Cryptocurrency regulations will become more variable

Futures Trading ◽

Content Type ◽

Securities Law ◽

The Us ◽

Regulatory Scrutiny ◽

Market Capitalisation ◽

And Control

Subject Cryptocurrency classification. Significance The classification of crypto assets under US securities law is less clear than in Japan, China and South Korea, but a working group comprising senior officials of the US Securities and Exchange Commission (SEC) and the US Commodity Futures Trading Commission (CFTC) is discussing it. The unclear status of Ethereum’s ether and Ripple’s XRP, the second- and third-largest crypto assets by market capitalisation, is the centre of attention. Impacts Mined crypto assets including bitcoin and litecoin are likely to remain classed as commodities. Ether and XRP are unlikely to be designated as commodities as they were initial coin offerings (ICOs) but also not as standard securities. As ICOs come under increasing regulatory scrutiny and control, more will fail, but a few may achieve notable success.

Parties push to enforce statutory time limits on SEC enforcement actions

10.1108/joic-06-2015-0036 ◽

2015 ◽

Vol 16 (3) ◽

pp. 30-32

Author(s):

Benjamin Neaderland ◽

Jared Cohen

Keyword(s):

Design Methodology ◽

District Of Columbia ◽

Courts Of Appeals ◽

Content Type ◽

Time Limits ◽

Court Of Appeals ◽

Securities Law ◽

The Us ◽

Purpose – To alert companies and individuals subject to regulation and investigation by the US Securities and Exchange Commission (SEC) of potential arguments to enforce time limits on enforcement actions that have heretofore commonly been ignored. Design/methodology/approach – Analyzes two cases - one recently decided and one pending - in US Courts of Appeals, explains significance of issues at stake. Findings – The Courts of Appeals for District of Columbia Circuit has recently reviewed, and the Court of Appeals for the 11th Circuit will soon decide whether statutory timing provisions effectively remove SEC power to bring enforcement actions past their deadlines, at least in some circumstances. Practical implications – Depending on the outcomes of the cases, companies and individuals may gain a new procedural defense or two against SEC enforcement actions. They may also expect the SEC to respond by more actively seeking tolling agreements, and/or being more cautious in issuing Wells notices. Originality/value – Guidance based on pending decisions interpreting US securities law, may bring regulatory adjustments to agency practice and procedure.

CFTC’s demanding new cooperation guidelines for companies and individuals

10.1108/joic-06-2017-0031 ◽

2017 ◽

Vol 18 (3) ◽

pp. 52-58

Author(s):

Breon S. Peace ◽

Jennifer Kennedy Park ◽

Robin M. Bergen ◽

Nowell D. Bamberger

Keyword(s):

Law Enforcement ◽

Regulatory Enforcement ◽

Futures Trading ◽

Content Type ◽

Legal Obligations ◽

The Us ◽

A Company ◽

Relevant Factors

Purpose To explain and analyze two Enforcement Advisories that set forth the factors the US Commodity Futures Trading Commission Division of Enforcement may consider in assessing cooperation by companies and individuals in the context of CFTC enforcement proceedings. Design/methodology/approach Explains the background, including the 2007 Enforcement Advisory for Companies. Explains the 2017 Enforcement Advisory for Companies and the parallel Enforcement Advisory for Individuals, including policy-based considerations and factors such as the materiality, timeliness, nature, and quality of a company’s cooperation; the value of a company’s cooperation to the Commission’s broader law enforcement interests; and the company’s culpability, culture and other relevant factors. Provides examples of uncooperative conduct. Discusses a broader trend among enforcement authorities in the US and abroad of setting higher cooperation standards. Findings The new Advisories make clear that merely complying with requests for information from the CFTC staff will not be sufficient; a company or individual seeking cooperation credit as part of a resolution with the CFTC must go above and beyond its legal obligations in order to qualify for such credit. Originality/value Practical guidance from experienced white collar defense, regulatory enforcement, civil litigation and arbitration lawyers.

CFTC amends chief compliance officer duties and annual report requirements

10.1108/joic-01-2019-0002 ◽

2019 ◽

Vol 20 (1) ◽

pp. 10-16

Author(s):

Julian E. Hammar

Keyword(s):

Annual Report ◽

Futures Trading ◽

Content Type ◽

The Public ◽

Close Analysis ◽

Compliance Officers ◽

Final Rule ◽

Compliance Officer

Purpose This paper summarizes the requirements of rule amendments promulgated by the Commodity Futures Trading Commission (CFTC) in 2018 regarding the duties of Chief Compliance Officers (CCOs) of swap dealers, major swap participants, and futures commission merchants (collectively, Registrants) and the requirements for preparing, certifying and furnishing to the CFTC the CCO’s annual report. Design/methodology/approach This paper provides a close analysis of the CFTC’s final rule amendments that make clarifications regarding the CCO’s duties and seek to harmonize with similar rules of the Securities and Exchange Commission (SEC) applicable to security-based swap dealers.It also analyzes rule amendments for the CCO’s report that provide clarifications and simplify certain requirements.In each case, it discusses comments from the public and the CFTC’s responses to those comments. Findings This paper finds that the rule amendments provide a number of helpful clarifications and simplify certain existing requirements for Registrants and their CCOs subject to the rules.While the rules overall achieve greater harmonization with similar rules of the SEC governing CCOs of security-based swap dealers, this paper notes that care will need to be taken by CFTC Registrants who also become registered with the SEC to be cognizant of remaining differences between the CFTC’s and SEC’s rules in order to ensure compliance with the rules of each agency. Originality/value This paper provides valuable information regarding the duties of CCOs of Registrants and CCO annual report requirements from an experienced lawyer focused on commodities, futures, derivatives, energy, corporate, and securities regulatory matters.

Smart contracts that violate the Commodity Exchange Act: which parties are liable?

10.1108/joic-06-2019-0037 ◽

2019 ◽

Vol 20 (3) ◽

pp. 28-31

Author(s):

Nikiforos Mathews ◽

Jonas Robison

Keyword(s):

Smart Contracts ◽

Futures Trading ◽

Virtual Currency ◽

Commodity Exchange ◽

Content Type ◽

Distributed Ledger ◽

Distributed Ledger Technology ◽

The Us ◽

Purpose The US Commodity Futures Trading Commission (CFTC), to date, has not directly addressed how liability for Commodity Exchange Act (CEA) violations involving blockchain or distributed ledger technology should be allocated among the various parties involved in the distributed ledger network, such as the network itself, persons running consensus nodes, developers building applications on the platform, and businesses and end users using such applications. This article discusses recent statements by CFTC Commissioner Brian Quintenz regarding this issue and the approach that the CFTC may take going forward. Design/methodology/approach This article examines the allocation of liability in the context of smart contracts that may violate the CEA. The article discusses how the CFTC, despite its significant focus in recent years on virtual currency and blockchain, has not addressed the issue of liability allocation directly. Recent remarks by Commissioner Quintenz may shed light on the CFTC’s future approach. Findings This article finds that liability allocation questions may become increasingly pressing as smart contracts that potentially violate the CEA proliferate, possibly exposing a broad range of parties involved in a distributed ledger network to liability. To the extent that Commissioner Quintenz’s recent remarks are indicative, the CFTC ultimately may adopt a foreseeability standard in determining liability. Practical implications Applications of distributed ledger technology (DLT) are ever-expanding, continually posing novel CFTC regulatory issues. This is especially the case with respect to smart contracts that may be subject to CFTC jurisdiction. Parties involved in such applications should be mindful of potential liability. Originality/value Practical guidance from experienced finance and derivatives lawyers with strong CFTC expertise.

CFTC enters the market for anti-corruption enforcement

10.1108/joic-06-2019-0038 ◽

2019 ◽

Vol 20 (3) ◽

pp. 32-38

Author(s):

Alice S. Fisher ◽

Douglas K. Yatter ◽

Douglas N. Greenburg ◽

William R. Baker III ◽

Benjamin A. Dozier ◽

...

Keyword(s):

Financial Services ◽

Design Methodology ◽

Department Of Justice ◽

Futures Trading ◽

Voluntary Reporting ◽

Content Type ◽

The Us ◽

Complex Landscape ◽

And Training

Purpose This paper aims to analyze the March 6, 2019 enforcement advisory in which the Division of Enforcement (Division) of the US Commodity Futures Trading Commission (CFTC or Commission) announced that it will work alongside the US Department of Justice (DOJ) and other agencies to investigate foreign bribery and corruption relating to commodities markets. Design/methodology/approach This paper explains the enforcement advisory and outlines key considerations for industry participants and their compliance teams, including the CFTC’s plan to investigate in parallel with other enforcement authorities, an expansion of the CFTC’s existing self-reporting, cooperation and remediation policy to address foreign corruption and the CFTC’s focus on market and economic integrity, and provides guidelines for commodities companies concerning anti-corruption compliance and training programs, investigating potential incidents of bribery and corruption, reporting obligations under the Commodity Exchange Act (CEA) and CFTC regulations, voluntary reporting of incidents of foreign corruption and whistleblowing. Findings The CFTC announcement adds a new dimension to an already crowded and complex landscape for anti-corruption enforcement. A range of industries, including energy, agriculture, metals, financial services, cryptocurrencies and beyond, must now consider the CFTC and the CEA when assessing global compliance and enforcement risks relating to bribery and corruption. Originality/value Expert guidance from lawyers with broad experience in white collar defense, investigations, financial services, securities, commodities, energy and derivatives.

Exploring instances of deviation in joint ventures between partners’ equity share and board representation

International Journal of Organizational Analysis ◽

10.1108/ijoa-11-2018-1598 ◽

2020 ◽

Vol 28 (1) ◽

pp. 260-273

Author(s):

Andres Velez-Calle

Keyword(s):

Joint Ventures ◽

Design Methodology ◽

Resource Dependency ◽

Content Type ◽

Board Of Director ◽

The Us ◽

Equity Ownership ◽

Board Representation ◽

And Control

Purpose To date, there has been little research about the degree of correspondence between partner equity ownership and partner representation on boards of joint ventures (JVs). It is generally assumed that partners’ share equals board representation in percentage. This paper aims to explore various instances of deviation from the above norm. Design/methodology/approach Using a unique database of 259 JV contracts extracted from the US Securities and Exchange Commission, and by drawing from resource dependency and transaction cost theories, this manuscript explores the factors that increase or decrease the deviation between equity share and board representation. Findings The results show that international JVs (IJVs) tend to deviate more, while JVs with a deadlock clause, a large board and based in a stable country deviate less from the degree of correspondence between equity share and board representation. Originality/value This study contributes to the alliance and governance literatures by identifying factors that influence the degree of correspondence between partner investment (equity share) and control through board of director representation.

Outsourcing Compliance Functions and Fraud Detection

10.1093/oxfordhb/9780198840954.013.21 ◽

2021 ◽

pp. 436-473

Author(s):

David M. Shapiro

Keyword(s):

Hedge Funds ◽

Hedge Fund ◽

Fraud Detection ◽

Commodity Futures Trading Commission

Commodity Futures ◽

Futures Trading ◽

Compliance Function ◽

The Us ◽

Key Issues ◽

This chapter addresses the compliance function for hedge funds and considers areas where violations can occur. It surveys regulation in place in the US and internationally, looking in particular at the Securities and Exchange Commission and the Commodity Futures Trading Commission, and highlights key issues. Primarily, the chapter focuses on the outsourced nature of many of the agents responsible for providing assurance of the honesty of hedge fund operations, including trading, and reporting, registration, and discussing how compliance is made effective. The chapter concludes by considering the risks that require further research.

CFTC harmonization rules: CPOs of RICs benefit from “substituted compliance”

10.1108/joic-01-2014-0007 ◽

2014 ◽

Vol 15 (1) ◽

pp. 17-24

Author(s):

Daphne G. Frydman ◽

Raymond A. Ramirez

Keyword(s):

Futures Trading ◽

Content Type ◽

Investment Companies ◽

Foreign Corporations ◽

Investment Advisers ◽

Sec Regulation ◽

Asset Managers ◽

Purpose – To explain regulatory developments and changes to compliance obligations for asset managers registered with the Commodity Futures Trading Commission (CFTC) as commodity pool operators of registered investment companies. Design/methodology/approach – Provides a general overview of new CFTC rules (Harmonization Rules) that afford relief to commodity pool operators of commodity pools that are registered as investment companies under the Investment Company Act of 1940; describes the specific CFTC disclosure, reporting and recordkeeping requirements that remain applicable to commodity pool operators that are also subject to Securities and Exchange Commission (SEC) regulation by virtue of operating commodity pools that are registered investment companies; discusses reliance on substituted compliance with applicable SEC requirements; outlines the method for claiming relief under the Harmonization Rules; provides guidance for CPOs of RICs that use controlled foreign corporations (CFCs). Findings – CPOs of RICs benefit from “substituted compliance” under the CFTC Harmonization Rules. Practical implications – Explains to investment advisers that have registered as CPOs of RICs the disclosure, reporting and recordkeeping obligations that apply to them, how to take advantage of compliance with SEC requirements in lieu of CFTC requirements, and how to claim relief with respect to certain CFTC compliance obligations. Originality/value – Practical explanation by experienced derivatives and securities lawyers.

Whistling fast and furious: SEC and CFTC continue to issue awards

10.1108/joic-07-2016-0035 ◽

2016 ◽

Vol 17 (3) ◽

pp. 28-30

Author(s):

Mark Srere ◽

Jennifer Mammen

Keyword(s):

Design Methodology ◽

Lessons Learned ◽

Publicly Traded ◽

Futures Trading ◽

Content Type ◽

Publicly Traded Companies ◽

Compliance Programs ◽

Purpose To analyze the recent Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) whistleblower awards and to evaluate what issues may be important for in-house counsel in the future. Design/methodology/approach The article discusses the most recent whistleblower settlements and focuses on lessons learned for compliance. Findings The SEC continues to publicize substantial whistleblower awards in an effort to attract additional whistleblowers and gather information that may lead to successful enforcement actions. In addition, the CFTC, whose corresponding Whistleblower Program has been slow to issue awards has announced that it is ramping up its program. Practical implications Companies should ensure that they have vigorous compliance programs in place to prevent and detect potential securities violations and to respond immediately in order to mitigate penalties that may result from inadvertent violations. Originality/value This article identifies recent awards issued under Whistleblower Programs created under the Dodd-Frank Act and should be of interest to publicly traded companies and all entities regulated by the SEC and CFTC that may be targeted by potential whistleblowers.

Differentiating Centralization and Overlap in Swap Regulation

Reorganizing Government ◽

10.18574/nyu/9781479829675.003.0007 ◽

2019 ◽

pp. 127-148

Author(s):

Alejandro E. Camacho ◽

Robert L. Glicksman

Keyword(s):

Commodity Futures ◽

Title Vii ◽

Regulatory Regime ◽

Securities Markets ◽

Futures Trading ◽

Legislative Changes ◽

Over Time

This chapter explains how legislative changes to, and the broader commentary on, US derivatives regulation illustrate the value of parsing the overlap/distinct and centralization/decentralization dimensions in assessing the tradeoffs of regulatory allocations. The Securities and Exchange Commission and the Commodity Futures Trading Commission have been tasked with decentralized authority over securities and futures, respectively. Over time, their jurisdictions have increasingly overlapped as the futures and securities markets converged. Reorganization proposals and legislation to correct perceived problems with the overlapping, decentralized regulatory regime (such as Title VII of the Dodd-Frank Act) have usually failed to parse the various tradeoffs between overlap and distinct or between centralized and decentralized authority. By limiting their analysis, policymakers and observers of derivatives regulation may have misdiagnosed problems with the existing allocation or missed potential opportunities to craft different regulatory configurations that might have better accommodated policy tradeoffs or been more politically viable.