Industry News Article Discusses the CFTC's Flash Crash Accusations and the SEC's Whistleblower Award to a Compliance Officer
In the latest installment of the Energy Metro Desk series "Around the Desk," editor-in-chief John Sodergreen discusses the recent charges against Navinder Singh Sarao and the whistleblower award given by the SEC to a compliance officer.
Regarding recent CFTC charges against Navinder Singh Sarao, Mr. Sodergreen noted the differences between the government press release and the actual complaint. According to Mr. Sodergreen, the government release did not blame Mr. Sarao explicitly for the flash crash (the "Crash"). It merely stated that his actions "essentially tossed additional high octane fuel on the fire." However, Mr. Sodergreen continued, the complaint "tiptoes" around the tenuous connection between Mr. Sarao and the Crash, focusing primarily on his spoofing activity in the market that day (which the government refers to as a "flash spoof").
Mr. Sodergreen went on to discuss why "nobody seems convinced" that Mr. Sarao is responsible for causing the Crash, and argued that Mr. Sarao used the same strategy long before the Crash and up until the CFTC brought charges against him. According to Mr. Sodergreen, it is unlikely that Mr. Sarao's actions that day resulted in the Crash.
Mr. Sodergreen also discussed the SEC's whistleblower award to a firm's compliance manager and asked whether compliance managers should be rewarded for doing their jobs. Mr. Sodergreen noted that he reached out to several people on the matter and concluded that "reviews were not exactly supportive," quoting a compliance advisor who said that "the regulators should not be setting up an environment of using publicly funded cash awards for individuals that are simply following their already-agreed-to governance responsibilities." Mr. Sodergreen also quoted Steven Lofchie's commentary in a Cabinet News item, in which Mr. Lofchie asked the following question: "Is it good public policy to pay whistleblower awards to compliance officers and would doing so discourage firms from disclosing potential problems to their compliance officers?" Mr. Sodergreen pointed out that the award money paid to the compliance officer/whistleblower may have been the same penalty money that was paid to the agency by his firm for its rule violation, which meant that the award was "sort of like a bonus from the company" to its employee.
Click here to view the article.The above link is to an excerpt from the most recent issue of Energy Metro Desk, which is published biweekly by Scudder Publishing Group, an energy trade news publishing company based in the Washington, D.C. metropolitan area. Those who are interested in learning more about Energy Metro Desk may do so by visiting www.energymetro.com or by e-mailing [email protected]. Reprinted with permission of the publisher, Scudder Publishing Group, LLC. Copyright 2014.
Related news:Finance Professor Calls CFTC Allegations That Nav Sarao Caused Flash Crash "Outrageous" (with Lofchie Comment and Video Selection) (April 24, 2015); CFTC Publishes Appendix to Motion against Nav Sarao (with Lofchie Comment) (April 23, 2015); Streetwise Professor Wonders Who's to Blame for Flash Crash (with Lofchie Comment and Music Selection) (April 22, 2015); SEC Announces Whistleblower Award to Compliance Officer (with Lofchie Comment) (April 22, 2015) CFTC Charges UK Trader Company with Spoofing Scheme That Contributed (Allegedly) to "Flash Crash" Day in 2010 (with Lofchie Comment) (April 21, 2015).