CFTC Commissioner Seeks Public Accountability for Wall Street by Applying HEAT

John Lothian

John Lothian

Executive Chairman and CEO

Christy Goldsmith Romero Uses CFTC Pulpit to Call for Financial Law Enforcement by Accountability, Justice and Deterrence

CFTC Commissioner Christy Goldsmith Romero issued a statement in September on a “Proposal for Heightened Enforcement Accountability and Transparency in Settlements.” She proposed a HEAT test to require more defendants to admit wrongdoing in settlements. 

John Lothian News wanted to know more about Goldsmith Romero’s thoughts on the matter and the origins of the HEAT test, so we interviewed her over Zoom from her CFTC offices. 

She said her interest in this subject goes back to her work as a line enforcement attorney for the Securities and Exchange Commission. She had a client who admitted guilt, but when writing up the settlement she was told to include a “neither admit nor deny” clause, which left her puzzled and annoyed. 

Goldsmith Romero said she wants to shift the culture of law enforcement in financial regulation  to demand more public accountability for defendants who break the law. 

The goals of law enforcement are accountability, justice, and deterrence, she said – helping people accept responsibility. Currently, “we are not fulfilling the full public accountability of the law,” Goldsmith Romero said.

She said she wants to stop wrongdoing before it happens, and that if she can get higher ups in Wall Street firms to pay more attention to these problems, she believes these executives will put a stop to the problematic activity. 

JLN asked Goldsmith Romero what is behind HEAT. The question is what cases should go to trial, she said. She made the following list of factors in her description of HEAT:

  • Egregious conduct;
  • The presence of a criminal scheme;
  • Significant harm or risks of harm to investors and/or market participants;
  • Significant harm or risks of harm to market integrity;
  • A recidivist defendant;
  • Obstruction, lying or concealment, in an investigation/examination by the CFTC, other federal authority on the same conduct, or a self-regulatory organization; and/or
  • The need to send a pronounced message about particular conduct or practices.  

Goldsmith Romero said one thing about HEAT is that it is a catchy term, which is important. She talked about the support she has received outside the CFTC. 

She said it helped to put a full-fledged articulation of the problem and a solution for it out there in writing. She is realistic, however, and said her goal is to try to move the ball forward.

Goldsmith Romero said she believes applying the HEAT test will result in cost savings to the CFTC as more firms respond to the deterrence. Deterrence is the big goal. If lawbreakers have to admit to violations, Goldsmith Romero said, the deterrence factor will work. If she can slow or stop the violations, that is better for our markets, period. 

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