Higher CFTC Fines Proposed in Derivatives Protection Act

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Interior of United States Capitol rotunda with ornamental dome, an image representing US courts and Attorney General Jeff Sessions

Senator Warren and two other Congressional members proposed the Derivatives Oversight and Taxpayer Protection Act into Congress at the end of June in order to allow self-funding of the CFTC and increase its authority for civil penalties, among other things.


As I understand the funding proposal, the CFTC would be allowed to assess and collect fees in order to recover the cost of the annual appropriation of funding by Congress. The measure would take the burden off the government to provide funding and put it on those that the agency regulates or its beneficiaries (investors). The SEC is already similarly self-funded by section 31 fees.

The proposal stops short of removing Congress from the appropriation process altogether, which may ultimately be what is needed to stop the chronic underfunding of the government’s regulators. Such an overhaul was proposed by former Federal Reserve Chairman Paul Volcker last year.

The legislation would also increase the maximum fines imposed by the CFTC on violations by individuals and corporations. Currently, these fines are capped at a maximum fine and triple the monetary gain. The bill would increase the maximum fine would be raised to $1 million for individuals and $10 million for others. It would also allow the fine to be the larger of triple the losses proximately caused by the violation or triple the monetary gain to all persons acting in concert.

The Derivatives Protection Act has been given little likelihood of passing through a Republican controlled Congress. But Government regulation of Wall Street has been a key point of contention among Presidential candidates so far this election and it could be a way to keep the issue on the public’s radar.

Republic Presidential candidate Donald Trump promised to largely dismantle the Dodd-Frank Act, the 2010 law put in place to enhance derivatives regulation, authorize the payment of whistleblower rewards, and prevent the next catastrophic economic downturn due to insufficient regulation of the securities market.

Trump has also called for the repeal of the Foreign Corrupt Practices Act (FCPA), one of the world’s leading anti-corruption laws. In a 2012 interview before the start of his campaign, he called it a “horrible law” that put American businesses at a disadvantage.

Democratic Presidential candidate Hillary Clinton, on the other hand, would provide the regulators more resources, tax high-frequency trading, discourage excess risk-taking and hold individuals/corporations accountable for violations of the law.

Last July, Hillary Clinton pledged to pay bigger rewards to corporate whistleblowers. Clinton specifically cited FIRREA’s $1.6 million cap on payments for information to mortgage whistleblowers as one area that she would tackle if elected President.

In other election coverage, the Republicans still haven’t held hearings to confirm President Obama’s Supreme Court nominee, Merrick Garland. The Republicans have insisted that the next President of the United States should be allowed to nominate the Justice.

To speak to one of our CFTC whistleblower attorneys about the proposed changes, or to discuss a potential whistleblower tip, please call 1-800-590-4116.