Caroline D. Pham has done it again: The Commissioner at the Commodity Futures Trading Commission (CFTC) has once more issued a statement criticizing the working ethics of the top US regulatory agency. The fresh criticisms came little more than a month after she attacked the enforcement division of the regulator for its alleged misconduct in its actions against My Forex Funds.

“Unclear Roles and Responsibilities”

Recently, she publicly revealed her observation that “most of the CFTC’s improper changes in the interpretation of decades-old CFTC regulations, in violation of the Administrative Procedure Act, due to the lack of a rational basis, reasoned decision-making, and public notice-and-comment—namely, regulation by enforcement—is because of unclear roles and responsibilities among CFTC divisions.”

This is one of many criticisms Commissioner Pham has directed at the workings of the US agency that regulates the financial derivatives markets in the country.

Her criticisms were widely shared within the retail trading industry last September when she questioned the regulator's ethics in its lawsuit against Traders Global Group Inc., the prop trading firm My Forex Funds operator. She even expressed grave concerns over the allegations of false statements related to the case made by CFTC staff in court.

“This is a grave matter, and we, the Commission, will be subject to intense scrutiny over how we handle the alleged CFTC misconduct,” Pham stated. “This type of behavior cannot be tolerated at a law enforcement agency.”

Notably, My Forex Funds is now seeking a sanctions order against the CFTC.

Earlier, she even questioned the CFTC’s “administrative proceedings,” saying that “the agency is the prosecutor, judge, and jury, lacking the checks-and-balances imposed by separation of powers between the executive and judicial branches of government to ensure a fair hearing and due process.”

She also pointed out the jurisdictional war between the CFTC and the SEC over cryptocurrencies when the two agencies took action against Kraken.

“[The lawsuit] appears to assert that fund shares held by investors—namely, securities—can themselves constitute leveraged trading,” Pham stated. “This interpretation fails to distinguish between an investment in a fund, which would typically be a security under the jurisdiction of the SEC, and the trading activities of a fund, alleged here to be under the CFTC’s jurisdiction.”

According to the Commissioner, “The CFTC’s approach may infringe upon the SEC’s authority and undermine decades of robust investor protection laws by conflating a financial instrument with a financial activity, disrupting the foundations of securities markets. Owning shares is not the same thing as trading derivatives.”

Who Is Caroline D. Pham?

Pham assumed her role as one of the CFTC Commissioners in April 2022, having been appointed by the Biden administration. She was nominated by President Joe Biden for the CFTC Commissioner role in December 2021 and was confirmed in March 2022.

She was not a stranger to regulatory workings, having served as Special Counsel and Policy Advisor to the Office of Commissioner Scott O'Malia at the CFTC between June 2013 and October 2014. She even interned at the regulatory agency.

Before she was appointed CFTC Commissioner, she worked at Citi for about seven and a half years. She joined the Wall Street bank in October 2014 as the Director and Head of Markets Regulatory Implementation and left as the Managing Director and Head of Market Structure for Strategic Initiatives.

Pham is one of the five CFTC Commissioners, all of whom are political appointees serving five-year terms. They collectively govern the regulatory agency's operations.

CFTC Must Fix Its Act

Pham’s latest criticisms of the agency highlighted its approach towards “self-reporting and cooperation credit,” which was tied to a particular case. She even stressed that the regulator must provide more clarity on self-reporting standards.

“I have proposed that the CFTC enhance procedures for coordination among the primary divisions—MPD, DMO, and DCR—and DOE to improve regulatory clarity and consistency in the interpretation and application of CFTC regulations, improve governance, and minimise the CFTC’s internal conflicts of interest,” she noted.

“The Commodity Exchange Act establishes various categories of market participants that must be registered in order to engage in activity in the derivatives markets,” she added in another criticism. “These CFTC registrants must comply with extensive requirements, including character and fitness standards.”