- Acting Chair of the CFTC, Caroline Pham, has signalled the regulator intends to shift away from ‘regulation by enforcement’ and instead focus more on policing fraud.
- Chair Pham announced an organisational restructure to consolidate the Department of Enforcement’s many task forces into just two — to improve efficiency and get better outcomes.
- The restructure comes as the SEC crypto taskforce examines whether to split responsibility for overseeing the crypto market, potentially increasing the role of the CFTC.
The era of regulation through enforcement is crumbling before our very eyes!
Caroline D. Pham, the newly appointed acting chair of the Commodity Futures Trading Commission (CFTC), has signalled a significant shift in the regulator’s approach, which she says will “combat fraud and help victims while ending the practice of regulation by enforcement”.
The new approach was announced in a February 4 notice posted to the regulator’s website. It involves a restructuring of the CFTC’s Division of Enforcement with its numerous task forces being consolidated into just two:
- The Complex Fraud Task Force, which will deal with large-scale complex cases spanning asset classes; and
- The Retail Fraud and General Enforcement Task Force, which will handle “general enforcement” and the more garden-variety breaches of the Commodity Exchange Act.
These much-needed changes will maximize the CFTC’s resources to bring more actions to pursue fraudsters and other bad actors, and not punish good citizens.
Caroline D. Pham, CFTC Acting ChairThis new approach from the CFTC comes as the head of the Securities and Exchange Commission’s (SECs) Crypto Task Force, Hester Peirce, released a document outlining its top ten priorities. One of which was clearly delineating how responsibility for regulation of the crypto industry should be shared between the SEC and its “sister regulators”, potentially signalling an increasing role for the CFTC in overseeing crypto.
Related: Trump’s New Era: Ripple’s Legal Chief Hails Transformative Shift in Crypto Regulation
CFTC Chair Quick to Bring an End to Gensler-Era Practices
In her announcement, Chair Pham explained that ending the practice of regulation by enforcement will simplify CFTC operations, improve efficiency and result in actual criminals being held accountable, rather than what she calls “good citizens” being hectored through the courts:
The CFTC is strengthening its enforcement program to focus on victims of fraud, as well as remaining vigilant for other violations of law. This simplified structure will stop regulation by enforcement and is more efficient.
Caroline D. Pham, CFTC Acting ChairThe CFTC’s Acting Director of Enforcement, Brian Young, said the regulator’s realignment would allow for an “energetic enforcement program” that would secure justice for victims of fraud:
Fraudsters are constantly evolving their tactics to exploit market participants and undermine the rules that provide the foundation for a vibrant, resilient and innovation-forward marketplace.
Brian Young, CFTC Acting Director of EnforcementThe organisational restructure to move away from regulation through enforcement and refocus on policing true cases of fraud and manipulation was one of Pham’s first actions since taking up the role of Acting Chair on January 20, suggesting she sees this as one of her top priorities.
Crypto Task Force Potentially Sees Larger Role for CFTC In Regulation of Crypto
Commissioner Hester Peirce, the head of the SEC’s new Crypto Taskforce, published a statement yesterday outlining its ten top priorities — the first of which was clarifying the security status of different types of crypto assets.
The second priority, which Peirce referred to as “scoping out”, will focus on identifying areas of regulation that fall outside the SEC’s jurisdiction, potentially increasing the role for other regulators such as the CFTC.
As Commissioner Peirce explained:
If the Commission spots fraud that lies outside our jurisdiction, it can refer the matter to a sister regulator.
Hester Peirce, Head of SEC Crypto Task ForceRelated: SEC Crypto Task Force Lead Hester Peirce Reveals Top Agency Priorities
Peirce added that the framework the task force is seeking to create will see multiple regulators charged with overseeing crypto, which is a pretty big change — historically crypto has largely been seen as being under the SEC’s jurisdiction:
Task Force is working to help create a regulatory framework that both achieves the Commission’s important regulatory objectives—including protecting investors—and preserves industry’s ability to offer products and services. This framework will be within the statutory authority given to the Commission, and we will work with other regulators operating within their own statutory authorities.
Hester Peirce, Head of SEC Crypto Task ForceCredit: Source link
