Commodity Futures Trading Commission Enforcement – new publication by Tony Mansfield, Washington DC Litigation partner
05 June 2018
Washington DC Partner Tony Mansfield recently published “Commodity Futures Trading Commission Enforcement”, a chapter in the Global Competition Review (“GCR”) March 2018 publication The Guide to Energy Market Manipulation. Tony’s article discusses enforcement authority under the U.S. Commodity Exchange Act and recent enforcement developments at the Commodity Futures Trading Commission (CFTC), where he served as a Chief Trial Attorney and Counsel to the Director in the Division of Enforcement.
The CFTC (and private litigants) have sought to enforce the Commodity Exchange Act and related regulations on an array of activities occurring outside the United States with varying degrees of success. The ongoing financial benchmark matters, including the investigations of the London Interbank Offered Rate and the markets for foreign exchange, are recent examples of the extraterritorial application of the CEA.
The CEA makes a variety of enforcement tools available to the CFTC to pursue alleged abusive conduct in the commodities markets. Claims sounding in manipulation and fraud have historically garnered the most attention and penalties, but the CFTC is authorised to investigate disruptive practices, including spoofing, and exchange trade practice violations such as wash trading, position limit violations and fictitious trades, among others, and its enforcement tools are constantly evolving. In 2015 for example, the CFTC introduced a new concept, charging a petrol trader with misappropriation, a claim that is more traditionally associated with insider trading claims in the securities markets, not the markets for commodities.
The CFTC is a political body run by five commissioners, each appointed by the President and confirmed by the Senate. As a result, while the tools available to the CFTC to enforce conduct in the commodities markets remain largely constant, decisions regarding the types of conduct to pursue, how to interpret and apply the laws and rules governing activities in the commodities markets, and the resources to devote to enforcement (as compared, for example, to regulation) may shift, depending on the agenda of a particular chairman and enforcement director.
It is not currently clear how the CFTC intends to use its misappropriation authority. For now, the market knows only that the agency has added another arrow to its enforcement quiver.
Tony, along with Greg Mocek, leads Allen & Overy’s commodities regulatory enforcement and advisory team. Tony and Greg represent clients in investigations conducted by the U.S. Commodity Futures Trading Commission (CFTC), the Federal Energy Regulatory Commission (FERC), the Federal Trade Commission (FTC), self-regulatory organizations, including U.S. exchanges (e.g. ICE, CME) and the National Futures Association, U.S. Congressional committees, and foreign regulators. They also routinely counsel market participants on a variety of regulatory issues associated with trading physical commodities and related derivatives, including registration, product classification, and exchange and CFTC trade practice rules. Tony served the CFTC as a Chief Trial Attorney and Counsel to the Director of Enforcement of the CFTC, where he worked with Mr. Mocek.
This chapter is an extract from the first edition of GCR’s The Guide to Energy Market Manipulation, first published in March 2018. The Guide takes an in-depth look at how competition law effects the energy industry, from the letter of the law to how it is practiced and regulated. The whole publication is available at https://globalcompetitionreview.com/edition/1001141/the-guide-to-energy-market-manipulation.