In remarks before the International Futures Industry Conference, Acting Chairman J. Christopher Giancarlo—who was just nominated by President Trump to be permanent Chairman—talked about the future of the Commodity Futures Trading Commission (CFTC) on a wide range of regulatory issues, priorities and reforms. Among them was enforcement. The CFTC, an independent rather than executive agency, aggressively pursued enforcement actions for violations of CFTC-enforced statutes and regulations—including the prohibitions against fraud, market manipulation and disruptive trading practices (e.g., “spoofing”)—throughout the Obama administration. See, for example, the CFTC’s most recent annual report. A question among energy industry participants (and other commodities-based industries regulated by the CFTC) has been whether a newly constituted Commission under the Trump administration will do the same. Acting Chairman Giancarlo’s remarks make it clear that the answer is “yes.” In the key passage, he states:
A similar balance is appropriate for the CFTC’s Division of Enforcement (DOE), which is staffed by experienced and decorated former prosecutors and, I can proudly say, is one of the premier civil law enforcement arms of the federal government. Yet, DOE also must look to benefit from cooperation and, where appropriate, deference to civil and criminal capabilities of other federal and state regulators and enforcement agencies.
But, as I mention the CFTC’s Division of Enforcement, let me take this moment to warn those who may seek to cheat or manipulate our markets: you will face aggressive and assertive enforcement action by the CFTC under the Trump Administration. There will be no pause, let up or reduction in our duty to enforce the law and punish wrongdoing in our derivatives markets. The American people are counting on us. (Bold in original version of speech on CFTC website)
Although the CFTC’s focus in the coming years will undoubtedly be influenced by three new Commissioners (once President Trump nominates and the Senate confirms them), if Acting Chairman Giancarlo is confirmed as permanent Chairman, his statements make clear that tough enforcement will remain a CFTC priority.
Like the CFTC, the Federal Energy Regulatory Commission (FERC) currently has three openings. At present, there is still no official word on who will be nominated for the open seats, including the Chairman’s seat—although many industry reports say that nomination announcements are imminent. Until then, the new FERC’s approach to enforcement is necessarily a matter of speculation. But market participants in the energy industry might find it significant that the potential new Chairman of the CFTC has just given an unambiguous endorsement of “aggressive and assertive enforcement” under the Trump administration.
Also noteworthy, Acting Chairman Giancarlo states that elements of the CFTC’s market surveillance efforts—which are now housed in the Division of Market Oversight—will be moved to the Division of Enforcement to “strengthen our mission to identify and prosecute violations of law and regulations, such as spoofing, manipulation and fraud.” While not necessarily motivated by how other federal enforcement agencies organize and manage their surveillance efforts, this CFTC restructuring will make its Division of Enforcement look more like FERC’s Office of Enforcement. One of the more important aspects of FERC Enforcement—which, since 2012, has significantly expanded its natural gas and electric market surveillance capabilities—is that the surveillance staff and the investigative staff are all housed within the Office of Enforcement and that the analysts and investigators work closely together on inquiries and investigations. Acting Chairman Giancarlo states that housing surveillance and enforcement together “will foster increased efficiencies through knowledge sharing and cross training under unified leadership; thus benefitting the Commission’s surveillance mission and enforcement responsibilities.” Many within FERC would say the same about their own agency’s integration of surveillance and enforcement.