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Article
Publication date: 4 July 2016

Scott Himes

To alert participants in the commodities markets to an important development in the exercise of enforcement authority by the Commodity Futures Trading Commission.

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Abstract

Purpose

To alert participants in the commodities markets to an important development in the exercise of enforcement authority by the Commodity Futures Trading Commission.

Design/methodology/approach

Explains a recent proceeding which resulted in the CFTC’s first-ever application of a newly-promulgated regulatory Rule to punish “insider trading” involving the commodities markets.

Findings

The CFTC has shown that it intends to apply its new Rule aggressively to address insider trading in the commodities markets.

Practical implications

As a result of the CFTC’s new enforcement approach to regulating insider trading in the areas under its jurisdiction, all participants in the commodities markets must be attuned to the prohibition on insider trading, familiar with actions that might be deemed unlawful insider trading, and act accordingly to avoid improper trading activities.

Originality/value

Practical guidance for participants in the commodities markets from an experienced attorney with expertise in government enforcement matters.

Article
Publication date: 27 February 2014

Daphne G. Frydman and Raymond A. Ramirez

To explain regulatory developments and changes to compliance obligations for asset managers registered with the Commodity Futures Trading Commission (CFTC) as commodity

Abstract

Purpose

To explain regulatory developments and changes to compliance obligations for asset managers registered with the Commodity Futures Trading Commission (CFTC) as commodity pool operators of registered investment companies.

Design/methodology/approach

Provides a general overview of new CFTC rules (Harmonization Rules) that afford relief to commodity pool operators of commodity pools that are registered as investment companies under the Investment Company Act of 1940; describes the specific CFTC disclosure, reporting and recordkeeping requirements that remain applicable to commodity pool operators that are also subject to Securities and Exchange Commission (SEC) regulation by virtue of operating commodity pools that are registered investment companies; discusses reliance on substituted compliance with applicable SEC requirements; outlines the method for claiming relief under the Harmonization Rules; provides guidance for CPOs of RICs that use controlled foreign corporations (CFCs).

Findings

CPOs of RICs benefit from “substituted compliance” under the CFTC Harmonization Rules.

Practical implications

Explains to investment advisers that have registered as CPOs of RICs the disclosure, reporting and recordkeeping obligations that apply to them, how to take advantage of compliance with SEC requirements in lieu of CFTC requirements, and how to claim relief with respect to certain CFTC compliance obligations.

Originality/value

Practical explanation by experienced derivatives and securities lawyers.

Article
Publication date: 7 September 2012

Rita Molesworth, Deborah A. Tuchman, Dianne E. O'Donnell, Jonathan Burwick and James Lippert

The paper aims to analyze amendments proposed by the US Commodity Futures Trading Commission to its disclosure, recordkeeping and reporting rules that are designed to…

Abstract

Purpose

The paper aims to analyze amendments proposed by the US Commodity Futures Trading Commission to its disclosure, recordkeeping and reporting rules that are designed to resolve or minimize certain conflicts between CFTC rules and US Securities and Exchange Commission rules applicable to registered investment companies (Futures RICs) whose futures and swaps trading will subject their advisers to regulation as commodity pool operators as a result of the amendments to CFTC Rule 4.5.

Design/methodology/approach

The paper explains certain significant differences between the CFTC's rules applicable to commodity pool operators (CPOs) and the SEC's rules applicable to Futures RICs and their advisers in the areas of disclosure, reporting and recordkeeping and describes how the CFTC's proposed rules for Futures RICs are intended to resolve or minimize conflicts with SEC rules.

Findings

CFTC and SEC rules differ in several significant areas, including the required contents of the disclosure document by which the pool is offered; when the disclosure document has to be delivered; how disclosure documents are updated and reviewed; when periodic reports are required to be made and what they are required to contain; and whether required books and records may be maintained at a location other than the main business office. The proposed harmonization rules attempt to resolve these conflicts by exempting the CPOs of Futures RICs from certain CFTC requirements regarding delivery of disclosure documents and recordkeeping, permitting CFTC‐required disclosures to appear in the prospectuses of Futures RICs after the SEC‐required disclosures and requiring monthly account statements to be posted to the CPO's website rather than distributed to shareholders of Futures RICs. Other conflicts between CFTC and SEC rules applicable to Futures RICs were not addressed by the proposed harmonization rules.

Practical implications

The proposed harmonization rules attempt to adapt CFTC requirements to Futures RICs that have not been subject to CFTC regulation since 2003. Other conflicts between CFTC and SEC rules were not addressed. The CFTC has not adopted the final rules in this area.

Originality/value

The paper provides expert guidance by lawyers experienced in regulation of CPOs and RICs.

Article
Publication date: 21 November 2008

Susan C. Ervin, Philip T. Hinkle, Brendan C. Fox and Alan Rosenblat

The purpose of this paper is to summarize key provisions of the CFTC Reauthorization Act of 2008 which reauthorizes the Commodity Futures Trading Commission (CFTC) through…

Abstract

Purpose

The purpose of this paper is to summarize key provisions of the CFTC Reauthorization Act of 2008 which reauthorizes the Commodity Futures Trading Commission (CFTC) through the year 2013 and substantially enhances the CFTC's authority in several areas.

Design/methodology/approach

The paper discusses the enhancements to the CFTC's authority over off‐exchange retail foreign currency transactions; explains the expanded CFTC oversight of significant price discovery contracts; and summarizes other amendments to the Commodity Exchange Act (CEA), including expansion of CFTC anti‐fraud authority over principal‐to‐principal futures transactions, modification of civil and criminal penalties for certain violations of the CEA, required CFTC and Securities and Exchange Commission (SEC) rulemaking on: risk‐based portfolio margining for security options and security futures products; and trading of futures on broad‐based indexes of foreign equities, and other technical amendments.

Findings

This paper notes that the key provisions of the CFTC Reauthorization Act substantially enhances the CFTC's regulatory authority in several areas and provides an introduction to those provisions.

Originality/value

The paper is an introduction to the new regulatory authority of the CFTC by experienced lawyers specializing in financial services.

Details

Journal of Investment Compliance, vol. 9 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 1 March 2001

JAMES C. YONG

This article is an exploration of the history of the regulation of stock futures leading up to the recent regulatory resolution in which the regulators (SEC and CFTC

Abstract

This article is an exploration of the history of the regulation of stock futures leading up to the recent regulatory resolution in which the regulators (SEC and CFTC) share responsibilities, thus leading to the trading of single stock futures.

Details

Journal of Investment Compliance, vol. 2 no. 2
Type: Research Article
ISSN: 1528-5812

Article
Publication date: 8 June 2012

Kenneth M. Rosenzweig, Wendy E. Cohen, Marilyn S. Okoshi and Fred M. Santo

The purpose of this paper is to explain the final rules adopted by the Commodity Futures Trading Commission (CFTC) on February 9 amending its Part 4 regulations governing…

Abstract

Purpose

The purpose of this paper is to explain the final rules adopted by the Commodity Futures Trading Commission (CFTC) on February 9 amending its Part 4 regulations governing commodity pool operators (CPOs) and commodity trading advisors (CTAs).

Design/methodology/approach

The paper explains, among other things, changes to CPO registration exemptions, additional reporting obligations for registered CPOs and CTAs, the imposition of new requirements for registered CPOs relying on certain exemptions, to provide annual financial statements, required risk disclosures regarding swap transactions, required annual affirmation and eligibility for exemptions and exclusions from CPO and CTA registration, and an initiative to harmonize CPO reporting, disclosure, and recordkeeping requirements of the CFTC and the SEC for registered investment companies.

Findings

Since the adoption of Rule 4.13(a)(4) in 2003, fund sponsors have frequently relied on the exemption made available by that rule to avoid both registration with the CFTC as CPOs and compliance with the CFTC's disclosure, reporting and recordkeeping requirements. The CFTC has now rescinded that exemption.

Practical implications

All advisers to registered investment companies need to evaluate their exposure to CFTC regulation after this rule amendment.

Originality/value

The paper provides practical guidance from experienced financial services lawyers.

Details

Journal of Investment Compliance, vol. 13 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 7 September 2012

Allison Lurton, Bruce Bennett, William Massey, Robert Fleishman, Mark Herman, Michael Sorrell and Ronald Hewitt

The aim of the paper is to explain the joint final rules adopted on April 18, 2012 by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange…

127

Abstract

Purpose

The aim of the paper is to explain the joint final rules adopted on April 18, 2012 by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) further defining the major categories of swap and security‐based swap market participants, “swap dealer“, “security‐based swap dealer”, “major swap participant”, “major security‐based swap participant” and “eligible contract participant” and to explain the process of evaluating a party's status under the rules.

Design/methodology/approach

The paper provides the statutory definition of a dealer, and explains the CFTC's and the SEC's interpretive guidance, including four tests and a discussion of the CFTC and SEC dealer trader distinctions, swaps not considered in determining dealer status, and a de minimis exception. It provides the statutory definition of a major participant, along with the four major categories of swaps and an explanation of the “substantial position”, “substantial counterparty exposure” and “highly leveraged” criteria, along with the exclusion of positions held for hedging or mitigating commercial risk from the substantial position analysis. A Dodd‐Frank amended definition of an eligible contract participant (ECP) along with the final ECP rules is provided.

Findings

All swap market participants will need to know whether they qualify as one of these entities because each type of entity figures prominently in the new swap market requirements imposed by the Dodd‐Frank Act.

Originality/value

The paper provides practical guidance from experienced financial services lawyers.

Details

Journal of Investment Compliance, vol. 13 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 23 September 2019

Alice S. Fisher, Douglas K. Yatter, Douglas N. Greenburg, William R. Baker III, Benjamin A. Dozier and Robyn J. Greenberg

This paper aims to analyze the March 6, 2019 enforcement advisory in which the Division of Enforcement (Division) of the US Commodity Futures Trading Commission (CFTC or…

Abstract

Purpose

This paper aims to analyze the March 6, 2019 enforcement advisory in which the Division of Enforcement (Division) of the US Commodity Futures Trading Commission (CFTC or Commission) announced that it will work alongside the US Department of Justice (DOJ) and other agencies to investigate foreign bribery and corruption relating to commodities markets.

Design/methodology/approach

This paper explains the enforcement advisory and outlines key considerations for industry participants and their compliance teams, including the CFTC’s plan to investigate in parallel with other enforcement authorities, an expansion of the CFTC’s existing self-reporting, cooperation and remediation policy to address foreign corruption and the CFTC’s focus on market and economic integrity, and provides guidelines for commodities companies concerning anti-corruption compliance and training programs, investigating potential incidents of bribery and corruption, reporting obligations under the Commodity Exchange Act (CEA) and CFTC regulations, voluntary reporting of incidents of foreign corruption and whistleblowing.

Findings

The CFTC announcement adds a new dimension to an already crowded and complex landscape for anti-corruption enforcement. A range of industries, including energy, agriculture, metals, financial services, cryptocurrencies and beyond, must now consider the CFTC and the CEA when assessing global compliance and enforcement risks relating to bribery and corruption.

Originality/value

Expert guidance from lawyers with broad experience in white collar defense, investigations, financial services, securities, commodities, energy and derivatives.

Abstract

Details

Modern Energy Market Manipulation
Type: Book
ISBN: 978-1-78743-386-1

Article
Publication date: 25 November 2020

Daniel Nathan and Nikiforos Mathews

To summarize and explain the U.S. Commodity Futures Trading Commission’s (CFTC’s) guidance regarding whether cryptocurrency is subject to CFTC jurisdiction.

Abstract

Purpose

To summarize and explain the U.S. Commodity Futures Trading Commission’s (CFTC’s) guidance regarding whether cryptocurrency is subject to CFTC jurisdiction.

Design/methodology/approach

The article reviews the CFTC’s March 24, 2020 final interpretive guidance, summarizes the history of the agency’s jurisdiction over leveraged, margined or financed retail transactions, and relates it to the CFTC’s guidance and judicial decisions regarding cryptocurrency.

Findings

We found that the CFTC, in carrying out its leadership role related to developments in the fintech industry, had provided clarity about its jurisdiction over cryptocurrency. The CFTC defines virtual currency as a “commodity,” even if intangible, and finds that many transactions in virtual currency satisfy the exception to the CFTC’s jurisdiction over leveraged retail commodity transactions because “delivery” can be said to occur within 28 days.

Originality/value

The article provides a useful summary of an important pronouncement from the CFTC in a manner that is readily understandable and relatable to industry participants and legal practitioners in this field.

Details

Journal of Investment Compliance, vol. 21 no. 2/3
Type: Research Article
ISSN: 1528-5812

Keywords

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