Regulating the regulator

CFTC Employee Dodges Prison and up to $500,000 Fine for Trading Forex

An employee of the U.S. Commodity Futures Trading Commission has engaged in forex trading without knowing he was violating the

A report by Law360 is detailing the adventures of a U.S. Commodity Futures Trading Commission (CFTC) employee with the regulator. After turning to the Office of General Council at the CFTC when he joined the agency, the employee was informed that foreign exchange trading was not barred for staffers.

He proceeded to apply for an account with a Retail Foreign Exchange Dealer (RFED) in 2013.

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In 2012 the rules have been amended to include forex trading into the list of activities which are forbidden for CFTC employees. Since the Office of General Council did not advise the employee about the changes, he effectively conducted a violation of the U.S. regulatory rules.

According to a report cited by Law360, the staffer was facing a prospective prison sentence and severe monetary charges. Due to the informational gaps which were identified at the regulator the staffer has escaped felony charges.

The enforcement division of CFTC got tipped off by an in-house counsel at a registered RFED that an employee of the regulator was attempting to open a forex trading account.

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The employee claimed no knowledge of violating the rules, referring to him contacting the Office of General Council to ascertain whether he was eligible to open a forex trading account.

An internal investigation into the matter has confirmed that the staffer violated CFTC’s code of conduct by trading forex in 2013 and 2014 using a different account account at the RFED that acted as a whistleblower to the CFTC in November.

The employee was facing serious consequences as the move by the employee is classified as a felony punishable by up to five years in prison and $500,000 in fines. The internal investigation has determined that the staffer didn’t access any sensitive information during his employment at the regulator and hence he did not use sensitive information when making trading decisions.

The CFTC did not update its code of conduct during the period mentioned above. The inspector general has criticized the CFTC on a number of matters. Namely, the agency took 2 1/2 months to refresh its internal code of conduct after the vulnerability has already been identified.

The agency has stated that it will not be alerting the Department of Justice nor recommends any action against the employee.

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