“The time has come to ease the burden on our prosecutors, and to better protect consumers and markets” CFTC Commissioner Bart Chilton

In a speech before the Institutional Investors Carbon Forum here today, Commissioner Bart Chilton of the Commodity Futures Trading Commission called for a unprecedented change in the legal standard required to prove manipulation cases in commodity futures cases. Chilton, citing the high burdens on prosecutors and the resulting dismal record of successful manipulation cases, called for a shift to an “easier to prove” legal standard. In support of his position, Chilton cited the fact that, in its 35-year history, the CFTC has successfully prosecuted and won only one manipulation case, which is currently on appeal in federal court.

“We have superlative, hard-working attorneys in our Division of Enforcement, with a great track record,” but in the area of prosecuting manipulation cases they are hampered by the “impossibly high legal burden.” As a result, “there are just too many market manipulations we simply can’t address,” Chilton said. “This can lead to unacceptable price volatility that affects consumers and business all across America, when they put gas in the car or food on the table.”

While Chilton did not go so far as to advocate wholesale adoption of the “reckless” standard utilized in securities market manipulation cases, he cited to that as a model that the futures world could look to for guidance in developing a new, more appropriate legal standard.

In the past, and again today, Chilton has called on Congress to grant the agency criminal authority to actually put criminals in jail. Currently, the CFTC must obtain assistance from a criminal authority such as the U.S. Department of Justice (DOJ) or other state or local criminal authority to prosecute cases in a criminal fashion. “For far too long,” Chilton said, “folks who commit financial crimes pay the fine but don’t do the time. That needs to change.” According to Chilton, two-thirds of all cases the CFTC refers to criminal authorities like DOJ are rejected. “Many times these are complicated cases that understandably would require many staff hours,” Chilton explained. “But in 100 percent of these cases the CFTC obtains a favorable outcome. So they are good cases, criminals just aren’t being punished properly and that is a problem on a number of fronts. It certainly doesn’t send a strong deterrent message.”

Chilton noted that with a new manipulation standard and criminal authorities the CFTC would be able to better guard against manipulation or attempted manipulation to protect markets and consumers alike.

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