The CFTC filed a record number of enforcement actions in 2019 against market participants, the majority of which involved commodities fraud, market manipulation, and spoofing. As a result of these actions, the CFTC reports that it obtained over $1.3 billion in monetary sanctions and disgorgement in 2019—a 39% increase over the prior fiscal year. And at this year’s ABA Derivatives & Futures Law Committee Winter Meeting, regulators from the CFTC and ICE warned market participants to expect these enforcement trends in spoofing and market manipulation to continue into 2020.
CFTC Seeks Parallel Enforcement with Market Regulators, but Coordinated Resolutions Scarce
The CFTC’s Chief Counsel of the Division of Enforcement, Gretchen Lowe, commented that protecting market integrity continues to be a top priority at the CFTC. She noted that Enforcement is particularly focused on spoofing and market manipulation, as well as matters involving regulatory infractions, such as registrants’ reporting obligations, failure to supervise, business conduct standards, and adequacy of remediation efforts.
Lowe also signaled that Enforcement will continue to pursue “parallel cooperative enforcement efforts” with both domestic and foreign market regulators—including SROs and criminal enforcement authorities in the spoofing context. ICE Futures U.S. Enforcement Counsel, Frances Mendieta reinforced that the lines of communication are “very open” between ICE and the CFTC, and that the regulators may share information with each other over the course of an investigation.
However, despite such extensive interplay between the regulators, coordinated or “global” resolutions appear to be the exception, rather than the rule. Both Lowe and Mendieta suggested that the sequential nature of the regulators’ respective investigations can make it difficult to coordinate settlements. Consequently, while regulators seem keen to build on each other’s investigations, the resolutions often occur months, or sometimes years apart, which can leave market participants in protracted cycle of enforcement involving the exact same conduct.