ARE YOU FACING A CFTC ENFORCEMENT ACTION? THE SPODEK LAW GROUP HAS OVER 40 YEARS OF EXPERIENCE, AND CAN HELP YOU WITH YOUR ENFORCEMENT ACTION, AND ANY QUESTIONS YOU MAY HAVE.
The CFTC is a powerful entity – especially when it comes to futures, options, or swaps. It regulates all actions on exchanges and OTC trades. Unlike similar organizations like FINRA, CFTC enforcement actions can be enacted against any operator, not just brokers — it means everyone in the industry has to comply. If you are unsure about CFTC compliance requirements it’s helpful to speak to our CFTC attorneys.
Basics about the CFTC
The CFTC is an entity which you need to be aware of, when it comes to futures, options, or swaps. This agency is responsible for virtually everything pertaining to futures and options markets, for derivates that are related to commodities and products which are subject to the Commodity Exchange Act.
CFTC Enforcement and Compliance Lawyers
The CFTC has power to inflict penalties for violations of the CFTC regulations. The sanctions can be fines, bans, or even criminal penalties. The United States Commodity Futures Trading Commission, known as the CFTC, Division of Enforcement investigates and furthermore – prosecutes, any alleged violations of the Commodity Exchange Act and CFTC Regulations. The Spodek Law Group has over 40 years of experience, and understands how to defend clients involved in CFTC inquiries, formal investigations, and CFTC enforcement actions. Our team of attorneys work with individual traders and large corporations alike. We can work with your in-house legal department and management teams in order to achieve your goal of avoiding prosecution. It’s critical that before any new commodities investigations occur – that you have a strategy and method of getting a favorable resolution. In some cases, it can be a good idea to work with the government cooperatively. In other cases, it’s better to have a defensive posture. Regardless of the strategy – rest assured it’s in your best efforts.
With the more recent Dodd-Frank amendment, there’s increased authority granted to the CFTC and it’s Division of Enforcement. As a result, the CFTC is very aggressive. Our CFTC enforcement lawyers can help you.
For over 100 years, the CFTC has been helping to make sure that the futures and options market remains honest and helpful to its participants. The CFTC, or the U.S. Commodities Futures and Trading Commission, is an agency within the U.S. government that’s independent and was created in 1974. This was when the Commodities Futures Trading Commission Act of 1974 was established.
What are Futures and Options?
Before understanding what the CFTC does, it’s important to understand what they protect. Futures and options are contracts centered around the capability of buying or selling an asset at a particular time in the future. Whereas futures contracts obligate its owner to buy or sell, options contracts only grant its owner the right to do so. There is a market around trading futures and options contracts. Businesses are likely to be participants so as to help save money on commodities just in case the prices of those commodities go up in the future.
Futures commodities have been around since the 1860s. These markets play a big role in the economy. Ranchers, farmers, and other producers use this market for an established rate on price. While locking in on prices for commodities, businesses can focus on creating new jobs, innovating, and producing services and goods for their consumers.
CFTC Mission and Responsibilities
The mission of the CFTC is to encourage the growth and development of the futures and options trading market. They want to help make the market competitive, public, fair, and financially solid. The CFTC works to lower systemic risk and protect the users from fraudulent, abusive, and manipulative practices.
The responsibilities of the CFTC is to regulate this market and enforcing the Commodities Exchange Act, or CEA. The CEA was actually established long before the CFTC in 1936. This act was created to regulate the futures and options trading. It’s actually a revised version of the Grain Futures Act, established in 1922.
As a result, the Department of Agriculture no longer has these responsibilities as they previously had since the 1920s. The agency now overlooks a large number of organizations and individuals of many variances in the derivative market. Over time, the market has opened up to include many more commodities including gold, gas, and copper.
The History of the Futures Trading Industry and the CFTC
Before the CFTC, futures commodity trading started in the 1860s. The main commodities being traded were within the agriculture sector. Therefore, the Grain Futures Act in 1922 was then enforced by the Department of Agriculture. They also helped to regulate the young market. The Grain Futures Act was then modified and became the new Commodities Exchange Act in 1936. What changed was that it was no longer only certain futures commodities that were being traded was regulated, but now all futures commodities. This paved the way for newer commodities to enter the market, including crude oil and silver.
The CFTC was then established in 1974. They assumed the responsibilities of the Department of Agriculture in administering the futures trading industry. In recent times, then-president Obama increased the authority of regulation for the CFTC. This was to help govern the swap market which, due to lack of control, ended up being the major cause of the 2008 financial crisis.
The extra authority given to the CFTC was due to the Dodd-Frank Act. Also known as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Dodd-Frank Act allowed the CFTC to monitor over $400 trillion worth of the swaps markets. This act has helped to reduce the number of risks in the U.S. financial system. Recently, though, Donald Trump has launched the CHOICE Act. This act is meant to take away that authority and “give it back to the American people.” It was passed by the House, but many speculate that it won’t get passed by the Senate.
CFTC Organization Divisions and Offices
The organization itself is governed by five commissioners. They are chosen by the President and each of them has to serve for five years. The President also chooses which of the five commissioners will be the Chairman. There can be up to three commissioners at once that are in the same political party. The offices contain ten sections, including the chief economist, whistleblower office, office of minority and women inclusion, and the general counsel.
The divisions of the CFTC organization include Enforcement, Clearing and Risk, Marketing Oversight, and Swap Dealer and Intermediary Oversight (DSIO). Enforcement is in charge of investigating any potential violations of the Commodity Exchange Act. Individuals who violate the act will be tried in court. The Clearing and Risk Division focuses on clearing futures and swaps. Marketing Oversight is the division that helps the markets to stay secure, fair, and open. DSIO supervises futures organizations that are self-regulatory.
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