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October 20, 1976


The opinion of the court was delivered by: GAGLIARDI

GAGLIARDI, District Judge.

 Plaintiff Commodity Futures Trading Commission ("CFTC") moves by order to show cause for a preliminary injunction, pursuant to Rule 65, Fed.R.Civ.P., to enjoin defendant British American Commodity Options Corp. ("British American") from making use of the mails or any means or instrumentality of interstate commerce in violation of Section 4m of the Commodity Exchange Act, as amended ("the Act"). 7 U.S.C. § 6m. *fn1" In a decision read into the record on October 6, 1976 (Appendix A), the court denied defendant's cross-motion to dismiss the action pursuant to Rule 12(b)(1), (2) and (6), Fed.R.Civ.P., for lack of jurisdiction and for the failure of the complaint to state a claim upon which relief can be granted and, pursuant to Rule 65, Fed.R.Civ.P., ordered an evidentiary hearing on the preliminary injunction motion which was held on the same day. After plaintiff CFTC rested its case defendant British American moved for a directed verdict pursuant to Rule 50 Fed.R.Civ.P. The court reserved decision on the motion. For the reasons stated herein, the court directs a verdict for the defendant and denies plaintiff's motion for a preliminary injunction.

 At the evidentiary hearing plaintiff introduced evidence solely on the issue of whether the defendant qualified as a "commodity trading advisor" under Section 2(a) of the Act, 7 U.S.C. § 2, *fn2" and therefore was required to register with the CFTC under Section 4m of the Act, supra. This evidence was adduced through eight witnesses whose testimony was limited solely to showing that employees of British American gave advice over the phone on commodity options as an investment vehicle and mailed explanatory pamphlets to customers and potential customers.

 The only other relevant testimony introduced at the hearing, in the form of exhibits, was the "commodity trading advisor" registration application of British American filed in March 1976 and other exhibits relating to the status of the administrative law proceeding.

 The CFTC has brought this preliminary injunction motion pursuant to the authority granted in Section 6c of the Act, 7 U.S.C. § 13a-1, which provides that:

Whenever it shall appear to the [CFTC] that any . . . person has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule, regulation, or order thereunder, . . . the [CFTC] may bring an action in the proper district court of the United States . . . to enjoin such act or practice, or to enforce compliance with this chapter, or any rule, regulation or order thereunder . . . . Upon a proper showing, a permanent or temporary injunction . . . shall be granted without bond.

 In all material respects this provision is identical to the injunctive provision in the Securities Act of 1933, § 20(b), 15 U.S.C. § 77t(b) and in the Securities Exchange Act of 1934, § 21(e), 15 U.S.C. § 78u(e). Accordingly, case law developed under the injunctive provisions of the securities laws is pertinent to the case at bar. CFTC v. J. S. Love & Associates Options, Ltd., P 20,198, CCH Comm.Fut.L.Rptr. at 21,106-07 (S.D.N.Y.1976).

 CFTC enforcement actions seeking injunctive relief, like Securities and Exchange Commission ("SEC") actions, are not governed by the criteria that apply in private injunction suits. SEC v. Management Dynamics, Inc., 515 F.2d 801, 808 (2d Cir. 1975). Proof of irreparable injury or the inadequacy of other remedies as in a private injunction suit is not required. Id. ; III L. Loss, Securities Regulation 1979 (1961, Supp.1969). However, the issuance of an injunction is always subject to the principles of equitable discretion. Hecht Co. v. Bowles, 321 U.S. 321, 328-30, 64 S. Ct. 587, 88 L. Ed. 754 (1944); SEC v. Texas Gulf Sulphur, 312 F. Supp. 77, 87 (S.D.N.Y.1970), aff'd in part and rev'd. in part, 446 F.2d 1301 (2d Cir.), cert. denied, 404 U.S. 1005, 92 S. Ct. 561, 30 L. Ed. 2d 558 (1971). Section 6c of the Act requires that "a proper showing" be made before a preliminary injunction "shall be granted". Such language affords no sufficient basis for concluding that Congress meant special weight to be given the CFTC's decision to institute suit. See SEC v. Frank, 388 F.2d 486, 491 (2d Cir. 1968). As stated by the Second Circuit Court of Appeals in SEC v. Management Dynamics, 515 F.2d at 808 (citations omitted):

We scarcely mean to imply that judges are free to set to one side all notions of fairness because it is the SEC, rather than a private litigant, which has stepped into court. . . . "[In] deciding whether to grant injunctive relief, a district court is called upon to assess all those considerations of fairness that have been the traditional concern of equity courts." See CFTC v. J. S. Love Assoc., supra at 21,107.

 If Congress had intended that the courts refrain from exercising their sound discretion in equity jurisdiction, it would have had to say so in unequivocal language in the Act. See Hecht Co. v. Bowles, supra 321 U.S. at 327-29, 64 S. Ct. 587; SEC v. Frank, supra at 491. In deciding whether to grant a preliminary injunction in this case:

"The only question presented at this stage of the proceedings, namely an application for a preliminary injunction in advance of a trial upon the merits, [before the administrative law judge] is whether a violation . . . has been so clearly established that defendants are, in effect, to be found at fault without awaiting the development of all the facts upon a trial." SEC v. Capital Gains Research Bureau, Inc., 306 F.2d 606, 608 (2d Cir. 1962) (en banc), rev'd. on other grounds, 375 U.S. 180, 84 S. Ct. 275, 11 L. Ed. 2d 237 (1963); see SEC v. Management Dynamics, supra at 807 n. 1.

 While the facts presented at the hearing in this case indicate, for the limited purpose of this preliminary injunction motion, that British American qualifies as a "commodity trading advisor", *fn3" this conclusion alone is not enough to grant CFTC's preliminary injunction. Under Section 4m of the Act, if British American is a "commodity trading advisor" it must register with the CFTC to do business. However, British American did file a registration application in March 1976. CFTC asserts that it rejected British American's application on April 16, 1976; that Section 4m of the Act prohibits doing business while unregistered; and that, therefore, this court must grant a preliminary injunction prohibiting British American from doing business.

 CFTC's argument ignores the equity discretion of this court, and its logic falls upon a closer examination of the Act and CFTC's actions against British American. The Act generally provides for automatic registration of applicants with the CFTC upon the expiration of a thirty-day period after an application is filed. Section 4n(2) of the Act, 7 U.S.C. § 6n(2); *fn4" see Appendix A at 671. Even in those situations where the CFTC decides that registration should be denied, in almost all cases such denial can only come after an opportunity for a hearing. See Section 4n(7) and 8a(2) of the Act, 7 U.S.C. §§ 6n(7) *fn5" & 12a(2). *fn6" In one situation, where a person is subject to an outstanding order under the Act denying trading privileges or revoking registration, registration can be denied without ever providing for a hearing. Section 4n(6) of the Act, 7 U.S.C. § 6n(6). *fn7" Finally, under three special situations, the Act allows registration to be denied prior to a final determination in the administrative proceeding. *fn8" Section 8a(2)(C), supra ("Provided, That pending final determination under clause (B) or (C), registration shall not be granted"); see Appendix A at 671-672. The first two special situations, conceded by the CFTC not to be at issue in the case at bar, are when minimum financial requirements are not met, Section 8a(2)(C) of the Act, supra, and when a person with certain specified interests in the registering corporation has been convicted of a felony or has committed other specified acts. Section 8a(2)(B)(i) of the Act, supra.

 CFTC assertedly denied British American's registration and brings this preliminary injunction action pursuant to the third special ...

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