The Commodity Futures Trading Commission’s Division of Enforcement published its annual report (here). Like the Report for the SEC’s Division of Enforcement, it outlines the priorities of the Division and its program. The Report also emphasizes that statistics in terms of the number of cases filed and the amount of money secured in penalties and disgorgement is not the definitive measure of the program. To the contrary it is the overall effectiveness of the program measured by how well its resources were allocated to achieve its goals.
The Division measures its self in terms of four priorities:
Preserving Market Integrity: This goal is a function of ensuring stability in pricing and preserving the ability to hedge and effectively allocate capital.
Protecting Customers: Protecting customers from fraud and abuse in traditional areas as well as those involving new products or technologies such as virtual currencies has, since inception, been a goal of the agency.
Promoting Individual Accountability: Key to deterrence and public confidence in the markets is individual accountability not just in terms of the person who commits the transgression but also those who supervise and control such individuals.
Increasing Coordination with Other Regulators and Criminal Authority: To most effectively protect the markets it is essential to work closely with other regulatory agencies as well as the criminal authorities.
In the end “the ultimate goal is to foster among our market participants a true culture of compliance,” according to the Report.
The Report also highlights initiatives of the Division in terms of cooperation and organization to increase effectiveness. The program announcement on cooperation and self-reporting should not be viewed as “giving anyone a pass.” To the contrary, the program is designed to be one of the “most aggressive tools” employed by the Division, encouraging those with knowledge of wrong doing to “tell us about it” to identify wrongful conduct and those involved. A key development in this program was the announcement following year end of the first declination based on self-reporting, full cooperation and remediation.
The Division also strengthened its operations with data analytics and specialty units. The Market Surveillance Unit was moved from the Division of Market Oversight to Enforcement, significantly augmenting Enforcement’s capabilities. Specialty units were also developed in four key areas: 1) Spoofing and manipulative trading; 2) virtual currencies; 3) insider trading and protection of confidential information; and 4) the bank secrecy act.
The statistics for the Division’s last fiscal year reflect its efforts. For example, during the last year 83 enforcement actions were brought, the most since 2013. Likewise, the amount of penalties imposed by the agency — $897,118,246 — represents an increase over the prior two years. The amount increases if disgorgement and restitution is added. And, 95% of the penalties were collected.
Finally, the types of cases filed reflect the goals of the Division. During the last fiscal year more cases involving manipulation were brought than in any year in this decade. Overall 26 manipulation, false reporting and spoofing actions were initiated. That is the second largest category of cases filed – the largest category was retail fraud. And, two thirds of the actions charged an individual while last year resulted in the largest number of cases having a parallel criminal prosecution this decade.
Program: The Fifth Annual Dorsey Federal Enforcement Forum will be held on December 5, 2018. The program, centered on a tech theme and SEC enforcement, includes a keynote address on artificial intelligence and its impact on the legal profession, panels analyzing critical issues facing SEC enforcement, the question of broker protocols, trends in investment adviser inspections, how to conduct an ICO and concludes with an address on cyber-security and internal controls. A holiday gathering follows. The program and registration for it and the party are here or separate registration for the holiday party only here.