CFTC Wants Direct Access to Customer Accounts

CFTC Wants Direct Access to Customer Accounts

CFTC Chairman Gary Gensler announced Wednesday that the agency will seek to have direct electronic access to all bank and electronic accounts holding customer funds.

The remarks, made at a hearing of the U.S. House Committee on Agriculture, signal the CFTC’s aggressive approach to dealing with the fallout from the Peregrine Financial scandal, which involved the disappearance of large amounts of customer segregated funds.

CME Group has offered another idea for improving the security of customer funds. In a letter to customers, CME executive chairman and president Terrence Duffy said the company is considering moving customer money to clearing houses or other depository institutions. However, he opposed the creation of an industry-funded insurance program, calling it prohibitively expensive and conducive to moral hazard.

Because the CFTC’s resources are limited, it conducts audits of only the largest FCM’s. Others, including Peregrine, are audited by the National Futures Association (NFA), which is under fire for allegedly failing to notice a history of fraud at Peregrine that may be decades old. The NFA has already stated that it supports direct electronic monitoring of customer segregated funds.

Gensler also drew attention to the CFTC funding situation. With House Republicans threatening to cut its budget, Gensler described the agency as “very thinly manned.”

In a sign that the unending wave of scandals may be eroding Republican opposition to stricter regulation, U.S. Rep. Steve Southerland, R-Fla., lashed out at industry representatives.  “You represent an industry that’s got an integrity crisis,” Southerland said. “I shiver to think what else is out there.”

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Photo credit: Rob Pongsajapan

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About The Author


Felix Shipkevich

Felix Shipkevich

Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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