Change is in the air and the political landscape may significantly affect the U.S. Commodity Futures Trading Commission’s enforcement agenda. Last month, Commissioner J. Christopher Giancarlo rose to the position of Acting Chairman and announced a number of staffing changes at the Commission, including a new Acting Director of the Division of Enforcement. Meanwhile, the U.S. Congress is considering legislation that could pare back a number of Dodd-Frank Act reforms to the Commodity Exchange Act. In this client alert, we review recent enforcement trends in light of the new political agenda and highlight important developments at the CFTC, including its potential enforcement priorities for 2017.
Shortly after President Donald J. Trump was inaugurated on January 20, 2017, Commissioner J. Christopher Giancarlo ascended to the position of Acting Chairman of the U.S. Commodity Futures Trading Commission (“CFTC”). In less than a week, Giancarlo announced a number of staffing changes, including the appointment of Vincent McGonagle as Acting Director for the Division of Enforcement. Meanwhile, the Commodity End-User Relief Act, which would reauthorize the CFTC through 2021 with a budget of $250 million a year and pare back some of the Dodd-Frank Act reforms to the Commodity Exchange Act (“CEA”), passed in the House of Representatives and similar legislation will now be considered in the Senate. Furthermore, President Trump’s transition team continues to work on broad policy guidelines for the reform of U.S. financial markets.1
In short, change is in the air and the political landscape may significantly affect the CFTC’s enforcement agenda. Market participants should expect:
- Enforcement of Current Laws and Regulations. The CFTC must and will continue enforcing the CEA and the regulations that are currently in effect;
- Greater Cooperation with the SROs. The National Futures Association (“NFA”) and commodities exchanges will continue enforcing the law that is in effect and, given budgetary constraints, the CFTC will push more on-the-ground enforcement responsibility and authority to these self-regulatory organizations (“SROs”);
- Focus on Money. Because the CFTC is assessed by its effectiveness as a regulator and by how much money it brings into the U.S. Treasury, the CFTC will continue prosecuting and imposing sanctions for violations of the CEA and its rules; and
- Use of Existing Law. There has been a significant body of law developed in the past 7 years following the passage of the Dodd-Frank Act that the CFTC can readily deploy in its prosecution of questionable market behavior. Strengthened by the Securities and Exchange Commission (“SEC”) precedents in similar actions such as insider trading, the CFTC’s Division of Enforcement has effective tools to build new enforcement actions.
Given that it is unlikely that the CFTC will ease up on enforcement actions in 2017, market participants should be aware of the following new guidelines and developments.
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Client Briefing 2017-046