On November 15, 2018, the Division of Enforcement (the “Division”) of the U.S. Commodity Futures Trading Commission (“CFTC”) released its Annual Report on the Division of Enforcement (PDF: 1.95 MB) (the “Report”), highlighting the enforcement division’s recent initiatives and reinforcing its focus on cooperation and self-reporting. The Report provides a succinct overview of the Division’s enforcement priorities over the last year, discusses its overall enforcement philosophy, sets out key metrics about the cases brought in the last year, and highlights its key initiatives for the coming year. While the Division’s priorities—preserving market integrity, protecting customers, promoting individual accountability, and increasing coordination with other regulators and criminal authorities—do not mark a departure from prior guidance, the Report does highlight the Division’s particular focus on individual accountability and a few target areas of enforcement. Continue reading
by James McDonald
November 14, 2018 – 7:00 p.m.
NYU School of Law: Program on Corporate Compliance & Enforcement
As Prepared for Delivery
Thank you for that introduction. I’m happy to be back here at NYU as part of the Program on Corporate Compliance & Enforcement (PCCE). Over the years, the PCCE has brought together some of the best thinking in the enforcement, business, and academic community to develop a richer and deeper understanding of the causes of corporate misconduct, and how enforcement and compliance programs can most effectively deter it. The result is that the work here at the PCCE has been a driver of some of the most significant developments in Enforcement and Compliance.
We’ve followed these developments closely at the Commodity Futures Trading Commission (CFTC). At every stage of our agency’s history, we’ve sought to bring impactful enforcement actions in the markets we regulate, and to ensure we stand ready to meet the challenges presented as these markets continue to evolve. Our most recent challenges have included responding to the dramatic expansion of our jurisdiction under Dodd-Frank in the wake of the financial crisis. Under David Meister, the first post-Dodd-Frank Director of Enforcement, the Division literally wrote the rules that set out some of our new enforcement jurisdiction. With the next Director, Aitan Goelman, the Division brought first-of-their-kind cases under these new rules. And under both Directors’ leadership, we began to define our major priorities and to develop some of the initiatives we rely on today, like the Division’s cooperation program. Thanks to their hard work and that of the dedicated career civil servants who staff the Division, we’re well positioned today to continue to build on those priorities and initiatives. As part of that effort, we’re constantly surveying the enforcement world to identify best practices and to incorporate them into our program. Continue reading
The CFTC Focused a Series of Recent Enforcement Actions on Manipulation, Aiding and Abetting, Spoofing, and Insider Trading; and the CFTC Announced an Insider Trading and Information Protection Task Force
In recent actions, the U.S. Commodity Futures Trading Commission (the “CFTC”) has continued to pursue cases alleging market manipulation and attempted market manipulation, aiding and abetting of market manipulation, and spoofing. Describing its recent efforts, the CFTC has said that it filed 83 enforcement actions in the last Fiscal Year, representing an approximately 25% increase over each of the prior three years. Notably, the CFTC brought more manipulative conduct and spoofing cases over the past year than ever before, resolving more than 25 such cases. Continue reading
This post reviews the New York State Office of the Attorney General’s (the “OAG”) Virtual Markets Integrity Initiative Report (the “Report”), which was published on September 18, 2018. The publication of the OAG’s 42-page Report brings to a close its six-month fact-finding inquiry of several virtual currency platforms. The OAG sent out detailed letters and questionnaires to a number of virtual currency platforms seeking information from the platforms across a wide-range of issues, including trading operations, fees charged to customers, the existence of robust policies and procedures, and the use of risk controls. Continue reading
On July 12 and 16, 2018, the U.S. Commodity Futures Trading Commission (“CFTC”) announced two awards to whistleblowers, one its largest-ever award, approximately $30 million, and another its first award to a whistleblower living in a foreign country. These awards—along with recent proposed changes meant to bolster the Securities and Exchange Commission’s (“SEC” or “Commission”) own whistleblower regime—demonstrate that such programs likely will continue to be significant parts of the enforcement programs of both agencies and necessarily help shape their enforcement agendas in the coming years.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) authorized the CFTC to pay awards of between 10 and 30 percent to whistleblowers who voluntarily provide original information to the CFTC leading to the successful enforcement of an action resulting in monetary sanctions exceeding $1 million. Following the introduction of implementing rules, the CFTC’s program became effective in October 2011. Over the next six-and-a-half years, the CFTC has paid whistleblower bounties on only four prior occasions, with awards ranging from $50,000 to $10 million. The $30 million award announced last week, thus, reflects a significant increase. This week’s award to a foreign whistleblower also represents another first for the CFTC’s program and reflects the global scope of the program. Continue reading
by James McDonald
September 25, 2017 – 6:00 p.m.
NYU School of Law: Program on Corporate Compliance & Enforcement /
Institute for Corporate Governance & Finance
As Prepared for Delivery
Thank you for that introduction. I’m happy to be here with you all today. I want to talk today about some of our priorities for the CFTC’s Division of Enforcement, and in particular about our cooperation and self-reporting program. In just a minute, I’ll talk in some detail about this program. But to frame that discussion, I want to start by talking more generally about our mission in the CFTC and the Division of Enforcement, and some of our priorities going forward. As I get started, please keep in mind that these are my own views and not necessarily those of the Commission or its staff.
CFTC Mission and Division of Enforcement
At the CFTC, our mission is to foster open, transparent, competitive and financially sound markets. A vigorous enforcement program is essential to fulfilling this mission. As Chairman Giancarlo has made clear, under his leadership, there will be no pause, no let up, and no relaxation in the CFTC’s efforts to enforce the law and punish wrongdoing. Continue reading
On January 19, 2017, the CFTC Enforcement Division issued new advisories outlining the factors that the Division would consider in evaluating cooperation by individuals (PDF: 272 KB) and companies (PDF: 282 KB). Intended to underscore the high value the Division placed on cooperation, these advisories were issued on the same day that the Commission announced a $25 million fine against Citigroup Global Markets, Inc., (“Citi”) for violating the CEA’s anti-spoofing provisions. The accompanying Order included a discussion of Citi’s cooperation and its impact on the terms of the settlement. On March 30, 2017, the Commission announced settlements with two former Citi traders, including the former desk head, for the same misconduct. These settlements included significant fines and market bans. Continue reading
On January 19, 2017, the Division of Enforcement (Division) of the U.S. Commodity Futures Trading Commission (CFTC or Commission) issued two Enforcement Advisories outlining its approach for evaluating cooperation by corporations and individuals in the agency’s investigations and enforcement actions. The Division investigates and prosecutes alleged violations of the Commodity Exchange Act and Commission regulations involving registered firms and other market participants across the financial, energy, and agricultural sectors as well as other commodities markets. The new Enforcement Advisories are the first update to the CFTC’s corporate cooperation guidelines since 2007 and the Division’s first statement of its policy for cooperating individuals. This article highlights how the CFTC’s new cooperation guidelines address certain important issues in the continually evolving landscape for engaging with civil and criminal enforcement authorities. Continue reading
2016 was a banner year for the Dodd-Frank Act’s most significant anti-fraud enforcement provisions: the whistleblower programs at the Securities and Exchange Commission and the Commodity Futures Trading Commission.
In the five years since these programs were established, whistleblowers have rapidly changed the global securities and commodities compliance landscape. The success of the Dodd-Frank whistleblower programs can be attributed largely to the significant actions the SEC and CFTC have taken that signal that whistleblowers will be rewarded and protected for their information and assistance.
As a result of the SEC whistleblower program, more than $874 million in financial remedies have been collected from companies in financial penalties and disgorgement since the program was established in 2011. Because the totals attributed to the whistleblower program are only reported after a whistleblower award has been made, the reported totals lag behind the amounts actually recovered. I believe that the actual amounts the SEC has recovered by virtue of whistleblower information exceed $1.5 billion.
Last year, the SEC surpassed the $130 million mark in total awards paid to whistleblowers. The SEC also set a new bar for whistleblower protection, demonstrating that it will go after companies that retaliate against whistleblowers or have severance or confidentiality agreements that aim to discourage employees from reporting wrongdoing to government enforcement agencies.
The CFTC, meanwhile, paid out in 2016 its largest ever award — $10 million — to a single whistleblower.
With that momentum, 2017 is shaping up to be another transformative year for these programs. Here’s what to expect: Continue reading
Financial services firms and market participants face an ever-evolving landscape of regulatory programs designed to encourage and enable whistleblowers to report potential misconduct. On August 30, 2016, the US Commodity Futures Trading Commission (CFTC) published proposed amendments to its whistleblower program. Drawing from the agency’s experience in administering its program over the past five years, as well as strides the US Securities and Exchange Commission (SEC) has made in administering its analogous program, the CFTC’s proposal aims to enhance the whistleblower review process and adopt new enforcement authority for whistleblower retaliation. Continue reading