The CFTC’s recent announcement that it is paying a whistleblower a $200 million award for providing information about wrongdoing concerning the manipulation of financial benchmarks used by global banks is likely to spur more whistleblowers to assist the CFTC in identifying and combating violations of the Commodity Exchange Act (CEA) and CFTC regulations. While many of the violations that result in SEC enforcement actions are commonly known (e.g., lying about earnings, running a Ponzi scheme, engaging in insider trading, etc.), the enforcement work of the CFTC is less known but no less vital.
Indeed, insufficient regulation and policing of the swaps derivatives markets led to the financial crisis that by some estimates cost the U.S. $20 trillion. In particular, credit default swaps in the mortgage market that were supposed to protect against the decline in the value of collateralized debt obligations backed by subprime loans proved worthless. In the prescient words of Warren Buffet in the 2002 annual report of Berkshire Hathaway, derivatives became “financial weapons of mass destruction.” To avert another financial crisis, Congress enacted the Dodd-Frank Act, which among other things, significantly expanded the role of the CFTC in policing the derivatives markets. Some of the reforms designed to promote market integrity and increase transparency include:
- requiring the registration and comprehensive regulation of swap dealers;
- imposing clearing and…
