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Legislation Would Increase CFTC’s Enforcement Powers and Budget

Legislation introduced by Senators Elizabeth Warren and Mark Warner and Representative Elijah Cummings would expand the CFTC’s enforcement power over derivatives and change the way the agency is funded, Reuters reports.  According to Representative Cummings, the legislation would give “the CFTC a stable funding stream and the tools necessary to help deter future illegal acts by permitting penalties large enough to impact the bottom lines of even the largest financial firms.”

Currently, the CFTC is funded through annual Congressional appropriations, while the SEC receives funding from user fees and fines.  The bill would move the CFTC to the same funding model as the SEC and, according to CFTC Timothy Massad would “help the agency keep up with technology advancements in the markets it oversees and with "high-powered defense teams" in its enforcement cases.”  Republicans lawmakers have said, however, that the current appropriations model keeps the agency responsive to elected leaders.

In addition to the changes in the CFTC’s funding, the legislation would also “put certain foreign exchange swaps under CFTC jurisdiction, change how derivatives are treated in bankruptcy, require posting initial margin in inter-affiliate swaps, and require regulators to review derivatives clearinghouses.”  In a statement about the legislation, Senator Warren said that “[t]he only way to make sure that derivatives can never lead to a financial crisis and taxpayer bailouts again is to put in place clearer rules and stronger oversight.”