In the past, the Securities and Exchange Commission (SEC) has had more
authority as a regulatory agency than the Commodity Futures Trading Commission
(CFTC). However, a provision of the Dodd-Frank Act, Section 753, has given
the CFTC similar powers to monitor “manipulative and deceptive”
conduct in the commodities, futures and swaps markets.
With the new authority, the CFTC has set its sights on policing fraud.
The organization has proposed a new rule (Rule 180.1) designed to prosecute
fraudulent activities from false financial statements to insider trading to
Ponzi schemes. The new rule resembles the SEC’s Rule 10b-5.
This new antifraud rule could be used by the CFTC to monitor a myriad of
other types of financial fraud, such as misstatements or
omissions of material information.
The CFTC is reportedly a lot smaller than the SEC. For fiscal 2010, the
CFTC has an enforcement budget of around $60 million compared to the SEC’s
$350 million enforcement budget. The CFTC has approximately 200 employees,
while the SEC employs nearly 1,200 people.
Many are looking to see whether the CFTC attempts to focus on insider trading
cases. The organization’s jurisdiction in regards to trading is
derivatives such as credit default swaps that do not involve securities, will be included
in its jurisdiction.
The new authority will likely mean more work for defense attorneys. In
the past, defense lawyers focused on the SEC. They will now have to consider
how to contend with the new powers given to the CFTC by the Dodd-Frank Act.