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Record CFTC enforcement year: Is the regulator stricter, or are firms falling behind with compliance?

The US Commodity Futures Trading Commission (CFTC) has announced record-breaking enforcement figures for the 2020 Fiscal Year.

Across 2020, the CFTC has filed 113 enforcement actions, which amounts to 44 more than in 2019 and more than in any other year in the history of the Commission. As well as the large number of enforcements filed the CFTC also approved its largest-ever case for monetary relief, with a $920 million resolution for cases related to market manipulation and spoofing.

The increased enforcement could, in part, be attributed to the Covid-19 pandemic during which the CFTC has “aggressively pursued fraud… at a time when victims may be particularly vulnerable.” Since 13th March 2020, when a national emergency was declared, the Commission has filed 29 cases associated with coronavirus.

Commenting on the impressive enforcement figures, CFTC Chairman Heath Tarbert said, “We are tough on those who break the rules, and this historic year only further underscores this point… The case statistics alone are impressive, but the fact that the enforcement program was this successful even during a pandemic is even more remarkable.

CUBE comment

Summer is now firmly behind us, and as we move towards the end of the year many regulators will start to uncover the ways in which the global pandemic has affected their regulatory activities.

Of course, 29 cases since March alone is significant – especially given that CFTC filed only 69 cases in 2019. However, the number of cases filed that were not pandemic related, still marks a significant increase year on year. Is the regulatory getting stricter? Or are firms being more lapse in their compliance practices?

Our guess is that it’s a bit of both. While many firms have made great strides in improving and automating their compliance programs, some continue to implement legacy systems that expose them to compliance gaps – not to mention regulatory fines. On the other hand, financial regulators across the globe have made it clear that they will no longer tolerate firms that implement inefficient compliance systems and cultures of non-compliance or willful ignorance.

The result? Increased enforcement actions across the board. We have no doubt that it won’t just be CFTC recording record enforcement action in 2020.