The Commodity Futures Trading Commission’s (CFTC) report card is out, and based on its annual enforcement results, it has been doing its homework! The results reveal that the regulatory agency was quite busy protecting the industry from violators, cheaters, and frauds in fiscal year 2011. Score one for the good guys!
Think of the CFTC as the trading scene’s very own superhero. It protects market players like you and me from manipulation, fraud, and unfair trading practices, while encouraging openness and competitiveness in the markets.
Like a true superhero, this year, the CFTC has been flexing its muscles. According to its annual report, it cracked down on a record number of violators in the fiscal year that ended on September 30, 2011. Charges against individuals and companies include manipulation of commodity prices, trading abuses, accounting failures, registration deficiencies, and fraud.
As a forex trader, you’ll be pleased to know that the CFTC has been cleaning up the retail forex scene as well. As a matter of fact, it successfully imposed over $17 million in sanctions against forex companies for conducting retail forex fraud. Aside from that, the CFTC’s Division of Enforcement has filed a total of 23 actions to enforce the Dodd-Frank Act and to ascertain that forex dealers and brokers have properly registered with the Commission.
Non-forex related charges filed by the Division of Enforcement reached a total of 99 enforcement actions in the fiscal year 2011, the highest in the CFTC’s history and almost double the previous fiscal year’s record of 57 actions. Not only that, it also launched 450 investigations in the same year, which is another high for the program.
Last but definitely not least, the report showed that the division was responsible for imposing $290 million in civil monetary penalties, as well as facilitating the payment of more than $160 million in restitution (giving something back to its rightful owner) and disgorgement (giving back profits obtained through illegal activities).
If you think that this is just a one-time energy burst for the CFTC, you’re dead wrong. For one, the CFTC will have more enforcement authorities thanks to the Dodd-Frank Act. Its new weapons include authority on fraud-based manipulation, jurisdiction on retail forex transactions, and authority over disruptive trading practices and other misconduct on registered entities.
While some cringe at the thought of the forex market possibly becoming overregulated, others appreciate regulatory efforts if only for the sake of preventing traders from being cheated. Once the CFTC gets its rhythm at ridding the markets of fraudulent entities and tracking broader industry manipulations, then we will hopefully see more traders participating in the forex market, which could result to more volume and maybe even smaller spreads in your favorite currency pairs.
If you have any questions or if you want to check up on your broker, you can visit the CFTC website: