It’s been a busy year for the Commodities Futures Trading Commission (CFTC). The Commission just announced its annual enforcement results for fiscal year 2017 ending the end of September. All in, the CFTC brought 49 enforcement-related actions and pursued what it called significant and complex litigation in cases charging manipulation, spoofing, and unlawful use of customer funds.
Why are commodities traders acting badly?
In the grand scheme of things, it’s really just the usual handful of bad apples in a huge barrel of upstanding firms. But what’s the fun of reporting on good news? When’s the last time we saw a news story about dogs licking children instead of dogs biting children?
Bad news is that the reputations of the good actors are tarred with the same brush. So, in reviewing its performance for fiscal 2017, the CFTC is promoting that it secured orders totaling $412,726,307 in restitution, disgorgement, and penalties, $265 million of which have already been collected and deposited in the US Treasury.
Who does the CFTC protect?
The reputation of the commodity futures industry and consumers. And the Commission intends to do better in 2018. According to CFTC Chairman J. Christopher Giancarlo, the “CFTC’s enforcement program is vital to the CFTC’s mission to protect from harm both customers and the integrity of the derivatives markets.”
In addition to its enforcement actions, the CFTC reported it has also implemented enhancements to increase the effectiveness and strength of its enforcement program. It has put into place new rules and procedures it expects will better protect whistleblowers and to further incentivize more whistleblowers to come forward. The Commission also realigned its market surveillance unit under the Division of Enforcement (DOE), which the CFTC expects will streamline the market surveillance unit’s ability to conduct market analysis and identify areas that may warrant enforcement inquiry.
In 2017, says James McDonald, the Commission’s Director of Enforcement, “The CFTC brought significant enforcement actions…The integration of the market surveillance unit into the Division of Enforcement, the strengthening of our whistleblower protections, and the development of our cooperation program will open new avenues through which we can identify misconduct, hold wrongdoers accountable, and deter future violations of the law.”
Among the highlights by the CFTC’s DOE were actions combating disruptive trading practices and retail fraud, including fraud involving virtual currency markets. The Commission also intends to continue cooperating with foreign regulators and law enforcement officials, as well as law enforcement in the US by continuing to refer matters to for consideration of criminal actions, including prison time for culpable individuals.
|FY 2017 Enforcement Actions by Category|
|Manipulation, Attempted Manipulation, False Reporting, Disruptive Trading||12|
|Protection of Customer Funds, Supervision and Financial Integrity||6|
|Illegal Off-Exchange Contracts, Failure to Register||1|
|Other Trade Practice: Wash Trades, Fictitious Trades, Position Limits, Trading Ahead||3|
|Total Number of Enforcement Actions Brought||49|
|Notes: CFTC enforcement actions include 29 administrative cases, 17 civil injunctive cases, and 3 non-prosecution agreements. The manipulation, attempted manipulation, false reporting, and disruptive trading actions included 8 actions involving spoofing (including 3 non-prosecution agreements), 2 actions involving attempted manipulation, 1 action involving both spoofing and attempted manipulation, and 1 action involving a manipulative or deceptive device. Some of the other enforcement actions involve multiple types of charges, but are listed above by the primary charges. For example: 3 retail fraud actions also involved illegal, off-exchange transactions; and 4 actions against registrants included a failure to supervise violation.|
What do the CFTC’s actions mean for traders?
Nothing for those already doing the right thing. But for those who stray, non-compliance can be costly. Just ask Californian Michael Symons of FTS Financial, Inc., who’s paying more than $5 million for fraud, or his co-Californians Joseph Dufrense and Morgan Renkow, doing business as SchoolofTrade.com who have been ordered to pay nearly $5 million in restitution and penalties for fraud.
It was a bad 4th quarter for those Californians, but no matter where one operates, fines and penalties are an unnecessary and costly expense. Compliance does not have to be overwhelmingly hard or wildly expensive. Really. Patrina’s built a business on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.