidence
and that the NFA committed no error
material to the outcome of the case. As
such, the CFTC clearly met the
requirements of sec. 21(i)(1)(A)(i) &
(ii), as well as sec. 21(i)(3)(A) (i) &
(ii). Further, on appeal to the
Commission, Bernstein argued that the NFA
erred by applying Rule 2-29 in a manner
that was inconsistent with the purpose of
the CEA. Since this argument was raised
before the Commission, it was necessarily
resolved by the Commission’s order of
summary affirmance. Accordingly, the
requirements of sec. 21(i)(1) (A)(iii) &
(3)(A)(iii) were satisfied as well, for
the Commission implicitly found that the
NFA applied its rules in a manner
consistent with the CEA.

  We are also (just barely) satisfied that
the CFTC order of summary affirmance met
sec. 21(i)’s requirement that the CFTC
declare its findings. We will "uphold a
decision of less than ideal clarity if
the agency’s path may reasonably be
discerned." Bowman Transp., Inc. v.
Arkansas-Best Freight Sys., Inc., 

, 286 (1974). Here, the CFTC did
not explicitly state its path, but the
path is nonetheless easily discerned, for
the CFTC adopted the NFA’s findings and
conclusions, finding no material error in
the NFA proceedings. Bernstein argues
that the CFTC’s decision is not clear
enough because it does not state what the
non-material errors are. However, the
non-material errors are, by definition,
not material and need not be elaborated
on. Accordingly, the CFTC has here made
all of the findings and declarations
required by sec. 21(i).

  Because we believe that in this case the
Commission’s order of summary affirmance
met the bare minimum of sec. 21(i)’s
finding and declaration requirements, we
need not address the Commission’s
argument that its occasional use of
summary orders, codified at 17 C.F.R.
sec. 171.33(b), is entitled to Chevron
deference. However, we note that given
sec. 21(i)’s express requirement that the
CFTC make and declare findings, it is
difficult to imagine that the
Commission’s use of summary affirmance
orders--which need not set forth any
reasoning or findings of fact--will never
run afoul of sec. 21(i).


C.   The CFTC’s Application of sec. 21(i)

  Bernstein lastly argues that the CFTC
allowed the NFA to apply Rule 2-29 in a
manner that violated his due process
rights. Bernstein’s first argument along
these lines, his claim that the
Commission deprived him of his due
process rights by failing to conduct its
own fact finding, has already been
disposed of; because the Commission was
not required to find its own facts, the
Commission did not violate Bernstein’s
due process rights by failing to do so.
Bernstein’s second argument, which we
address here, is that his due process
rights were violated because both the NFA
and the CFTC applied expansive readings--
of which he had no notice--of the NFA
Compliance Rules to him./7 In
particular, Bernstein argues: (1) that
the NFA enforced a novel construction of
Compliance Rule 2-29(a)(1); (2) that the
NFA enforced a novel construction of
Compliance Rule 2-29(b)(1); (3) that the
NFA enforced a novel construction of
Compliance Rules 2-29(a) & (b); and (4)
that the CFTC erred by affirming
interpretations of NFA rules that
amounted to impermissible rule changes.
Bernstein does not appear to be taking
issue with the NFA’s interpretive
notices, which the NFA publishes as its
own rule interpretations (but which are
apparently not approved by the CFTC
pursuant to 7 U.S.C. sec. 21(p)).
However, Bernstein does contest what he
alleges to be novel applications of
Compliance Rule 2-29 and the NFA’s
interpretive notices construing it.

  The standard of review we apply to legal
questions that have been decided by an
agency (such as Bernstein’s due process
arguments here) "depends on the nature of
the question and the comparative
qualifications and competence of the
decisionmakers." Monieson v. CFTC, 

, 858 (7th Cir. 1993) (citing
Morris v. CFTC, 

, 1293 (9th
Cir. 1992)). Here, the question is one of
both statutory interpretation (whether
the NFA rules and their interpretations
are consistent with the CEA) and due
process (whether the NFA rules and their
interpretations were fairly applied).
Because these are both issues that courts
commonly encounter, we review these
aspects of the CFTC’s decision de novo.

1.

  Bernstein first argues that the NFA
improperly applied Rule 2-29(a)(1), which
states that "[n]o Member or Associate [of
the NFA] shall use any promotional
material which . . . is likely to deceive
the public." The NFA interpretive notice
that discusses this rule states that a
disciplinary panel will not find a
violation of the rule without a
determination that the member acted with
fraudulent intent or recklessness. See
NFA Interpretive Notice para. 9003. While
Bernstein does not contest the CFTC’s
finding that he acted recklessly in
contracting away ultimate control of the
infomercial and web site, he argues that
the finding does not satisfy the NFA
Interpretive Notice’s scienter
requirement because there is a difference
between "reckless business practices
unrelated to truth or falsity" and
"recklessly false speech."

  While there may, in certain
circumstances, be a difference between
"reckless business practices" and
"recklessly false speech," the
distinction is non-existent here. Cast in
traditional legal terms, Bernstein’s
argument reduces to a claim that, as
expressly stated in the marketing
agreement, Genesis operated as an
independent contractor, and that, under
the common law of independent contractor
relationships, he is not liable for
Genesis’ misleading marketing tactics.
See, e.g., General Building Contractors
Ass’n, Inc. v. Pennsylvania, 

, 396 (1982) (noting "the common-law
rule that a principal normally will not
be liable for the tortious conduct of an
independent contractor"). However, there
is an important exception to this rule in
that a non-delegable duty may not be
discharged by using care in delegating it
to an independent contractor. See id. at
395./8

  Here, Bernstein’s duties under
Compliance Rule 2-29 are clearly non-
delegable. The NFA Hearing Committee held
as much when it stated that:

MBH and Bernstein’s behavior in
contracting away the ultimate control of
the promotional material was extremely
reckless and was inconsistent with their
obligations under NFA Compliance Rule 2-
29. They cannot use their own decision to
give up control as an excuse.

In the Matter of MBH Commodity Advisors,
Inc., NFA Case No. 96-BCC-015, at 29 May
5, 1998. And contrary to Bernstein’s
argument, this is not a new
interpretation of Compliance Rule 2-29.
Rather, it is the application of an
established legal principle, and it
should not surprise Bernstein in the
slightest. Indeed, Bernstein’s argument--
which reduces to the claim that someone
who helps prepare, approves of, and
appears in a misleading infomercial
should not be liable because he was not
responsible for airing the infomercial--
makes little legal or policy sense, and
Bernstein should not be surprised that he
cannot contract away liability for duties
that he assumed by virtue of his
membership in the NFA. Accordingly, the
NFA did not apply a novel interpretation
of Rule 2-29(a)(1) to Bernstein.

  With respect to the web site,
Bernstein’s case is slightly more
sympathetic. Indeed, Bernstein claims
that he was not even aware of the site
until notified by the NFA. (While this
observation is not relevant to the
outcome of this case, we note that the
web site was mentioned in the
infomercial. Because Bernstein helped to
prepare--and signed off on--the
infomercial’s script, Bernstein’s
assertion that he did not know of the
site until notified by the NFA is
somewhat suspect.) Nonetheless, because
the web site was implemented as part of
the marketing agreement with Genesis, the
site implicates Bernstein’s non-delegable
duties under Rule 2-29. Bernstein’s
imprimatur on the web site made
Compliance Rule 2-29 applicable to the
site, and Bernstein cannot now hide
behind Genesis to rid himself of
liability for the web site’s failure to
comply with NFA rules.
2.

  Bernstein next argues that the NFA and
CFTC enforced a novel construction of
Compliance Rule 2-29(b)(1) by applying it
to the web site. Compliance Rule 2-
29(b)(1) states that "[n]o Member or
Associate [of the NFA] shall use any
promotional material which . . . is
likely to deceive the public." The
guidance accompanying this rule states
that "[o]f course, to find a violation of
this Subsection, a Business Conduct
Committee would have to find that the
Member or Associate reasonably should
have been able to determine that the
material was likely to deceive." NFA
Interpretive Notice para. 9003. The NFA
and CFTC found that Bernstein had
violated the rule by claiming in the web
site that he was a successful trader in
spite of the fact that his trading
account annually lost money between 1992
and the first 11 months of 1996. Here,
Bernstein accepts the fact that the web
site was misleading, but argues that the
NFA and CFTC failed to find that he
should have known that the site was
misleading. Again, Bernstein’s argument
borders on the frivolous; where--as here-
-the promotional material is so obviously
deceptive that no reasonable person could
believe otherwise, it is not necessary
for the NFA to explicitly set forth its
finding that Bernstein should
havereasonably known the material to be
misleading.

3.

  Bernstein further argues that the NFA
and CFTC erred in applying Compliance
Rule 2-29(a) and (b) to him. Compliance
Rule 2-29(a) states that "[n]o Member or
Associate [of the NFA] shall make any
communication with the public" that has
certain content. Compliance Rule 2-29(b)
states that "[n]o Member or Associate [of
the NFA] shall use any promotional
material" that has certain content.
Bernstein argues that he is not subject
to Compliance Rule 2-29(a) and (b)
because it was Genesis, not he, that
"communicated with the public" and "used
promotional material." As already noted,
Bernstein may not use Genesis to shield
himself from liability for the misleading
communications with the public that
occurred through the infomercial and web
site. Accordingly, this argument also
fails.

4.

  Bernstein lastly argues that, in
disciplining him for the web site, the
CFTC erred in affirming interpretations
of NFA Rules that amounted to illegal
rule changes. In support of his argument,
Bernstein notes that under 7 U.S.C. sec.
21(j), the NFA is required to submit all
proposed rule changes to the CFTC prior
to implementation. See also General Bond
& Share Co. v. SEC, 

, 1458
(10th Cir. 1994) (NASD interpretive
notice that "established a new standard
of conduct" was a rule change that
required the NASD to seek SEC approval).
Because "there was no indication [prior
to this proceeding] that Rule 2-29
reached beyond ’communication between the
member and the public’ to impose more
general requirements to retain control of
promotional material so that others may
not misuse it," Appellant’s Br. at 37,
Bernstein believes that "stretching Rule
2-29 to cover material that Bernstein and
MBH did not make or broadcast created a
new standard of conduct under the rule."
Id. This argument essentially rehashes
Bernstein’s previous arguments, and we
pause only to reiterate that, for
purposes of fulfilling the obligations
imposed by Rule 2-29, a member of the NFA
cannot hide behind a third party with
which it has contracted. This is a tradi
tional legal principle and, contrary to
Bernstein’s argument, does not create a
new rule. Accordingly, General Bond is
distinguishable from the instant case,
and the CFTC did not violate Bernstein’s
due process rights.


III.   CONCLUSION

  For the foregoing reasons, the decision
of the Commodity Futures Trading
Commission is

Affirmed.

FOOTNOTES

/1 During the relevant period, Bernstein was a
principal of MBH, as well as its president. For
convenience, we will collectively refer to
Bernstein and MBH as "Bernstein" for the
remainder of this opinion.
/2 The Commodities Exchange Act (CEA), 7 U.S.C.
secs. 1-25, governs the trading of commodity
futures contracts, and grants to the CFTC author-
ity to implement its regulatory regime. See,
e.g., 7 U.S.C. sec. 4a(j). One duty of the
Commission, conferred in 1974, is the registra-
tion of futures associations. See 7 U.S.C. sec.
21; 17 C.F.R. pt. 170. On September 22, 1981, the
Commission registered the NFA as the first, and
so far only, self-regulatory futures association.
See generally Philip McBride Johnson & Thomas Lee
Hazen, Commodities Regulation 1-243 (3d ed.
1998).

/3 Bernstein did not raise this argument before the
CFTC even though the CFTC has clearly stated in
its regulations that it interprets sec. 21(i) to
require only a weight of the evidence review. See
17 C.F.R. sec. 171.34. The government thus be-
lieves that Bernstein has waived this argument by
failing to make it below. See Sims v. Apfel, 

, 2084-85 (2000) ("[C]ourts require
administrative issue exhaustion ’as a general
rule’ because it is usually ’appropriate under
[an agency’s] practice’ for ’contestants in an
adversary proceeding’ before it to develop fully
all issues there.") (quoting United States v.
L.A. Tucker Truck Lines, 

, 36-37
(1952)). However, the CFTC addressed the standard
of review issue in its order of summary affir-
mance, explicitly finding there that the NFA’s
findings and conclusions were "supported by the
weight of the evidence." MBH Commodity v. NFA,
CFTC Docket No. CRAA 99-3 (Mar. 31, 2000). Conse-
quently, the issue was properly adjudicated, and
Bernstein may present it to this court for deci-
sion. See Watson v. Henderson, 

, 322
(7th Cir. 2000) ("[A]n issue may be deemed ex-
hausted if . . . actually addressed by the
agency.").

/4 Bernstein also argues that de novo review is
warranted because sec. 21(i) triggers the protec-
tions of sec. 554 of the Administrative Procedure
Act, 5 U.S.C. sec. 554. However, assuming that
this case is a "case of adjudication required by
statute to be determined on the record after
opportunity for an agency hearing," as required
by sec. 554(a), the APA does not require that the
CFTC review NFA disciplinary decisions de novo,
and Bernstein does not point to any such provi-
sion in the APA, arguing only that "a Section
17(i) proceeding trigger[s] the protections of
Sections 554, 556 and 557 of the APA . . . ."
Appellant’s Br. at 19. But none of these sections
so much as mention the term de novo, and we
certainly do not understand them to require the
CFTC to apply de novo review to NFA disciplinary
proceedings.
/5 Indeed, the history of the statutes’ amendments
convincingly shows that Congress does not neces-
sarily consider the statutes to serve identical
purposes: while Congress amended sec. 78s in
1975, changing the text that governs the SEC’s
review of NASD disciplinary decisions to what it
is today, Congress did not alter the language of
sec. 21(i) until 1986, over 10 years later.
Accordingly, it is difficult to conclude that
Congress truly wished the statutes to be inter-
preted alike, even if the CEA was eventually
amended to match the language of the SEA.

/6 In what we hope was an unintentional mistake,
Bernstein’s brief omits the word "essentially"
from its quotation of this report. See Appel-
lant’s Br. at 17. In some contexts a minor
quotation error is of little import. However, in
the statutory interpretation context--where every
word counts, especially a modifier like "essen-
tially" that has the power to change the meaning
of a sentence--minor quotation errors can lead to
major reasoning errors. Bernstein’s omission thus
emphasizes the need for diligent quotation check-
ing in briefs before this court.

/7 Bernstein charges the NFA and CFTC with identical
due process failures. With respect to the NFA,
Bernstein must, of course, establish that the NFA
is a state actor before he can argue that it is
subject to the due process requirements estab-
lished by the U.S. Constitution. See R.J. O’Brien
& Assocs. v. Pipkin, 

, 262 (7th Cir.
1995) (defendant must be a state actor in order
to be subject to the Constitution’s due process
requirements). Because we find that the CFTC did
not violate Bernstein’s due process rights--and,
thus, that the NFA did not violate Bernstein’s
due process rights either--we need not address
the question whether the NFA is a state actor.

/8 For the purpose of our analysis, we will assume
that Genesis was acting as an independent con-
tractor. We have our doubts that this is truly
the relationship, especially with regard to the
infomercial since Bernstein seems to have been
allowed a substantial amount of power over the
infomercial’s content (thus making it more of a
principal/agent relationship). The contract
between Genesis and Bernstein characterized their
relationship as such, and while a contract’s
characterization does not necessarily govern, it
does not really matter what kind of relationship
existed between Bernstein and Genesis, for in
neither agency nor independent contractor rela-
tionships may a master escape liability for a
servant’s failure to adhere to a non-delegable
duty.