Commodity Futures Trading Commission has announced a major reorganization of the Division of Enforcement. The goal is to focus on combating fraud, protecting victims and eliminating what some critics call “unfair practices”. “regulation by enforcement.”
The Acting Chair Caroline D. Pham stated that the restructuring is intended to simplify investigations, improve efficiency and provide fair oversight for US derivatives market without having to impose new compliance standards via enforcement actions.
Pham said the move is designed to better allocate the agency’s resources to target fraudulent actors rather than imposing unnecessary burdens on legitimate market participants. Reorganization of the CFTC will allow it to fulfill its mission and ensure that enforcement actions don’t create unwanted regulatory mandates.
Pham:
“This simplified structure will stop regulation by enforcement and is more efficient. These much-needed changes will maximize the CFTC’s resources to bring more actions to pursue fraudsters and other bad actors and not punish good citizens.”
Two primary units
The consolidation of multiple task forces for law enforcement into two main units.
Paul Hayeck will lead the Complex Fraud Task Force. He will supervise all initial inquiries, investigation and litigation regarding sophisticated fraud schemes as well as market manipulation in commodities, derivatives, digital assets, etc.
Under the leadership of Charles Marvine (Acting Chief), the Retail Fraud and General Enforcement Task Force will be responsible for cases that involve retail investor fraud and other general enforcement issues under the Commodity Exchange Act.
Brian Young, the CFTC’s Acting Director for Enforcement said that the new changes would allow the agency to focus more on fraud and ensure fair enforcement. He said that fraudsters’ schemes are evolving as the financial market changes, and regulators must adapt.
Young said:
“This task force realignment will enhance our vigorous and energetic enforcement program by empowering our talented staff to focus their expertise on matters that secure justice for victims and uphold public confidence in the integrity of our markets.”
Industry Concerns
The decision to restructure is part of a larger debate on the role enforcement plays in financial regulation.
Industry players and legislators have expressed concern that the CFTC and Securities and Exchange Commission, among others, have used enforcement actions in the past to establish compliance expectations and set regulatory uncertainty.
Pham’s decision marks a move towards a more transparent, predictable and formal approach. It places a greater emphasis on ad hoc actions of enforcement over formal rulemaking. It also reflects discussions that are taking place in Congress regarding the future of regulation in financial markets, especially in regards to crypto-assets and digital currencies.
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