March 18, 2022
Washington, D.C. — The Commodity Futures Trading Commission today announced an approximately $10 million award to a whistleblower who voluntarily provided original information that led the CFTC to open an investigation. The whistleblower gave useful information at the earliest stages of the investigation and later provided supplemental information.
“This award demonstrates the continued success of the CFTC’s Whistleblower Program,” said Acting Director of Enforcement Vincent McGonagle. “The CFTC is committed to rewarding whistleblowers who identify misconduct in our markets.”
“The CFTC has granted a number of multimillion-dollar whistleblower awards to date,” added Whistleblower Office Director Christopher Ehrman. “These large awards are putting market participants on notice that whistleblowers continue to provide significant information to the Commission.”
About the CFTC’s Whistleblower Program
The CFTC’s Whistleblower Program was created under Section 748 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Since issuing its first award in 2014, the CFTC has granted whistleblower awards amounting to approximately $330 million. Those awards are associated with enforcement actions that have resulted in monetary sanctions totaling more than $3 billion. The CFTC issues awards related not only to the agency’s enforcement actions, but also in connection with actions brought by other domestic or foreign regulators if certain conditions are met.
The Commodity Exchange Act (CEA) provides confidentiality protections for whistleblowers. Regardless of whether the CFTC grants an award, the CFTC will not disclose any information that could reasonably be expected to reveal a whistleblower’s identity, except in limited circumstances. Consistent with this confidentiality protection, the CFTC will not disclose the name of the enforcement action in which the whistleblower provided information or the exact dollar amount of the award granted.
Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected. All whistleblower awards are paid from the CFTC Customer Protection Fund, which was established by Congress, and is financed entirely through monetary sanctions paid to the CFTC by violators of the CEA. No money is taken or withheld from injured customers to fund the program.
Source: Commodity Futures Trading Commission
Today, Commodity Futures Trading Commission chair Rostin Behnam delivered remarks at the FIA Boca 2022 International Futures Industry Conference where he described the CFTC’s priorities for managing commodities markets through what he describes as bursts in market activity. These bursts, in some part due to technology-driven innovation in the markets, reflect the influence of monetary policy and global interconnectedness on markets. Mr Behnam argued that market innovation emerges when there is a backdrop of regulatory reassurance.
Regulatory reassurance means the management of the risks that emerge from the bursts of transformative change in the markets. Mr Behnam sees these risks being managed in one of two general ways. Either the bursts themselves will have to be managed or the markets will have to get comfortable with the fallout from these risks.
Mr Behnam appears to prefer a middle-of-the-road approach by noting that policy priorities rest with core markets by achieving regulatory certainty and creating fail safe market mechanisms.
Two major policy tools stood out during Mr Behnam’s remarks. First was an update on proposed rule making that addresses risk governance for derivatives clearing organizations. DCOs arrange or provide on a multilateral basis for the settlement or netting of obligations.
Second, Mr Behnam wants Congress to pass legislation that gives the CFTC authority to develop a regulatory framework for the cash digital asset commodity market. Mr Behnam noted his support of President Joe Biden’s executive order calling for coordination by financial regulatory bodies to create a framework for ensuring consumer and investor protection in the cryptocurrency market.
What is missing from Mr Behnam’s consumer/investor protection narrative is the portion that discusses government securing its legal tender turf. While the government’s position as source of the nation’s circulating currency is not under immediate threat, the federal government’s concern has often been dressed in the rhetoric of financial stability or economic growth. I believe market makers in the cryptocurrency trade are already mindful of this but earlier predictions about increased scrutiny are taking fruit.
December 22, 2020
Effective date for Interpretive Notice establishing SD supervision requirements over use of marketing materials
NFA recently adopted an Interpretive Notice entitled NFA Compliance Rule 2-9(d) Swap Dealer and Major Swap Participant Supervision of the Use of Marketing Materials. The Interpretive Notice provides guidance to swap dealer (SD) Members regarding their regulatory obligations under Compliance Rule 2-9(d) related to their use of marketing materials. The Interpretive Notice is based on supervisory principles that are tailored to reflect that SD Members conduct business exclusively with counterparties that qualify as eligible contract participants and negotiate bilateral, bespoke swaps tailored to a counterparty’s specific needs. The Interpretive Notice will become effective on May 31, 2021.
NFA Compliance Rule 2-9(d) places a continuing responsibility on each SD Member to diligently supervise its employees and agents in the conduct of their swap activities for or on behalf of the Member. Compliance Rule 2-9(d) is broadly written to provide each firm with some degree of flexibility in determining what constitutes “diligent supervision” and in developing and implementing written supervisory procedures tailored to meet the Member’s particular needs. Although NFA leaves the exact form of supervision to the SD Member, all SD Members are required to have written policies and procedures designed to achieve ongoing compliance with applicable NFA and CFTC requirements. In discharging their supervisory obligations, SD Members should have written policies and procedures (supervisory program) governing the use of marketing materials if they provide marketing materials to counterparties and potential counterparties.
The Interpretive Notice requires an SD Member to adopt a supervisory program that is designed to reasonably ensure that marketing materials comply with all applicable NFA and CFTC requirements including rules related to fraudulent and deceptive practices. While SDs have flexibility in designing their programs, the Interpretive Notice requires that an adequate supervisory program include policies and procedures related to:
- Review and approval of marketing materials;
- Training; and
NFA’s Swap Participant Advisory Committee supported this Interpretive Notice, which was unanimously approved by the Board.
More information regarding the Interpretive Notice can be found in NFA’s December 2, 2020 submission letter to the CFTC. If you have any questions related to the Interpretive Notice please contact Mike Otten, Vice President, OTC Derivatives (email@example.com or 212-513-6046).
Source: National Futures Association