CFTC, Libor Usher in New Era of Financial Penalties

CFTC, Libor Usher in New Era of Financial Penalties

The U.S. Commodity Futures Trading Commission (CFTC), in conjunction with the fallout from the Libor scandal, has recently upped the ante for financial penalties.

The new fervor on the part of regulators to exact financial penalties is embellished by today’s announcement that UBS AG, accused of manipulating the Libor interest rate, will pay a penalty of $1.5 billion jointly imposed by regulators in the U.S. and Britain. The penalty marks the second enormous settlement from a bank accused of manipulating the interbank interest rate.

The fine, which exceeds the expectations of most analysts, is also three times higher than the fine against Barclays. The British bank paid a fine of $450 million after admitting to manipulating Libor in June.

The $1.5 billion fine, however, is not even the largest bank settlement of the week. The penalty comes on the heels of a fine against HSBC last week, which agreed to pay $1.92 billion in order to settle an investigation into alleged money laundering to drug cartels.

CFTC and Penalties

The CFTC has used a blitzkrieg-style approach while exacting financial penalties from both large and small entities in the weeks after the presidential election. The end of November and the first week of December saw enforcement actions rise into the double digits as the agency took on various Ponzi and commodity pool schemes.

The agency also fined Goldman Sachs $1.5 million for failing to supervise a trader who assumed an $8.3 billion trading position that resulted in a loss of over $100 million.

CFTC’s Chilton Asks for Larger Penalties

With penalties stemming from the Libor rate-rigging scandal now exceeding $1 billion, it is likely that the CFTC will continue its push for larger penalties, or at least the power to seek them.

CFTC commissioner Bart Chilton has called on Congress to allow for a maximum penalty of $1 million per violation and $10 million per entity for failing to ensure diligent supervision of trading and traders. In the case of the Goldman Sachs violation, the potential maximum penalty would have been roughly $60 million, up from a mere $1.5 million.

In theory, this push for greater penalties would square with the incoming head of the Congressional Financial Services Committee. Rep. Jeb Hensarling, who has been a vocal critic of the size of U.S. banks and the “too-big-too-fail” ethos. In practice, however, it may be quite a while before the agency can exact Libor-like penalties for the financial practices it monitors.

Read more.

 

Related Posts Plugin for WordPress, Blogger...
468 ad

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.

Comments are closed.