Expect More Investigations and Enforcement Actions From CFTC

October 25, 2011Articles Westlaw News & Insight Securities Blog

One of the results of the economic crisis and the adoption of Dodd-Frank is stepped up enforcement by the regulatory authorities. The Commodity Futures Trading Commission recently provided its fiscal year statistics, which only show that the CFTC has stepped up its efforts in a significant way. For fiscal year 2011 (October 1, 2010 through September 30, 2011), the CFTC filed 99 enforcement actions, which represents a 74 percent increase from its prior fiscal year. Of these 99 enforcement actions, 55 represented fraud cases against 75 defendants. In addition, the CFTC filed 23 enforcement actions against foreign exchange dealers under new authorities conveyed to the CFTC through Dodd-Frank that require foreign exchange dealers and introducing brokers to register with the CFTC. The CFTC's enforcement actions also resulted in 70 criminal indictments and convictions.

The enforcement actions, in particular, focused on a number of different areas. The CFTC, like the SEC in recent years, dealt with Ponzi schemes. The CFTC also addressed cases involving commodity price manipulation, supervision failures, deficiencies with registration and accounting failures.

Consistent with stepped up enforcement, the CFTC has generated significant monetary sanctions against violators, as well as large restitution awards. For the fiscal year 2011, the CFTC has recovered $290 million in civil monetary sanctions, as well as approximately $160 million in restitution. The CFTC highlighted a couple of its more successful enforcement proceedings. In one case involving fraud, the CFTC obtained a court-ordered initial distribution and return of nearly $800 million to investors in a commodity pool. In an action against an accounting firm, the CFTC obtained fines of approximately $1 million arising from the firm and individual accountants' failure to use generally accepted auditing standards over a futures commission merchant that was ultimately charged with fraud.

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