Fiscal Year 2016 CFTC Enforcement Results

The Commodity Futures Trading Commission (CFTC) released its annual 2016 CFTC enforcement results. Here is a list of “high-impact” cases:

• Two first-of-their kind actions charging employees of companies with misappropriating and trading using material non-public information in breach of their duties to hold such information confidential. This trading, done to benefit the defendants’ personal trading, violated CFTC Rule 180.1, issued pursuant to the Dodd-Frank Act, which bans schemes or artifices to defraud or manipulate;

• A federal court action, including a two-week hearing, against a trader and his company, Igor Oystacher and 3 Red Trading LLC, for allegedly spoofing and manipulation across five derivatives markets;

• A $100 million action against JP Morgan Chase Bank, N.A. for failure to disclose certain conflicts of interest to clients of its wealth management business;

• Two actions against Citibank NA for attempted manipulation and false reporting relating to two major interest rate benchmarks, LIBOR and ISDAfix, resulting in $425 million in penalties and undertakings to strengthen the integrity of its internal controls;

• Nine actions against registered swaps dealers, Futures Commission Merchants (FCMs) and companies for failure to report accurately and fully critical trading and market information and for recordkeeping violations. This included a first-of-its kind federal court action against Deutsche Bank for swaps reporting violations and seeking the appointment of a monitor to ensure compliance;

• A first-of-its kind action against an FCM involving risk management and related supervisory failures and the knowing submission of inaccurate information in its Annual Chief Compliance Officer Report filed with the CFTC;

• An action against a Russian bank and its affiliate for executing fictitious and noncompetitive block trades in Russian Ruble/US Dollar future contracts with a penalty of $5 million;

• An action against a natural gas trading and marketing firm and a trader for attempted manipulation of natural gas monthly index settlement prices at four major trading hubs in Texas and elsewhere during “bid-week,” resulting in a $3.6 million penalty and two-year trading limitation;

• Cases charging firms and individuals with making false statements or knowingly providing inaccurate information to the CFTC and the National Futures Association (NFA) during investigations; and

• Actions against fraudsters preying on retail customers, including the operators of illegal, off-exchange boiler rooms pushing precious metals and binary options scams.

The total number of enforcement cases filed was 68, down 1 from 2015.

To view the entire news release, please click here.

About Kennyhertz Perry’s Commodities, Futures, and Derivatives Practice Group

Kennyhertz Perry advises clients on a wide range of commodities and derivatives regulatory matters.  Kennyhertz Perry has experience in all types of derivative transactions and design structures to meet clients’ specific trading, financial and/or credit needs.  The roots of the practice are in the commodities markets, where Kennyhertz Perry partner Braden Perry spent time as a Senior Trial Attorney with the Commodity Futures Trading Commission.  Our lawyers regularly advise our clients on compliance with the complex laws and regulations governing the securities and derivatives industries, including the Commodity Futures Modernization Act of 2000, the Commodity Exchange Act, the Gramm-Leach-Bliley Act, the Securities Acts of 1933 and 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the SEC and CFTC regulations, the rules of the various derivatives exchanges and clearinghouses and other industry self-regulatory organizations and the “Blue Sky” state securities laws. Keeping abreast of regulatory developments is imperative, and enables our lawyers to guide clients on comment-making about proposed legislation and regulation, provide ongoing operational and compliance counseling, and offer advice on appropriate modifications of transaction structure and documentation.

Clients also benefit from Kennyhertz Perry’s experience in related areas of law, such as litigation, banking, securities, insurance, and its regular practice before the Commodity Futures Trading Commission. Leaders in the financial industry choose Kennyhertz Perry because the firm’s lawyers tailor their advice to the unique issues presented by each matter they handle.

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