CFTC Releases Annual Enforcement Results for FY 2015
Commentary by Steven Lofchie
The CFTC released its enforcement results for fiscal year 2015, which "included a record $3.144 billion in civil monetary penalties ordered against wrongdoers." The CFTC stated that: “These are the highest figures in the CFTC’s history with respect to the amount of civil monetary penalties imposed and collected during a fiscal year. Alone, this year's civil monetary penalties total more than twelve times the CFTC’s operating budget for the FY. These Orders bring the CFTC’s total monetary sanctions over the past two fiscal years to more than $6.4 billion.” The CFTC reported that it filed 69 enforcement actions focusing on manipulation, spoofing and fraud.
Highlights of the key enforcement actions are contained in the attached release.
Commentary
The financial regulators, not only the CFTC, continue to measure themselves by the amount of money that they collect. See, e.g. SEC FY 2014 Enforcement Actions Summary (with Lofchie Comment) (Oct. 16, 2014).
Financial regulators should measure themselves by the quality of the markets they regulate and by the strength of the economy. The amount of money financial regulators collect through enforcement is not a measure of either. What the CFTC should care about most is not whether it continues to collect more money, but whether, for example, it can fix swap rules in a way that enables global markets to function smoothly.
This overemphasis on enforcement is highlighted by the very first case that the CFTC touts to trumpet its regulatory prowess. The case of Navinder Singh Sarao and his company Nav Sarao Futures Limited PLC, concerns a small time trader whom the CFTC blamed for creating the Flash Crash. The CFTC press release points out only that Mr. Sarao "contributed to the conditions" that caused the Flash Crash, which is nearly an admission that the accusation that he "caused" the Flash Crash was unfounded. That is, everyone who is in the market at a particular moment (and even those not in the market, if one is being philosophically minded) "contributed to the conditions" that existed in the world at any moment in time. See our prior article on the Butterfly Effect: Finance Professor Calls CFTC Allegations that Nav Sarao Caused Flash Crash ''Outrageous'' (with Lofchie Comment and Video Selection) (April 24, 2015).