## Facts

- Dominic Marchese was a customer of Shearson Hayden Stone, Inc. (Shearson), which acted as a securities broker and a futures commission merchant (FCM).
- Marchese brought a declaratory-judgment action on behalf of a putative class consisting of persons who, within the limitations period, provided money, securities, or other property to Shearson “to margin, guarantee or secure” commodity futures trades or contracts.
- Under § 4d of the Commodity Exchange Act (CEA), customer margin funds received by an FCM for futures trading must be separately accounted for and held in segregated accounts, rather than mixed with the FCM’s own funds.
- Shearson held customer margin funds in segregation as required, and the segregated funds generated “interest and increment” while on deposit.
- Marchese’s amended complaint sought a declaration that, under CEA § 4d and the related Commodity Futures Trading Commission (CFTC) regulations, Shearson had no right to keep the interest and increment on those margin funds (beyond amounts taken as lawful commissions and charges).
- After extended litigation history (including a prior Ninth Circuit appeal on other issues), Shearson moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.

## Issues

1. Whether CEA § 4d and the CFTC’s segregation regulations give futures customers a federal statutory right to the interest and increment earned on segregated margin funds held by an FCM.
2. If no such right exists under § 4d and its regulations, whether a declaratory-judgment complaint premised solely on that theory states a claim for relief.

## Decision

- The court granted Shearson’s Rule 12(b)(6) motion and dismissed the amended complaint.
- The court held that, under CEA § 4d and its implementing regulations, an FCM may retain all interest and increment earned on customer margin funds held in segregated accounts.
- Because Marchese’s claim depended on a statutory entitlement to those earnings that the court found absent, the pleading failed to state a claim.

## Legal Principles

- CEA § 4d and the CFTC’s segregation framework are designed to protect customer margin from misuse and from the FCM’s financial distress by requiring segregation and limiting improper use of customer funds.
- A segregation mandate does not, by itself, assign ownership of earnings generated while funds are held in a segregated account.
- When the CEA and the CFTC regulations specify how customer funds must be held and safeguarded but do not expressly require an FCM to credit customers with interest or other earnings, courts will not read such a payment obligation into § 4d.
- In the absence of an express statutory or regulatory requirement, the question of who receives interest on margin deposits is treated as part of the broker-customer economic arrangement and is generally left to contract or other non-CEA law rather than imposed by § 4d.
- If a complaint seeks declaratory relief based solely on a legal duty that does not exist under the governing statute and regulations, dismissal under Rule 12(b)(6) is appropriate.

## Conclusion

The district court dismissed Marchese’s putative class action seeking a declaration that Shearson could not keep interest and increment earned on segregated futures margin funds, holding that CEA § 4d and the CFTC’s segregation rules require protection and segregation of customer principal but do not create a federal right requiring an FCM to pay customers the earnings on those segregated funds.


Marchese v. Shearson Hayden Stone, Inc., 644 F. Supp. 1381 (1986)