10.17.13

First Ever $100 Million Fine Issued to Protect Consumers from Commodities Market Manipulation

CFTC uses new anti-reckless manipulation authority granted by Dodd-Frank

WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA) praised the Commodity Futures Trading Commission (CFTC) for its $100 million settlement with JPMorgan Chase over market manipulation.

This is the CFTC’s first use of expanded authority from a Cantwell-authored provision in the Dodd-Frank Wall Street Reform bill, which allowed the CFTC to more effectively prosecute and deter Enron-style manipulation of the commodity futures and derivatives markets.

“For the first time, the CFTC has used its new authority to police market manipulation and protect the American consumer,” Cantwell said. “This settlement sends a clear signal that market manipulation will no longer be tolerated. Commodities are building blocks of the economy -- and Americans should never have to pay more for their groceries or gas because of bad actors distorting markets for personal gain.

“Today’s settlement is exactly what Congress intended when we passed my amendment to Dodd-Frank to deter market manipulation,” Cantwell continued. “Before Dodd-Frank, the CFTC lacked the tools necessary to deter and fight market manipulation. It had successfully prosecuted just one manipulation case in more than 35 years.  Now, it’s time for Wall Street to wake up and realize that the CFTC is no longer a ‘toothless tiger,’ but a vigorous cop on the beat to protect consumers and the American economy.”

Cantwell’s rule changed the burden of proof for the CFTC to prosecute market manipulation from “specific intent” to do harm to the same fraud-based “reckless conduct” standard currently employed by the Securities and Exchange Commission (SEC), the Federal Energy Regulatory Commission (FERC) and the Federal Trade Commission (FTC). This anti-manipulation standard has been employed by the SEC for more than 75 years and upheld and defined in many court cases, including cases before the Supreme Court. 

Prior to Cantwell’s rule, the CFTC had only won one case on manipulation in the previous 35 years. At the time of the rulemaking for the anti-manipulation authority, CFTC leaders praised Cantwell for her work in getting the bill passed.

“I particularly thank Senator Maria Cantwell for her leadership on the anti-fraud and anti-manipulation provisions,” CFTC Commissioner Bart Chilton said in a statement in July 2011. “Without Senator Cantwell these provisions wouldn’t exist.”

“I thank Senator Maria Cantwell for her work to secure this important authority for the CFTC,” said CFTC Chairman Gary Gensler in a prepared statement at the time the rule was approved. “As Senator Cantwell explained in proposing that this authority be included in the Commodity Exchange Act, ‘it is a strong and clear legal standard that allows regulators to successfully go after reckless and manipulative behavior.’”

Cantwell was instrumental in granting the same authority and legal standard to FERC for electricity and natural gas markets in 2005 following her historic battle with Enron, and to the FTC on wholesale oil markets in 2007. 

Cantwell’s market manipulation rule was enacted into law in 2010 as part of the Dodd-Frank Financial Reform bill.

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