Regulatory: The CFTC’s record year

A look at the statistics surrounding increasing regulatory oversight in the financial sector

The Commodity Futures Trading Commission (CFTC) recently reported that it filed a record number of enforcement actions in 2012. Steadily increasing its pursuit of fraud since Congress passed the Dodd-Frank Act, the agency has brought 102 enforcement actions so far this year. The result has been more than $585 million in sanctions against alleged violators.

To put these numbers in perspective, and to highlight the CFTC’s increasingly prominent regulatory role, consider that the agency improved on last year’s numbers and nearly doubled its enforcement actions from two years ago, when it pursued only 57 enforcement actions. The CFTC also more than doubled the amount of sanctions it levied from last year.

As we all know by now, the agency has the Dodd-Frank Act to thank, in large part. The act’s provisions have given the CFTC increased authority and additional weapons to initiate investigations and enforcement actions. The Dodd-Frank Act has not been a stranger to this column, specifically the various methods the act affords regulatory agencies to pursue market fraud and manipulation. But the act also gives the CFTC the power to write rules to bolster its oversight of financial markets.

The agency’s growing prominence goes well beyond Dodd-Frank. For example, the agency can attribute much of its success to cooperation with domestic and international regulators. During the past year, the CFTC received more than 300 responses to requests for assistance in pursuing fraud. More than 70 different regulatory agencies lent a helping hand pursuant to various information sharing agreements. In addition, the CFTC gained notoriety for its involvement in several high-profile matters. It levied its largest fine in history, $200 million, against Barclays PLC for the alleged manipulation and false reporting of LIBOR and other global interest rates. In another matter, JP Morgan paid $20 million to settle CFTC allegations that it mishandled Lehman Brothers Inc.’s customer funds during the firm’s decline. And finally, the agency continues to focus on its more traditional matters, including cases involving Ponzi schemes, false statements to the CFTC, violations of customer funds safeguards, stock manipulation, fraud in mineral futures and position limit violations.

The increase in CFTC enforcement actions presents an even more telling picture of growing regulatory oversight in the financial market when coupled with last year’s record-breaking year for the SEC. With a broader mandate than the CFTC to pursue fraud, the SEC brought 734 enforcement actions, collecting $2.8 billion in sanctions. So far, this year, the SEC is on pace to build on last year’s numbers.

Taken as a whole, these statistics and increased cooperation among regulators should be a warning for both in-house and outside counsel. Although many suspected it, the statistics now confirm it: dogged regulatory oversight is here to stay. This trend points toward regulators increasing investigations and actions into any potential fraud, trade violations or mismanagement of customer funds. The CFTC is already looking to improve on last year’s numbers and has opened more than 350 new investigations in 2012. For counsel, the focus must be on careful internal and external monitoring of market activity to avoid contributing to the CFTC’s rising numbers next year. 

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Matthew Ingber

Matthew Ingber is a litigation partner at Mayer Brown.

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