The Commodities Futures Trading Commission (CFTC) and the National Futures Association (NFA) have outlined a broad enforcement agenda that aims to address recent commodities marketplace trends. The Futures Industry Association’s Annual Law & Compliance Division Conference, on April 27, 2022 in Washington, D.C., included among its speakers CFTC Acting Enforcement Director Gretchen Lowe and NFA Associate General Counsel Cynthia Cain Ioannacci, who highlighted the following commodities enforcement priorities:
- Spoofing: The CFTC is increasingly bringing spoofing enforcement actions in parallel with indictments filed by the Department of Justice (DOJ). According to Lowe, the CFTC relies on data analytics to address sophisticated forms of spoofing, including, among others, spoofing on futures exchanges and cross-market manipulation (such as spoofing involving both U.S. and foreign exchanges).
- Insider Trading: Regulators have recently brought a series of insider trading actions based upon misappropriation of material non-public information in order to trade on commodities exchanges. The CFTC is focused, for example, on (1) misappropriation of customer trading information by broker-dealers who owe a duty of trust and confidence to customers in order to trade in commodities or tip others, and (2) “front running” commodities block trades.
- Cryptocurrency: The CFTC and NFA are seeking to meet the growth and proliferation of cryptocurrency products with increased enforcement efforts. Regulators are focused on, among other things, cryptocurrency investment fraud schemes, misrepresentations made in cryptocurrency offerings, “touting” and “pump-and-dump” schemes, and cryptocurrency price manipulation.
- Market Manipulation: Regulators remain focused on other forms of commodities market manipulation, including the manipulation of commodities price benchmarks.
In addition, Lowe and Cain Ioannacci have made clear that corporate recidivism is a top priority of enforcement efforts. They stated that the CFTC and NFA will seek to assess an offender’s regulatory history and compliance efforts in evaluating liability and that companies may receive credit for self-reporting allegations of wrongdoing to regulators. Their remarks follow similar indications made by other law enforcement leaders, including Deputy Attorney General Lisa Monaco, who has directed prosecutors to consider the full criminal, civil, and regulatory records of companies that are targets of criminal investigations, as well as their affiliates, rather than just the specific conduct at issue in that particular investigation, in order to assess a company’s overall commitment to compliance when pursuing prosecutions and considering corporate resolutions. Similarly, Damian Williams, United States Attorney for the Southern District of New York, and Rohit Chopra, Director of the Consumer Financial Protection Bureau, have also publicly announced their focus on deterring corporate recidivism.
How Companies Can Prepare
Lowe’s and Cain Ioannacci’s public statements underscore the importance of maintaining effective and up-to-date compliance programs and rules and regulations designed to safeguard against market manipulation and other improper trading activity. Companies can proactively respond to the CFTC’s and NFA’s enforcement agenda by (1) implementing and maintaining a robust internal program that ensures compliance with applicable laws and regulations and (2) conducting prompt and thorough investigations when misconduct is alleged or suspected.