October 4, 2022

Volume XII, Number 277


October 03, 2022

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CFTC Annual Enforcement Update

On November 22, 2017, the Commodity Futures Trading Commission (“CFTC”) released its annual enforcement report for fiscal year 2017.  As in previous years, this year’s report highlights the agency’s continued commitment to enforcement and aggressive pursuit of those viewed as engaging in conduct that undermines the integrity of CFTC-jurisdictional markets. In fiscal year 2017, the CFTC brought 49 enforcement actions, with matters involving market manipulation, prohibited trading practices, or retail fraud (e.g., Ponzi schemes) accounting for the vast majority of these actions (35 out of 49).  In total, the CFTC obtained $334 million in civil penalties and $79 million in restitution and disgorgement orders during this period.  Of the penalties imposed, the CFTC collected and deposited at the U.S. Treasury more than $265 million.  The penalties imposed and collected during fiscal year 2017 represent a decrease from 2016, when the CFTC assessed approximately $1.29 billion in monetary penalties and disgorgement and collected and deposited approximately $484 million.

Highlights of the report include:

  • Market Surveillance Unit – The report highlights the CFTC’s recent decision to incorporate the CFTC’s market surveillance unit into the CFTC’s Division of Enforcement (“DOE”). The report notes that, following this realignment, the market surveillance unit has been conducting market analysis to “confirm market integrity and [identify] areas that may warrant enforcement inquiry.”  The CFTC’s decision to incorporate its market surveillance unit into the DOE aligns its structure with that of the Federal Energy Regulatory Commission (“FERC”), who’s Division of Analytics and Surveillance has been a key division of FERC’s Office of Enforcement for years.

  • Cooperation Advisories – The report also notes recent efforts by the CFTC to encourage cooperation with staff investigations and self-reporting.  As detailed in an earlier post on the Energy Legal Blog in September 2017, the CFTC announced that it would be implementing a cooperation and self-reporting program that would provide substantial benefits in the form of significantly reduced penalties to those who promptly self-report potential violations and cooperate fully with staff investigations.  The CFTC’s announcement came only months after the agency entered into its first ever non-prosecution agreement.  The agreement in question involved with three traders who had cooperated in an investigation that led to the assessment of civil penalties against their employer and a number of other traders.

  • Whistleblower Protections – The report also highlights the CFTC’s recent efforts to strengthen the CFTC’s Whistleblower Program, under which the CFTC will pay awards to whistleblowers who voluntarily provide information about violations of the Commodity Exchange Act that result in an enforcement action that results in more than $1 million in monetary sanctions.  In May 2017, the CFTC revised its Whistleblower Rules to include additional safeguards to protect whistleblowers from retaliation by their employers.  Among other things, the CFTC revised its rules to expressly recognize that the CFTC – in addition to a whistleblower -- can bring an enforcement action against an employer for violation of the anti-retaliation provisions of the Commodity Exchange Act.  The CFTC also revised its regulations to prohibit a person from taking any action to impede an individual from communicating directly with the Commission’s staff about a possible violation of the CEA, including by threatening to enforce a confidentiality agreement or arbitration agreement. 

© 2022 Bracewell LLPNational Law Review, Volume VII, Number 331

About this Author

Michael Brooks, Energy, Commodities, attorney, Bracewell, law firm

Michael focuses his practice in the areas of energy, commodities and derivatives law. He represents energy companies and commodity trading companies in a wide variety of regulatory, compliance and enforcement matters and routinely advises clients regarding compliance with federal rules and regulations governing the trading, ownership and transportation of energy commodities.

In addition to actively representing clients in investigations and regulatory matters involving the Federal Energy Regulatory Commission (FERC) and the Commodity Futures...

David Perlman, Energy Practice, Partner, Lawyer, Bracewell law firm

David Perlman is a partner in the energy practice in Bracewell's Washington, D.C. office. He represents and counsels clients before regulatory bodies such as the Federal Energy Regulatory Commission (FERC), Commodity Futures Trading Commission and state public utility commissions in regulatory and compliance matters, in the conduct of compliance programs and training, and in energy-related transactions and financings.

Mr. Perlman represents a variety of clients, including utilities, commodities merchants, marketers, industrial customers,...

George Fatula, Energy, Attorney, Bracewell law firm

George Fatula is a member of the firm's energy practice. He focuses on energy-related transactions, regulatory matters, projects and controversies.

Mr. Fatula advises clients on a variety of transactional and project development matters involving natural gas, NGLs, and oil. He is active in advising natural gas, oil and liquids pipeline project developers in negotiating terms of service and navigating the regulatory and approval process for the development of new and repurposed pipeline infrastructure projects before FERC and other regulatory...

Robert E. Pease, Energy, Attorney, Bracewell law firm
Senior Counsel

Bob Pease represents clients involved in the energy sector in CFTC and FERC regulatory, compliance and enforcement matters involving power, gas, and crude oil, as well as Dodd Frank implementation. Bob has more than 25 years of senior-level experience at CFTC and FERC handling energy-related policy, compliance and enforcement matters, most recently as Counsel to the Director in the Division of Enforcement with the CFTC. Before his time with the CFTC, Bob spent more than 20 years at FERC most recently as Director of Investigations. Bob was involved in some of the...

Stephen Hug, Environmental Attorney, Bracewell Law Firm

Stephen Hug represents clients in matters related to federal regulatory policies, regulations and rules applicable to the electric industry. His experience includes assisting clients with compliance with the rules and regulations of the Federal Energy Regulatory Commission (FERC) and the Federal Power Act (FPA).  Stephen also represents clients in litigated proceedings before FERC.