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A $2.375 million fine imposed by the Commodity Futures Trading Commission against the seller of software designed to make trading recommendations was “capricious and indefensible” given the lack of demonstrated harm to purchasers of the software, the 5th U.S. Circuit Court of Appeals ruled Feb. 24, remanding the case for a new penalty assessment that takes into account mitigating evidence of customer satisfaction (R & W Technical Services Ltd. v. Commodity Futures Trading Commission, 5th Cir., No. 99-60182, 2/24/00).

R & W Technical Services sold software that analyzed financial data and made buy and sell recommendations. Advertisements for the software included claims of enormous profits and characterized results as “certified.” However, R & W never tested the system by making trades in actual markets; rather, all performance data came from hypothetical “paper trades” that the company tracked.

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